Heat networks are predicted to meet around a fifth of UK heat demand by 2050. As part of its commitment to support sector growth and decarbonisation, the UK Government is preparing to regulate heat networks, with Ofgem to take on the role of regulator.
In November 2024, DESNZ and Ofgem published a joint consultation with further details on the consumer protection requirements that will form part of sector regulation (known as the Heat Networks Market Framework). Simultaneously, Ofgem published a standalone consultation with proposals for its authorisation regime, which will be a light-touch version of the licensing regime used for retail gas and electricity and used to authorise heat networks to perform regulated activities. Ofgem has also put forward proposals on how it regulates the market, including its monitoring, auditing, compliance and enforcement activities.
Proposals are largely consistent with the consumer protection proposals consulted on under the Sunak government in 2023, with a few notable exceptions and developments.
Regulation timeline
Firstly, the 2024 consultations provide updated timelines for when regulation will come into force. The key dates are as follows:
- 1 April 2025: Heat networks regulation will begin entering into force. From this date, heat networks will automatically be deemed authorised to undertake regulated activities during a transition period that will last until 26 January 2027. Heat networks will need to register with Ofgem by the end of this period through a digital service that will be available from early 2026.
- April 2025: Citizens Advice in England and Wales and Consumer Scotland in Scotland will begin providing consumer advocacy and advice services to heat network consumers. The Energy Ombudsman will begin operating a consumer redress scheme for consumers who have not been able to resolve a dispute directly with their heat network. These functions will be equivalent to the organisations’ functions in retail gas and electricity.
- 27 January 2026: This is when consumer protection rules enter into force in the form of authorisation conditions. Ofgem will have powers to take action to ensure that heat networks comply with these conditions. Draft general authorisation conditions are included as an appendix to the DESNZ / Ofgem joint consultation.
- 26 January 2027: As mentioned, this is the deadline by which heat network-regulated entities need to have provided information to Ofgem about their organisation and heat network(s).
Scope of regulation
Secondly, DESNZ and Ofgem have set out the full scope of consumer protections, including standards of conduct, pricing rules, support for consumers in vulnerable circumstances, complaints handling, and Guaranteed Standards of Performance. Heat networks will need to begin preparing to ensure their customer service and heat supply agreements align with these incoming rules.
Interaction with existing social housing and landlord rules
Finally, DESNZ and Ofgem have advanced their thinking on how regulation needs to be adapted to such a diverse sector. At one of its recent heat network webinars, Ofgem highlighted that it is considering how regulation will interact with existing requirements on landlords and social housing providers that operate or supply heat through heat networks. Existing requirements include the social housing redress scheme administered by the Housing Ombudsman, heat supply provisions contained in a wider leasehold agreement, and heat charges contained in wider service charges.
Engage Consulting
At Engage, we have a team of expert consultants with extensive and direct experience in:
- Designing and interpreting the incoming heat network regulations
- Supporting regulated entities to ensure compliance with regulatory requirements
- The interaction between heat networks and existing buildings, social housing, and landlord regulations
We offer a range of services that provide end-to-end compliance process coverage; find out more about this from our Heat Networks expert, Lorenzo Wong.
