Heat networks regulation is now live

Heat networks provide heating, cooling and hot water to multiple properties in a building or to multiple buildings from a single source.

Today, we are launching new consumer protection rules to start regulating the heat networks sector in Great Britain (England, Scotland and Wales). This is a major milestone that will, over time, change how these services operate, putting consumers at the heart of everything they do.

Why we needed to regulate

As a mostly unregulated market, unlike gas and electricity, heat network consumers are not offered many protections.

We needed to regulate to ensure energy consumers are protected and get a fair deal. This meant introducing some core protections, including:

• how customers are billed
• customer service standards
• complaints handling
• protections for vulnerable consumers

The challenges

Introducing regulation poses significant challenges because of a combination of things including:

• poor design
• variations in customer service and consumer protection
• the large number and diversity of organisations, public bodies and private individuals and other entities who operate heat networks
• the interaction with housing regulation

The transition to regulation

The phasing in of regulations has already started with the introduction of advice and advocacy services for consumers.  Consumers should expect that, over time, the new protections will ensure a more consistent standard of service across the sector. Importantly, they will have a clear route to hold operators and suppliers accountable if their heat network fails to meet these expectations

What we have done so far 

Setting up a new regulatory system is a huge task. We’ve been working with the government to develop policy. Colleagues in the Department of Energy Security and Net Zero (DESNZ) continue to work on their areas of responsibility which include heat networks technical standards and heat networks zoning.

An important milestone is the recent publication of the joint response with the DESNZ on implementing consumer protections. This outlines the rulebook and the initial set of consumer protection standards.

We’ve also published our response to the consultation on how we’ll oversee the sector, including the methods we’ll use to manage risks and protect consumers.

We are very grateful to all those who have engaged with all our consultations and met with us to share their experiences and views. We hope this will continue.

Building trust and reliability

Initially, regulation will focus on creating a reliable, trustworthy environment. This will encourage investment in heat networks, while giving customers the confidence they have a right to expect. Many heat network customers already receive a good service, but we also know that too many people face unclear bills, poor communication, or uncertainty about what to do when things go wrong.

Over time, our regulations mean that customers will be able to:

• understand their bills 
• trust that prices are fair 
• rely on their heat supply 
• know how to get help 

These are protections that are commonplace for customers of gas and electricity companies. Heat networks customers can expect the same in future.

Growing the sector

Building on these foundations, we want a regulatory regime that enables the growth of a modern heat networks sector that is integrated into the wider energy system and plays its part in decarbonising Great Britain.

By providing a stable regulatory environment, we anticipate investors having the confidence to develop innovative and flexible solutions. This may mean new services and technologies that enable customers to better manage their heat usage, or heat network operators providing flexibility to the wider energy system. This demonstrates the exciting role that heat networks can play over the decades to come, and the importance of putting the right regulatory regime in place over the coming years.

Delivering this in partnership with others

We can’t deliver this alone. As regulation is new for this sector, we expect to learn together and adapt over time to make it work as effectively as possible.

Our shared goal must be to improve outcomes for consumers, and we will work collaboratively with suppliers and operators to achieve this aim, providing focused support in the early years of regulation. We also are committed to working with the government to support their plans for growth through their zoning policy and wider aims as set out in the Warm Homes Plan published this month.

Actions for heat networks

In preparation for regulation, we encourage all heat network operators and suppliers to join the Energy Ombudsman Heat Network Supplier scheme. This will make sure that unresolved disputes with consumers are handled without confusion or delay.

Existing operators and suppliers of heat networks will be required to register on Ofgem’s new digital service from April. This service will be the primary means for heat networks to interact with Ofgem and demonstrate compliance.

You can stay up to date about registration and supporting activities we will be running, or join our distribution list, by contacting us on heatnetworksregulation@ofgem.gov.uk.