The statutory route to regulation will be primary legislation through the Energy Bill 2022-23 and the Heat Networks (Scotland) Act 2021.

These Acts will be underpinned by secondary legislation in the form of specific Statutory Instruments (SIs) relating to heat networks. Some details of the regulations will be different in Scotland (as devolved matters) and will be enacted through Scottish SIs.

The SIs will in turn be underpinned by a set of conditions under which heat suppliers are authorised to operate. These authorisation conditions will contain consumer protections that are similar, but not identical, to those set out in gas and electricity supply licences.

The new regulations will build on the foundations set by Heat Trust’s existing consumer protection standards but will also go further, for example by covering pricing. They will also contain mandatory minimum technical standards for heat networks that will supersede the existing Heat Networks Metering and Billing regulations as well as current voluntary engineering standards.

Ofgem will be the regulator for heat networks across the whole of Great Britain (England, Wales and Scotland). The statutory consumer advocacy bodies will be Citizens Advice (for England & Wales) and Consumer Scotland (for Scotland), with all GB heat network consumers having right of recourse to the Energy Ombudsman.

What is the regulatory timetable?

 

Government and Ofgem will progress enabling legislation, stakeholder consultation and preparatory work during 2023-24.

Phase-in of actual regulations will start in 2025, with the new market framework intended to be fully operational from 2026. In between these points, there will be a transition period of at least a year. During this interim transition period, some but not all of the new regulatory obligations on heat suppliers and operators will be in place. 

There are three main parts to the planned regulations, which collectively make up the government’s heat network market framework.

Authorisation and consumer protection

 

All heat suppliers / heat network operators will need to be authorised by Ofgem. Conditions of these authorisations will include compliance with consumer protection standards of conduct. Ofgem will have powers to monitor compliance and take enforcement action for any breaches of the conditions.

Ofgem and the Department for Energy Security and Net Zero (DESNZ) are currently consulting on their planned consumer protections as well as the scope, phasing in and monitoring/enforcement of regulation. Their consultation closes on 27 October 2023 and you can find it HERE.

The timing of Ofgem’s and Scottish Government’s consultation on Ofgem’s administration of an additional Scottish licensing regime is still to be confirmed.

Heat network zoning

Government will have powers to designate areas as ‘heat network zones’ where heat networks are expected to be the lowest cost solution for decarbonising heat. Certain buildings within zones may be required to connect to heat networks within a specified timeframe. This supports government’s target of supplying 20% of homes through heat networks by 2050.

The specific regulations around zoning will be different in Wales and Scotland to those in England.

Ofgem and DESNZ plan to consult on English zoning later in 2023. Scottish regulations on zoning are already being brought in, and you can find details HERE. The Welsh government is currently consulting on its Heat Strategy for Wales, which includes zoning – their consultation closes on 8 November 2023 and you can find it HERE.

Technical standards, carbon emissions limits and step-in arrangements

Heat suppliers / heat network operators will be required to comply with a GB-wide code that sets out minimum technical standards designed to ensure performance and efficiency. These standards are being designed under the Heat Networks Technical Assurance Scheme (HNTAS) Programme. You can find information on this HERE.

Heat networks are fuel-agnostic in that they can be connected to any fuel source. They’re therefore set to play a key role in government’s net zero objectives. Regulation will include decarbonisation targets for heat networks.

Ofgem will also put in place ‘step-in’ arrangements to protect consumers if their heat supplier goes out of business or performs consistently poorly.

Ofgem/DESNZ plan to consult on these areas in early 2024. 

Heat Trust has long advocated for statutory regulation of the heat networks sector. We are firmly behind the intent of the planned statutory protections for heat network consumers and believe that they can’t come quickly enough.

Our Heat Trust Scheme Rules are the foundations on which the formal regulations will build and we’re working closely with Ofgem and government. Registering with Heat Trust now gives consumers confidence and helps heat suppliers get regulation ready.

Ofgem and DESNZ say: ‘The Heat Trust's established role in setting industry standards provides a strong foundation upon which the new regulation will build and their continued involvement will aid transition, ensuring continuity, and reducing risk of disruption for the sector and its consumers … [We] encourage parties to follow existing good practice, such as that set out by the Heat Trust.’

Between now and introduction of full regulation in 2026, our continued involvement will help ensure that:

• Consumers remain front and foremost in regulatory design and decision making (by engaging in consultations and regulatory forums, sharing our insight and expertise)
• Heat suppliers are ready for regulation (by registering and auditing as many as possible under our Scheme)
• There is no gap in consumer protections (by continuing our Scheme for as long as needed, until formal regulation is fully operational)
• Our Registered Participants experience a smooth transition (through alignment of our Scheme and future regulations)

As the national and independent consumer champion for heat networks, Heat Trust’s input to regulation won’t be limited purely to matters covered by our Scheme. We’re not a trade association and we don’t lobby on behalf of our Registered Participants or heat suppliers generally.

While we’ll publicise key regulatory developments through our website, newsletters and LinkedIn, we can’t urge heat suppliers strongly enough to engage directly in the regulatory consultation process.

We’ll publish all of Heat Trust’s responses to government consultations HERE. 

You can find out more at the links below:

https://www.ofgem.gov.uk/energy-policy-and-regulation/policy-and-regulatory-programmes/heat-networks
https://www.gov.uk/government/collections/heat-networks
https://www.gov.scot/policies/renewable-and-low-carbon-energy/heat-networks
https://www.gov.wales/heat-strategy-wales-html