As the UK progresses towards a low-carbon future, heat networks are increasingly emerging as a key player in the decarbonisation of heat in buildings. The government’s Energy Bill aims to institutionalise a regulatory framework for heat networks, laying the foundation for consumer protections and industry standardisation. This pivotal legislative shift will have substantial implications for both owners and operators of heat networks, as well as for consumers who rely on them for heating solutions.

Produced by Sharpe Pritchard LLP, this comprehensive article delves into the intricacies of the Energy Bill and its impending impact on the heat networks sector. From the appointment of Ofgem as the new regulator to the introduction of authorisation regimes, mandatory technical standards, and consumer protection measures, the article aims to bring clarity to an evolving landscape.

Drawing on insights from the Government’s “Heat networks regulation: Consumer protection” consultation, this article will serve as a valuable resource for heat network owners and operators, offering a clear overview of impending changes while addressing key areas of interest and concern. Furthermore, it highlights preparatory steps that industry stakeholders can undertake to align with new regulations, ensuring a smooth transition as the sector undergoes this transformative change.

Stay ahead of the regulatory curve and understand what these pivotal changes mean for you with this timely and informative guide.

Speed read

Overview

• Heat networks are vital for the UK’s energy strategy, with legal changes underway to boost regulation. The Energy Bill appointed Ofgem as the heat networks regulator. Here’s what you need to know about what lies ahead.

Regulation roadmap

• Immediate: Heat networks are currently largely unregulated. Although, laws like the Landlord and Tenant Act 1985, the Heat Networks Metering and Billing Regulations 2014, and the Consumer Rights Act 2015 already apply.
• Initial phase: The first steps will involve Ofgem gathering information and existing heat networks joining the authorisation process.
• Future: The Energy Bill will empower Ofgem to enforce authorisation regimes, quality standards, and price caps if needed.

What you should prepare

• Soon to operate as a heat network owner or heat supplier, you’ll need Ofgem’s authorisation.
• Follow the current Heat Trust rules as a baseline for meeting the new standards.

Quality of service

• Complaint handling and service quality are likely to be regulated. You may want to test your current operations against Heat Trust standards.

Pricing

• Be prepared for pricing scrutiny. Be transparent and cost-reflective.

Step-in provisions

• Keep an eye out for consultations on what happens if a heat network fails.

Key changes

• Ofgem as regulator: Will enforce standards and can investigate pricing.
• Authorisation regime: Mandatory for all heat network operators and suppliers.
• Consumer protections: Fair pricing, service quality, and minimum technical standards will be regulated.
• Transparency measures: Enhanced metering and information sharing with consumers.
• Emergency protocols: Back-up and step-in arrangements for supplier failure.
• Enforcement powers: Ofgem will be able to issue fines and revoke licences.

Unresolved questions

• There remain a lot of questions as yet unanswered by the consultation.

What’s next

• Further consultations are expected, particularly around technical standards and step-in provisions.
• Be proactive in aligning your operations with forthcoming regulations to be “oven-ready” for compliance.
• By staying informed and prepared, you can navigate the upcoming regulatory landscape effectively.

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