Countdown to heat network regulation – are you ready?

From 26th January next year, the heat network sector will become regulated for the first time and councils and local authorities that own or manage buildings containing a heat network, or which are connected to one, may find themselves having to comply with a raft of new consumer protection standards.

In due course, failure to comply with the regulations will attract corporate and individual liability, so if you haven’t done so already, now is the time to check whether they apply and understand what you need to do to prepare for compliance.

The regulations create two new roles:

• Network operator: the entity which has control over the operation of the network and the right to direct maintenance and upgrades
• Heat supplier: the entity responsible for supplying heat or cooling to customers under a supply agreement, lease or tenancy agreement

If your organisation carries out either role, it will have to comply with a set of Authorisation Conditions governing a number of issues, including:

• The key principle of fair treatment for all residential and small business customers
• Minimum contractual supply terms
• Treatment of vulnerable customers
• Fair pricing and billing processes
• Debt handling
• Complaints handling

The regulatory burden for either role can be passed on to a third party where the council/local authority has appointed an energy services company (ESCO) on a long-term basis to take the risk in the operation of the network and make supplies to customers. This is typically via a concession arrangement.  

The regulatory burden will not have been passed on where individual services such as metering, billing and maintenance have been outsourced on short-term “fee for services” basis without key risks transferring. If a building receives a bulk supply from an ESCO, the council/local authority could have the regulatory burden for the part of the network through which it on-supplies heat/cooling to its tenants.  

The Consumer Redress Scheme is already open and dealing with complaints, so all heat suppliers will need to register with the Energy Ombudsman as soon as possible. 

During 2026, minimum technical standards will also be brought into force under the Heat Network Technical Assurance Scheme (HNTAS). These are still subject to consultation at present.

All existing heat and cooling schemes are deemed to be automatically authorised with Ofgem, so physical registration is not required until January 2027, but compliance with the Authorisation Conditions will still be compulsory from January 2026.   

If you have any queries on this contents of this legal article or want to find out more about heat network regulation, get in contact with Rhianna Wilsher or visit the Freeths heat network and zoning web page.