The Heat Network (Market Framework) Great Britain Regulations 2025 (the Regulations) and the associated Ofgem General Authorisation Conditions (the Conditions) introduce regulations that impact landlords and developers with heat networks on their sites. They may also affect ManCos, resident management companies and owners of individual blocks within wider developments with heat networks.
Commencement and key dates
The Regulations came into force on 3 March 2025 and the Conditions came into force on 27 January 2026 with Ofgem taking the role of regulator across the sector. All operators and suppliers of heat networks are required to be “authorised” under the Regulations and have been required to comply with the Conditions from 27 January 2026.
Any entity seeking to supply on or operate a new heat network after 27 January 2027 must apply for prior authorisation from Ofgem.
Suppliers/operators of heat networks that are already in existence before 27 January 2027 are automatically deemed authorised under the Regulations. However, these entities must still register their heat networks with Ofgem before 26 January 2027.
Are you an “operator” or “supplier”?
In general, a heat network “operator” is the entity that owns, manages and controls the heat network infrastructure and makes the decisions (and payments) on repair and replacement of the heat network.
A heat network “supplier” is the entity that supplies heating, cooling or hot water using the relevant heat network. According to Ofgem, it will be the entity that is responsible for the contractual and customer-facing arrangements associated with supplying heat.
Landlords who manage their own heat networks will usually fulfil the role of both operator and supplier.
What do the Conditions say?
The overarching principle set out in the Conditions is that the customers connected to a heat network must be treated “fairly”. Some of the key Conditions have been flagged below.
Conditions that apply to both operators and suppliers:
- Fair Pricing and Cost Allocation: Charges must be fair and proportionate and Ofgem guidance sets out six fair pricing principles that must be followed. There is also guidance on how heat network costs should be allocated and how this should be reflected in pricing.
- Financial Resilience: Landlords must have sufficient financial and operational resources to run the heat network properly and to meet their obligations and liabilities. This includes ensuring that the amounts collected from residents for heat network maintenance or replacement is available for the purpose for which they were collected. Please note that there are exemptions available for local authority landlords and registered providers of social housing here.
- Continuity Arrangements: Landlords will need business continuity plans in place to ensure that the network continues to function “efficiently and effectively” if the landlord was to cease providing operation or supply activities (e.g. insolvency). Please note that there are exemptions available for local authority landlords and registered providers of social housing.
Conditions that apply to suppliers:
- Supply contracts: Consumers must be given a written supply contract, in plain and accessible language. The contract must include the specific key terms set out in the Conditions, including details of services, billing and charging information and the supplier’s complaint handling procedures. While leases and tenancy agreements can qualify as “supply contracts”, it is unlikely that pre-existing leases and tenancy agreements will incorporate all of the supply terms that are required under the Conditions.
- Billing & Pricing: Bills must be based on actual consumption of heat and suppliers must provide residents with all of the “Billing Information” set out in the Conditions. There are also restrictions on a supplier’s ability to “back bill” for historic heat consumption. Please note that there are certain exemptions for residents that are subject to leases or tenancy agreements with variable service charges and also for properties that do not have individual supply meters installed.
- Vulnerable Customers and those facing payment difficulties: There are extensive requirements on suppliers to identify and support vulnerable customers. There are restrictions on a supplier’s ability to disconnect due to non-payment for vulnerable customers in certain circumstances. There are also enhanced processes that a supplier must follow to support customers facing payment difficulties.
- Prepayment meters & self-disconnection: If access is required to properties in order to install/switch on prepayment meters, then suppliers can only do this if they obtain explicit consent from residents. Suppliers have ongoing obligations to assess whether prepayment meters remain appropriate and must monitor residents on prepayment meters to identify and manage any self-disconnection events. There are further restrictions surrounding the installation and operation of prepayment meters for vulnerable residents.
Conditions that apply to operators:
- Ensuring a reliable service: Operators must operate their networks to ensure a reliable and consistent supply of heating and must take all steps to minimise supply interruptions and network outages. There are also obligations to maintain the network in accordance with good industry practice and this will interface with the technical standards for heat networks under the Heat Network Technical Assurance Scheme (HNTAS) that the government will be bringing in shortly.
What sanctions exist for non-compliance?
Ofgem have the ability to issue fines of up to one million pounds or 10% of an organisation’s turnover (whichever is higher). It can also issue consumer redress orders which include requiring compensation payments to be made to customers. It is a criminal offence to carry out heat network operation or supply activities without Ofgem authorisation.
Next steps for landlords
Landlords that fall within the operator and supplier roles have been regulated since January this year and should be in the process of registering their heat networks with Ofgem before the registration deadline in January 2027. They should also be reviewing and modifying their arrangements on site to ensure compliance with the Conditions.
There are options are available for landlords who do not wish deal with the regulatory liability for their heat networks directly. For example, entering into a long-term energy services company (ESCO) concession arrangement with a third-party provider can result in the ESCO taking on the operator and supplier roles under the Regulations. It is important that ESCO concession agreements are structured properly to allow this to happen.
Please contact us for further advice on the steps landlords and developers should be taking to comply with the Heat Network Regulations.