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Meet your obligations with heat network regulations

Posted by Ian Allan

Tuesday 13th February, 2024

Preparing for regulation: The Ofgem Customer Protections Consultation

Posted by Helen Newman

In this blog, Helen Newman, our Senior Marketing Executive summarises her thoughts on our webinar about preparing for regulation following the conclusion of the Ofgem Customer Protections Consultation for Heat Network Operators.

I recently joined the Switch2 marketing team and as part of my induction I enjoyed listening to our latest webinar about preparing heat networks for regulation. Here, Ian Allan, our Head of Market Strategy, talks about the content of the Ofgem consultation and regulation implications for the sector. It was interesting to hear how the consultation is shaping the regulations and what these will mean for residential and communal heat networks.

This subject really struck a chord with me, after recently moving from the heavily regulated financial services sector to work in the unregulated heat network industry. I can certainly see some similarities between the impacts of regulation in financial services and the potential changes that will be needed in heat networks, that will affect building owners and consumers.

Ofgem has been working with heat networks for a while, so it’s no surprise that they have been appointed as the industry’s regulator. My take on the new regulations is that the main objective is to ensure that customers are paying a fair price and have a reliable supply of heat. The full regulations are due to be rolled out in 2025 and all heat networks will be required to be authorised by Ofgem and compliant by this time. As for existing heat networks, I understand that they will be authorised automatically subject to the provision of data to the regulator.

In addition, the Government has an ambition of increasing the amount of heat generated by heat networks from 2% to 20% of all housing by 2050. This ambitious target means that heat networks will also play a major role in helping to reduce carbon emissions to contribute to the Government’s net zero target.

Ofgem’s remit will be to set rules on pricing and set quality standards to protect consumers of heat networks across the country. The regulations will apply to all residential customer on communal and district heat networks. Communal heat networks are defined as one building with a central energy centre with multiple end users and district heating which are larger scale heat networks, usually in cities involving the supply of heat to many buildings.

From a consumer perspective, I can see many benefits to regulation. Heat is an essential service, so the regulations will help ensure fair pricing and consistent standard of delivery. They will also ensure that the quality of information provided to customers is sufficient, clear and not misleading to enable them to make informed decisions. It’s also good that the regulations aim to ensure that vulnerable customers will be supported appropriately according to their specific needs.

Right now, as a resident who has their heat supplied through a heat network, if I’m unhappy about the cost of my heating or the reliability of my supply, I can’t choose to switch to another supplier. This is where the regulations become even more important for the consumer, as it seems they will provide greater protections similar those that apply to customers of other utility providers.

Although the full regulations are due to be rolled out in 2025, we expect there to be further consultations before this happens. While protecting customers is the Government’s main reason for regulating the sector, there are implications to how heat networks will be managed. In the meantime, for building owners there is a lot to consider. Some of these considerations include the governance around heat networks, maintenance of heat networks, implementing scheme efficiencies and improvement planning. Wider considerations include pricing, transparency of information for customers, quality of service in the supply of heat, protections for vulnerable customers, metering and the provision of data.

In summary, regulation of heat networks will provide more transparency to consumers, greater certainty for investors and help drive decarbonising in the UK as we transition to net zero. Whilst I’ve only scratched the surface of what the regulations mean, our webinar goes into a lot more detail around the specific implications for heat networks, what building owners need to consider and what they can be doing now to prepare. You can access the full webinar by completing the form below.

If you have any questions or would like to speak to one of our experienced team members about how we can support you, please get in touch.

In the meantime, I’m looking forward to a whole range of challenges in my new role here at Switch2, although it’s clear I won’t be getting away from regulation any time soon!

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