Written statement: Heat Network Market Framework Great Britan Regulations Commencement - Jan 27

Minister for Energy Consumers (Martin McCluskey): Today I am announcing the commencement of heat network regulation.

Remaining sections of the Heat Network (Market Framework) (Great Britain) Regulations 2025 (as amended) will come into effect, introducing protections for both existing and future heat network consumers as we seek to grow the sector. These protections build on the introduction of statutory advice and advocacy through Citizens Advice and Consumer Scotland and statutory redress through the Energy Ombudsman, introduced from April 2025.

Heat networks are a decentralised energy distribution technology, which circulates heating, cooling and hot water from central sources to multiple points of use. The scale of these networks can vary significantly, from single-building, communal networks to multiple-building district networks. Heat network consumers have not, until now, enjoyed similar regulatory protections to those in gas and electricity markets. This unregulated state has led to a large variation in consumer experiences including limited transparency on pricing. Where there are no consistent rules on prices, supplier behaviour or technical operation, this has meant some consumers can experience unfair high prices, poor customer service and frequent outages with limited routes of redress.

That is why the government has taken steps to regulate the market, acting on recommendations from the Competition and Markets Authority and appointing Ofgem to act as the heat network regulator. Ofgem will operate an authorisation regime, which heat networks are bound to comply with to maintain their right to operate in the market. Ofgem's powers will enable them to collect information from heat suppliers that will help them assess whether regulations are proportionate and to take decisive action if necessary to address regulatory non-compliance.

Existing heat networks have been automatically deemed as holding an authorisation until the end of the transitional period on 27 January 2027. These heat networks, and any heat networks that commence operation from now until the end of the transitional period, will need to submit a lighter-touch registration to Ofgem before the transitional period ends.

Ofgem Authorisation conditions include rules on how prices are charged, requiring that prices are clearly explained, bills are transparent and that prices charged are fair. Once Ofgem have collected a full years' worth of sector data, they will set benchmarks of acceptable prices for different network characteristics, which will be a basis for more systematic action to tackle examples of unfair high pricing. Ofgem will also have powers to introduce Guaranteed Standards of Performance once market data becomes available. This will set out the standards of service that heat networks will be expected to provide to consumers and they will be required to pay compensation when these standards are not met. In addition, we have published a consultation on proposals for minimum, mandatory technical standards to help drive improved heat networks efficiency and performance.

The regime that is commencing today is the first comprehensive utility regulations in the heat network sector's history. We will monitor the market closely, working with Ofgem and other statutory partners, to ensure that the regulatory regime works effectively and is fit for purpose in protecting heat consumers.