The Government’s plans for heat network regulation will rapidly transform the sector, driving long-term investment. However, they will also increase scrutiny of local authorities – and many aren’t ready, says Simon Green, managing director at GEM Environmental Building Services.

From next month, we’ll see the first stages of a radical new regulatory regime for heat networks as Ofgem takes on oversight of the sector.

The end goal for the Government is twofold: to raise standards and ensure that customers on these networks have equivalent protections to peers on main energy grids; and to ultimately encourage investment in existing and new networks. The intention, as set out in the Energy Act 2023, is that networks will account for 20% of total heat provision in the UK by 2050 – up from the current 3%.

For local authorities, this brings the promise of modernising networks, becoming more transparent, efficient and sustainable. However, the pressing issue for many is how to manage change. Throughout the next decade, Ofgem will gradually increase enforcement of these regulations on local authorities. Reputational risk and regulatory penalties threaten those who don’t get on the front foot.

The rapid pace of reform

Amid wider changes in energy policy since Labour came into power last year, heat network regulation has had a lower profile, but change will be radical – and comparably swift. Ofgem’s regime will start in a phased way from April, with a timetable to have all networks meeting minimum standards of performance and customer metering by 2028.

This presents a significant compliance challenge for local authorities which will need to get their head around an entirely new regulatory regime in just a few years. There are currently 17,100 registered heat networks in the UK, with considerably more flying under the radar, unregistered with the current regulator, the Office of Product Safety and Standards. Local authority owners in particular are more likely to be managing older networks which might be 50-60 years old.

Customer redress – and scrutiny – from April

If networks have had a low profile to-date, owners should prepare for this to become a very noisy issue from next month. At this point, Ofgem’s consumer protections regime will kick in. This means consumers can apply to Citizens Advice and the Energy Ombudsmen for redress, advice and representation.

This should be a wake-up call for many authorities. In practice, actual changes to networks at this point will not be required, so this risks creating a disconnect between what customers expect and what the local authority can provide from day one of the new regime.

Network owners should prepare their response now, considering proactive communications to avoid being caught on the wrong foot as well as reactive Q&As. While it may be tempting to remain quiet and potentially avoid difficult discussions with heat network customers, this would likely be counter-productive in the long run.

Looking at the challenges ahead

Making a plan for customer communications will ensure that this doesn’t distract from focusing on the bigger challenge, which is to prepare for network registrations from January 2026.

Requirements for registration will be set out in a key consultation on Heat Network Technical Assurance Scheme (HNTAS) that is due imminently. This will propose minimum levels of performance and reliability that networks will need to meet.

The majority of network owners will need to mobilise considerable resources to stay on the right side of this regulation: mapping networks, securing data on performance and ultimately rolling out metering. This will involve a significant investment in both physical hardware and in data management, giving authorities real-time visibility on performance and enabling reporting to Ofgem. Potential penalties range from fines and confiscation of non-compliant equipment to criminal convictions in extreme cases.

Success will rely on close cross-team collaboration between directorates. Of course, heat network investment is not the only demand on councils either. These new areas of compliance will need to dovetail with – and be budgeted alongside – those of the Regulator of Social Housing for complex areas including environmental monitoring for damp and mould, and for building safety.

A positive start to the new regulation

While authorities may not relish the scale of work required, there is comfort to be found in collaboration. The age and nature of networks means that many owners will face similar hurdles and sharing best practice will be essential over the coming months. By utilising this expertise, local authorities can begin to address the compliance headache that looms. Most importantly, owners should stay focused on the end goal – shaping energy systems that are more transparent, more sustainable and more effective.