Ofgem regulation - what changes will regulation bring?

This milestone marks an important shift to a regulated utility model where both heat networks operators and suppliers are regulated like any other utility. Ofgem will regulate the heat network sector using the same principle-based approach to regulation that they use for gas and electricity suppliers - focussing on delivering good outcomes to consumers. Given the number and varying size of heat network operators and suppliers, this will enable Ofgem to take a proportionate and risk-based approach. 

While gas and electricity suppliers are required to hold a licence and abide by licence conditions, as there are thousands of heat network suppliers, an authorisation model will be used instead.

The main elements that come into effect from today are:

• Mandatory Registration: All operators and suppliers must obtain authorisation by registering their heat networks with Ofgem by January 2027. Registrations will be taken via a digital portal Ofgem is expected to launch in Spring 2026.
• Adherence to a suite of Authorisation Conditions: These are the rules that heat network operators and suppliers must abide by – i.e. the rule book. Split into three sections there are a total of 29 authorisation conditions (see below). The requirement to treat customers fairly is captured in an overarching Standards of Conduct authorisation condition.
• Mandatory performance reporting: Ofgem will monitor Authorised Persons (those authorised to be a supplier or operator) in a variety of ways, including information requests, annual and quarterly data requests, combined with feedback and data from the Energy Ombudsman and consumer bodies. Ofgem can carry out enforcement action is they find non-compliance by suppliers or operators which leads to customer detriment.

Authorisation conditions 

There are 29 authorisation conditions split into three sections.

• Section A has 15 authorisation conditions that apply to both operators and suppliers. They cover fair pricing, cost allocation, responding to data and information requests, independent audits and continuity arrangements.
• Section B has 12 authorisation conditions that apply to suppliers only and focus on consumer protection. They cover heat supply agreements, billing and price transparency, complaints, support for vulnerable customers, managing payment difficulties, prepayment meters and self-disconnection.
• Section C has 2 authorisation conditions that apply to operators covering standards of conduct and security of supply.

Transition period and approach to compliance during 2026

To support this industry-wide shift, Ofgem will provide close support in the first year of regulatory implementation to ensure proper roll out and effective integration of new processes. Data collected during this opening year (and on an ongoing basis) will be used to refine and augment. Additional consultation on guaranteed standards of service (GSOS) and audits are also expected later this year, which may see additional reporting metrics added to the current list of data points that Ofgem has confirmed.

Ofgem has confirmed that while it aims to be collaborative during this first year, where there is evidence of customer detriment and an unwillingness of the operator or supplier to address non-compliance, Ofgem will take enforcement action.

How are we responding to the commencement of regulation 

We welcome Ofgem as the sector regulator. We have also been proactive and taken action in advance of regulation by voluntarily registering and operating in line with Heat Trust standards, for our heat networks where we have domestic end users, since 2024. Through its Scheme Rules, Heat Trust has drawn on licence conditions for gas and electricity providers to set comparable service standards for domestic and micro-business customers.

Under regulation, we will continue to provide expert customer care and offer customer protection equivalent to gas and electricity customers from day one. Our service values remain central to our customer promise, which prioritises fairness, proactivity and accountability.

To find out more about our customer promise and service values, visit our website here.

To find out more about our heat networks, visit Where we are - Vattenfall Heat UK.

Supporting partners on their heat networks plans and the transition to regulation 

At Vattenfall, we are experts in developing large, city-scale low carbon heat networks that are not only compliant with regulation, but aim to set the highest standards of delivery and service.

We offer a unique end-to-end solutions to decarbonise heating at scale for local authorities, real estate developers or housing associations. Our expertise supports the development of holistic energy strategies, master planning, construction, finance, through to operations and maintenance for end customers. 

By working together with councils, developers and wider stakeholder, we can unlock economic growth in communities across the country. With plans to invest over £1 billion in UK heat networks by 2030, our projects are enabling housing development, creating jobs and recirculating value within the local economy through the use of local suppliers and partners. 

If you want more information on how Ofgem regulation affects you or how we can support you with developing your heat networks plans, please get in touch.