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For operators of existing heat networks, the introduction of the Market Framework Regulations and HNA general conditions does not immediately change the ability to operate. Most schemes benefit from “deemed authorisation”, allowing continued operation during a transitional period. However, this should not be mistaken for compliance.
For many operators, the key question is no longer whether they can continue operating – but whether their current structures can meet regulatory expectations without material change.
The real challenge is to move from this temporary position to a state of demonstrable compliance within the regulatory timetable. In broad terms, existing operators should be preparing for registration by January 2027, while using the Initial Period to complete the legal, operational and governance changes needed to move towards full compliance by January 2028. In practice, that requires a structured programme of review and implementation across legal, operational and governance workstreams.
Deemed authorisation provides continuity, not comfort. It allows existing operators to carry out regulated activities without having applied for authorisation – but it does not disapply the authorisation conditions themselves.
This creates an important dynamic: operators can continue to operate today, but they are already expected to be working towards compliance with the new regime. This in turn creates a degree of regulatory risk, as operators may already be exposed to non-compliance even before formal authorisation is required. Operators should therefore view the transitional period not as a delay, but as a limited window to identify and address compliance gaps before Ofgem’s proportionate enforcement approach falls away.
For most existing networks, achieving compliance will involve three core workstreams.
The starting point is to understand the current position. This typically involves:
In practice, this often takes the form of a structured review of documentation and delivery models. In our experience, identifying the “operator” in multi-party structures is frequently more complex than expected – particularly where responsibilities are split across developers, landlords and service providers.
Compliance cannot be achieved through contracts alone. Operators must have appropriate systems in place to meet ongoing obligations, including:
For many legacy networks, these systems were not designed with regulated requirements in mind. As a result, transition often involves implementing or upgrading operational processes in parallel with legal changes.
For some operators, this represents a material investment decision, particularly where existing billing or data systems need to be replaced rather than adapted.
The new regime requires a more structured approach to governance. In particular:
This also feeds directly into authorisation strategy – including whether a single entity or multiple entities should seek authorisation across a portfolio, and how risk is managed across delivery structures.
In our experience, existing heat networks often present similar challenges when assessed against the new regime.
A common feature of legacy projects is a landlord-led structure, where heat is procured centrally and passed through to occupiers via leases or service charges.
Under the new regime, this raises questions around:
If not addressed, this can lead to misalignment between contractual arrangements and regulatory responsibilities, creating unintended regulatory exposure.
Many existing networks have evolved over time, resulting in a patchwork of:
This creates challenges in demonstrating compliance, particularly where obligations must be applied consistently. As a result, operators are increasingly moving towards contract rationalisation and standardised, compliant templates across their portfolios.
For most operators, the transition from deemed authorisation to compliance is best approached as a managed programme, rather than as a one-off exercise.
Successful programmes are typically phased and risk-based – prioritising higher-risk assets and delivery models before rolling out standardisation across the wider portfolio.
In practice, this involves:
Given the scale of change required, many operators will need to begin this process well before registration in January 2027, rather than leaving substantive compliance work until the end of the Initial Period.
The move to a regulated regime represents a fundamental shift for existing heat networks. While deemed authorisation provides breathing space, it also creates a clear imperative to act. Operators who engage early – and take a structured, programme-led approach – will be better placed to achieve compliance and manage regulatory risk. Those who delay may find that legacy issues become more complex and costly to resolve as the Initial Period comes to an end.
As part of our Clean Heat Hub series, we are supporting clients across the lifecycle of heat network projects – from structuring delivery models through to regulatory readiness and implementation.
If you are assessing readiness for registration in 2027, or planning the steps needed to achieve full compliance during the Initial Period, we can support with targeted gap analysis, transition planning and contract updates.
Please get in touch with Antonia Venning or Charles Robson if you would like more information.
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