Heat Networks Regulation: Comply by partnering

The Heat Networks (Market Framework) (Great Britain) Regulations 2025 introduced a regulatory regime for relevant heat networks in Great Britain, with Ofgem as regulator. The first set of authorisation conditions took effect from 27 January 2026. Operating a relevant heat network or supplying heating, cooling or hot water through one without authorisation is now a criminal offence. Networks range from small blocks of flats and private landlords to large social housing schemes, communal networks (which serve a single building) to large district systems. Some organisations which have become subject to the new regulations may not realise they are, or what they need to do to comply. This article considers some options.

Behind the new regime is a practical shift in how heat networks are run and documented. Many existing schemes were developed in a less prescriptive regulatory environment, with responsibility for plant, pipework, customer billing and resident communications spread across landlords, managing agents, ESCos and outsourced operators. The new Ofgem framework may make existing arrangements harder to sustain because compliance now requires parties to do things which they may not be well qualified and/or resourced to do. For example, the entity controlling the transfer of heat is now likely to be a regulated operator, and the entity setting charges, billing residents, providing customer service and handling complaints is now likely to be a regulated supplier.

Why partnering is attractive

For organisations that do not wish to be the regulated operator or supplier themselves, contracting with a specialist third party might be the best way to comply. The partner may be able to deliver the required operational expertise, an established customer service capability and a clear compliance framework, particularly where the asset owner does not have an internal platform to manage billing, complaints, reporting and audit requirements. This may be especially relevant for existing networks which must now comply with authorisation conditions on fair pricing, billing transparency, vulnerability, financial resilience and audits.

Allocate the regulated roles clearly

That model only works, however, if the documents explicitly allocate responsibility. Ofgem’s framework allows the operator and supplier roles to sit with different entities, with separate authorisations where the roles are split, and it also allows authorisations to be transferred in future. Contracts therefore need to be clear about who is responsible for running the network, who manages residents and vulnerable customers, who controls key assets, and how continuity of heat supply will be protected if the arrangement fails or changes.

Reflect compliance in the full document suite

The same approach should be reflected in the full contractual suite. Developers and providers need their construction documents, concession arrangements, operation and maintenance agreements, and sale or transfer paperwork to reflect the intended compliance model from the outset. If those documents do not line up, the commercial deal may suggest one party as the regulated entity but the roles in practice contradict this, increasing the risk of gaps in authorisation, reporting or resident protections.

Developers and the social housing sector

Developers, particularly those procuring or delivering new residential or mixed-use schemes with heat network infrastructure, need to engage with this now. Decisions taken at the development, construction and handover stages about ownership, operational control, interaction with customers and long-term service arrangements are likely to determine who plays the regulated operator or supplier roles.
Social housing providers may benefit from a lighter-touch approach in some areas, because Ofgem has said that certain regular financial monitoring requirements will not apply to entities covered by social housing regulation. But social housing is still within the overall regime, so providers also need to engage now.

How the regulations apply depends on who performs the relevant functions in practice, so contracts, governance and operational processes need to be drafted to reflect this. A sensible first step is to map the network’s current operating model against the operator and supplier roles envisaged by the regulations.  Next, identify where customer-facing services, control over assets and decision-making powers actually sit. From there, organisations can update their concession, operation and maintenance, management and transfer documents so that responsibilities are allocated to the right people.

Partnering can reduce compliance risk, but only if contracts clearly allocate regulatory responsibility, operational control and customer-facing obligations.

We are already supporting clients with gap analysis, delivery model structuring and contract updates. If you are reviewing a project or existing network we can help, please do get in touch.

This article was written by Shauna McGinn, Solicitor.