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26 January 2026
From 27 January 2026, heat network suppliers and operators in Great Britain move from a largely bespoke landscape to a formal regulated regime. The key change is that Ofgem’s Heat Network Authorisation Conditions become the baseline rulebook, supported by new Ofgem guidance on fair pricing, cost allocation, consumer protection, billing, complaints, vulnerability and security of supply.
If you run a heat network, manage a concession, or recover heat costs through rent or service charges, this matters immediately. The regime is not just about technical standards. It is about pricing fairness, contract terms, billing transparency, protections for vulnerable households, debt and disconnection safeguards, complaint handling, and how suppliers and operators coordinate where responsibilities are split.
This article explains what comes into force in January, who it applies to, and the practical first steps for three common models. It ends with a short critique of regime-wide gaps and risks that are likely to matter in practice.
From 27 January 2026, relevant heat network suppliers and operators must comply with Ofgem’s authorisation conditions, including rules on:
Alongside the conditions, Ofgem has published guidance explaining how it expects these duties to work in practice. The guidance is deliberately a mix of minimum expectations and best practice. That distinction matters because not everything in the guidance is a hard rule.
The authorisation conditions are split into three groups.
These apply to all authorised persons for each regulated activity they carry on. They include registration duties, fair pricing and cost allocation duties, governance expectations, information requests, cooperation with Ofgem, audit powers, and continuity and resilience requirements for some entities.
These apply to authorised persons carrying on the regulated activity of supply, meaning supplying heating, cooling or hot water to heat network consumers via a relevant heat network. The supplier conditions are the main consumer-facing protections. They include standards of conduct, heat supply contract requirements, notice of contract changes, complaints, assistance and advice, billing and transparency, back-billing, priority services, payment difficulty support, disconnection restrictions, prepayment meter protections, self-disconnection protections, and social obligations reporting.
These apply to authorised persons carrying on the regulated activity of operating a relevant heat network. They include standards of conduct for operators and a security of supply duty aimed at reliability and outage minimisation.
There are also carve-outs that matter in practice. Some supplier and operator conditions do not apply to entities that only supply or only operate industrial heat networks or self-supply networks. Some general resilience conditions do not apply where the authorised person is a local authority or certain registered social housing providers.
The starting point is whether you are carrying on a regulated activity. The regime separates two regulated activities: supply and operation.
You supply heating, cooling or hot water to heat network consumers by means of a relevant heat network. The guidance treats a wide range of arrangements as “heat supply contracts”, including not only standalone supply agreements but also leases, tenancy agreements, and service charge agreements. A “deemed contract” can also arise where premises are supplied without a formal agreement in place.
This matters because some organisations have historically treated themselves as building managers rather than “suppliers” where heat is bundled into housing charges. The guidance does not support this narrow interpretation. It treats housing documents as capable of being the supply contract.
You control the transfer on a heat network of thermal energy for the purpose of supplying heating, cooling or hot water. Control is about decision-making power over the network, not simply owning the pipes or plant. Multiple entities can be treated as operators where each controls different parts of a network.
Many schemes are integrated. A single entity can be both supplier and operator. Where that is the case, the guidance expects the supplier standards of conduct to apply as the higher standard for consumer-facing dealings.
Where supply and operation are split between entities, the regime expects cooperation. Operators must share information with suppliers where needed so the supplier can comply with consumer-facing duties. Suppliers must also share information with operators where needed for operator compliance. In practice, this is critical for outages, billing disputes that rely on meter data, and complaint resolution.
“Standalone” here means the consumer is billed directly under a heat tariff or a heat supply contract that looks like a utility relationship, rather than paying through rent or service charge.
These schemes are generally the easiest to align with the conditions because the regime is built around the assumption that there is a clear supplier relationship and a discrete heat bill.
Confirm whether you are the supplier, the operator, or both. Where you outsource billing, metering, customer service or maintenance, treat those providers as part of your compliance perimeter. The guidance expects authorised persons to remain accountable for outcomes even where delivery is outsourced.
The authorisation conditions expect a contract to be in writing, in plain language, in a single pack, and not to incorporate terms by reference to a website. The contract content expectations are extensive and include charges, billing information, contact details, complaints handling, key performance indicators including efficiency, and dispute resolution routes.
Where you have legacy contracts, the transitional approach is pragmatic. You are expected to take reasonable steps to move toward compliance, and to treat consumers as if the contract met the requirements where appropriate.
Billing and transparency is one of the most prescriptive parts of the regime. Where supply meters are installed, bills and billing information should be accurate and based on actual consumption as the default, with estimates only in defined circumstances. Consumers should be able to understand how bills are calculated and should receive minimum billing information.
Where billing is weak, the knock-on effects are large. It drives complaints, debt, disputes, and risk of shock bills.
There are strong notice rules for price increases and unilateral changes that make a consumer worse off. These notices must be standalone and must explain the change, the reason, when it starts, and what options the consumer has. There is also a limit on how often prices can be increased in the directly billed world.
The complaints condition is detailed and operational. It expects multi-channel complaint intake, a defined process, recording requirements, internal review options, and signposting to independent redress routes on the required timelines. It also expects complaint remedies to include compensation in appropriate circumstances.
The regime expects suppliers to identify consumers in vulnerable situations, maintain a priority services register, and provide priority services free of charge to those who reasonably require them. It also sets detailed safeguards around payment difficulty, prepayment meters, disconnection, and self-disconnection.
“Rent-bundled” means the consumer pays a single housing payment and heat is included within it, with no clear standalone heat bill.
This model creates the biggest compliance friction because several conditions assume there is a discrete heat charge and a heat bill, but rent bundling often does not provide one.
The guidance recognises that heat can be included in rent, but it does not treat that as an exemption. It also signals an expectation that unbundling becomes the direction of travel where individual metering is introduced.
The supply contract guidance treats tenancy agreements as capable of being the heat supply contract. Where the housing contract does not contain all the heat-specific terms expected, the regime anticipates that you supply the missing information through a separate document and treat the consumer as if those terms applied.
In practice, rent bundling is difficult to police without at least one clear document that explains:
If you do not meter individually, the strongest consumption-based billing requirement will not bite, because that rule is framed around supply meters being installed. The guidance still expects unmetered consumers to be given the charges for the period and a clear explanation of how the amount is calculated.
The practical problem is that “rent” is not naturally a “heat charge for a relevant period”. Unless you track and explain the heat element, compliance becomes hard to evidence and hard to enforce.
The guidance states that where individual metering comes into effect, suppliers are expected to charge separately and unbundle the heat charge from service charges or rent where possible. Rent-bundled schemes should treat this as a compliance migration issue, not a distant optional improvement.
The practical work here is not just installing meters. It is designing a charging model that can turn meter readings into a bill, setting out the tariff structure, and building consumer communications and support routes that match the utility-style expectations.
Service charge schemes are explicitly accommodated by the guidance. Leases and service charge agreements can be the heat supply contract. Billing and transparency expectations are modified where the lease regime for service charges applies.
This creates a recognisable two-tier structure in the regime. It is not automatically “worse”, but it is different and some consumer protections are weaker.
The guidance treats leases as a valid supply contract for heat supply. It also expects that where a lease contract does not contain the full set of heat supply information, the supplier should take reasonable steps to provide missing information upon request and should not necessarily vary the lease if doing so is not reasonable.
In practice, the route is often a supplementary document that provides the heat-specific terms and information that the lease does not contain.
The billing condition is modified where service charges apply. The key practical differences are:
The practical effect is that service charge billing outputs can remain aligned to service charge statements and service charge periods rather than utility-style billing cycles.
Price-change notices and the six-month cap on price increases do not apply to the extent charges are service charges. The 12-month back-billing limit also does not apply to service charges. The guidance points instead to housing law timing rules and challenge routes.
This means a service charge model can remain legally coherent while delivering a weaker consumer experience on notice and back-billing protections compared to direct billing. That is the core two-tier concern.
Where the regime disapplies consumer-facing protections, the best way to avoid consumer harm is often to adopt the better practice voluntarily. The guidance itself encourages going beyond the legal minimum. In practice, this means aiming for more regular and clearer heat statements, explaining apportionment, and minimising back-billing even where housing law allows longer time bars.
There are strong protections in the regime, especially around vulnerability, payment difficulty and restrictions on disconnection. There are also some structural weaknesses that are likely to matter, particularly in housing-linked settings.
The central pricing rule is that charges must be fair and not disproportionate. The fair pricing guidance sets principles and a fairness test and points to future tools such as benchmarking and profitability assessments. There is no upfront price cap and no predefined return threshold. Benchmarking can only mean comparison to something, and the framework leaves open what comparator is used, how networks are segmented, and what divergence triggers intervention. This risks producing slow, evidential, selective enforcement rather than predictable affordability outcomes across the board.
Where heat is recovered through service charges, key protections such as retail-style price increase notice rules and back-billing caps do not apply in the same way. Billing rules are also modified and some baseline protections fall away. This is an explicit accommodation to housing regimes, but it makes parity of outcomes harder to claim.
Rent bundling is not treated as a service charge case for billing modifications, but it often does not produce a discrete heat charge that can be billed and explained. That creates a compliance and enforcement gap. The regime signals a direction of travel towards unbundling when metering arrives, but it does not give a simple blueprint for what compliant rent bundling looks like today.
Compensation is available through complaint remedies and may be required through redress routes, and the pricing framework prevents suppliers passing compensation and redress costs back to consumers through charges. But there is no scheme-wide automatic “if the heat goes off, you get £X” standard built into the conditions. Temporary heat supply and alternative heat for vulnerable households appear as good practice in guidance rather than a mandated universal minimum.
The Special Administration Regime is an important legal mechanism, but a domestic heat network is a site-specific physical system. Transfers are slow and involve technical due diligence and operational takeover, not a simple customer transfer. A failing scheme is often unattractive to successors. This backstop can keep supply going temporarily, but it does not guarantee a readily available long-term successor in small domestic schemes.
Many duties rely on open-textured standards such as fair, reasonable, appropriate, and all reasonable steps. Those standards are enforceable, but they often require evidence, comparison and judgement. Bundling and split responsibility structures increase that difficulty because Ofgem may need to pin down who is responsible and obtain data before it can test compliance on substance.
The guidance is extensive and repeatedly encourages best practice beyond the legal minimum. Some of the most consumer-protective elements in guidance are not mandatory obligations. That creates a practical risk that regulated parties meet the black-letter minimum and treat the consumer-friendly guidance as aspirational, which can weaken early consumer outcomes unless Ofgem uses enforcement and precedent to harden expectations.
If you run a heat network, the safest mindset is not “are we exempt” or “what is the minimum”. The safest mindset is “can a consumer understand who we are, what they pay, why they pay it, how to get help, and what happens when things go wrong”.
Standalone heat suppliers can usually get there by tightening contracts, billing, notices, complaints, vulnerability support and debt pathways.
Rent-bundled providers should treat transparency packs and planning for unbundling as urgent compliance work, not optional nice-to-haves.
Service charge providers should treat the housing interface as a consumer risk area and aim to deliver utility-style outcomes voluntarily wherever possible, because the legal framework is explicitly two-tier.
If you have not thought about this at all then now is the time.
