Ofgem's financial resilience requirements for heat network operators. Business continuity planning, continuity of supply, and step-in provisions.
Heat network consumers cannot switch supplier. Unlike gas or electricity customers who can choose an alternative provider, heat network consumers are physically connected to a single network. If the operator fails financially, consumers face the prospect of losing their heat supply entirely. This is why Ofgem's Authorisation Conditions place significant emphasis on financial resilience.
Ofgem's financial resilience requirements sit across three Authorisation Conditions:
Important: these conditions do not apply to every operator. AC A12 and AC A13 do not apply where the operator is a Local Authority or an Excepted Company — and "Excepted Company" is defined to include registered providers of social housing, registered social landlords, and bodies on the Scottish social landlord register. The same exemption covers industrial and self-supply networks. So a council or a registered housing association operating a heat network is fully exempt from AC A12 (Operational Arrangements and Material Assets) and AC A13 (Availability of Resources and Financial Responsibility Principle). But one duty still applies even to them — see "Continuity of Supply" below.
Note that entities owned by or operating on behalf of Local Authorities — such as energy service companies (ESCOs) or special purpose vehicles (SPVs) — are not automatically exempt. The carve-out applies to the Local Authority itself and to bodies that meet the definition of "Excepted Company"; an ESCO or SPV will generally need to demonstrate it qualifies as a Local Authority or Excepted Company on its own terms.
For operators in scope, AC A13 requires more than a vague expectation of solvency. The operator must act in a responsible manner calculated to secure that it:
That last point is a concrete ring-fence: where an operator collects money from consumers towards maintenance or asset replacement, that money cannot be diverted to other uses. AC A13 also requires directors to notify Ofgem immediately if they no longer have a reasonable expectation that the operator will have the resources, or be able to meet liabilities, that the condition requires.
AC A12 is drafted around a principle — the "continuity objective" — rather than a rigid list of rules. The operator must maintain appropriate legally enforceable rights over the assets, contracts and arrangements needed to run the network, and must keep a register of those Material Assets recording, for physical assets, their condition and function. The condition restricts disposing of, or creating security interests over, those assets where doing so would create an undue risk of the continuity objective not being met — a principles-based test, not a blanket prohibition. Standard financing (mortgages, loans) is not automatically caught; what matters is whether the arrangement puts continuity of supply at undue risk.
AC A14 requires in-scope operators to prepare and maintain a continuity plan setting out how each regulated activity would continue if the operator ceased to carry it on, covering key service providers and staff, consumers, metering and billing information, management structures and Material Assets.
Crucially, where the supply and operation of a network are carried on by separate parties, AC A14 places a duty on the operator to ensure arrangements are in place so that heat supply can continue if the supplier fails — and, if the supplier does cease supplying, to carry on that supply itself or ensure a third party does. AC A14.10 disapplies paragraphs A14.1 to A14.8 for Local Authorities and Excepted Companies (including registered providers of social housing) — but A14.9, the operator's duty to step into supply if the supplier fails, continues to apply. So a council or housing association that operates a network served by a separate supplier still needs to be able to step into the supply role if that supplier fails.
A continuity plan should address fuel supply interruption, major equipment failure, loss of key personnel, financial distress, and force majeure events. For each scenario, the plan should identify the risk, the mitigation measures in place, the response procedures, the responsible individuals, and the communication plan for informing consumers.
Operators in scope need a financial resilience approach evidencing the A13 resource and liability tests, a continuity plan meeting the A14 content requirements, and — where a separate supplier is involved — documented step-in arrangements addressing the operator's continuity-of-supply duty. Local Authorities and Excepted Companies should focus on that step-in duty under A14.9, since AC A12, A13, and A14.1–A14.8 do not apply to them. Our platform generates this documentation, mapped to the relevant Authorisation Conditions.
Financial resilience policy, business continuity plan, and step-in arrangements — AC A12, A13, and A14 requirements addressed and cited.
Generate financial resilience documentationLast checked against official sources: 28 May 2026.