Ofgem Heat Network Authorisation — What Operators Need to Know

The Energy Act 2023 established Ofgem as the statutory regulator for heat networks in Great Britain. The Heat Networks (Market Framework) (Great Britain) Regulations 2025 commenced on 27 January 2026, creating a formal authorisation regime that applies to every operator and supplier of a relevant heat network — regardless of size, ownership model, or how long the network has been in operation.

This guide sets out what authorisation means in practice, which conditions apply to your organisation, what you need to have in place, and the consequences of non-compliance.

Who Needs Authorisation?

Authorisation is required by any person who operates or supplies heat through a relevant heat network in Great Britain. A relevant heat network is one that supplies heat to two or more premises that are not all owned by the same person. This definition captures the full range of communal and district heating arrangements:

• Housing associations and registered social landlords with communal boiler systems
• Local authorities operating district heating or communal heating in residential estates
• Energy Service Companies (ESCOs) operating under concession or management agreements
• Private landlords and freeholders with communal heating in multi-unit buildings
• Property developers with heat networks in new-build residential schemes
• Managing agents and facilities managers acting on behalf of building owners
• Bulk suppliers providing heat to other heat network operators

The Authorisation Conditions

Ofgem published its final determined Authorisation Conditions in January 2026 following consultation. The conditions are organised into three sections, each applying to different categories of authorised person.

Section A — General Conditions (A1–A15)

Section A conditions form the foundation of the regulatory framework and apply universally.

• AC A1 — Application of general authorisation conditions: Sets out which conditions apply to which categories of authorised person.
• AC A2 — Interpretation: General rules of interpretation and application.
• AC A3 — Definitions: The glossary of defined terms used throughout the conditions, including "Vulnerable Situation", "Relevant Consumer", and "Prepayment Meter".
• AC A4 — Registration: Operators and suppliers must register with Ofgem by 26 January 2027, providing information about the network, their organisation, and their consumers.
• AC A5 — Nominated Operator: Where multiple operators are responsible for different parts of a heat network, one must be nominated as Ofgem's contact point.
• AC A6 — Fair Pricing: Charges imposed on Applicable Consumers must be fair and not disproportionate, interpreted in accordance with Ofgem's Fair Pricing and Cost Allocation Guidance.
• AC A7 — Cost Allocation: Charges must be structured and attributable to costs consistently with fair pricing. Penalties and redress payments cannot be passed on to consumers.
• AC A8 — Ongoing Fit and Proper Requirement: Key personnel in positions of Significant Managerial Responsibility or Influence must be fit and proper. Operators must conduct regular assessments.
• AC A9 — Provision of Information to the Authority: Operators must provide information to Ofgem when requested, in the form and by the time specified.
• AC A10 — Open and Co-operative: Operators must be open and co-operative with Ofgem, including proactive disclosure of matters that could give rise to consumer detriment.
• AC A11 — Independent Audits: Ofgem can require an operator to commission an independent audit or appoint one itself.
• AC A12 — Operational Arrangements and Material Assets: Operators must act to safeguard the continuity of their regulated activities, including maintaining appropriate legal rights over the Material Assets needed to run the network.
• AC A13 — Availability of Resources and Financial Responsibility Principle: Operators must have sufficient financial and operational resources to carry on their regulated activities, and must notify Ofgem if this is at risk.
• AC A14 — Continuity Arrangements: Operators must prepare and maintain a continuity plan setting out how the regulated activity can be transferred to a successor if they cease to carry it on.
• AC A15 — Revocation: Sets out the circumstances in which Ofgem may revoke an authorisation.

Section B — Regulated Activity of Supply (B1–B12)

Section B applies to organisations that supply heat directly to consumers. Organisations that operate the network infrastructure but supply through a separate entity may have limited Section B obligations — the allocation of responsibility depends on the contractual and operational structure.

• AC B1 — Supplier Standards of Conduct: Five consumer-facing principles covering behaviour, information, customer service, consideration of vulnerability, and consumer engagement. Includes the specific duty to identify occupants in vulnerable situations and provide relevant additional support.
• AC B2 — Heat Supply Contracts: Requirements for the form, content, and terms of supply contracts with relevant consumers, including deemed contracts.
• AC B3 — Contract Changes Information: Notice requirements for disadvantageous contract changes and charge increases.
• AC B4 — Complaints: Documented complaints handling procedure with defined timescales, recording requirements, and escalation to the Energy Ombudsman after eight weeks (twelve for Housing Ombudsman).
• AC B5 — Assistance and Advice: Obligations to provide consumers with information about contacting the supplier, accessing independent advice, and managing their supply.
• AC B6 — Provision of Billing and Price Transparency of Information: Billing requirements including accurate, actual-consumption-based bills at least annually for metered networks, and specified billing information content.
• AC B7 — Back-billing: Back-billing limited to 12 months for domestic and microbusiness consumers in most circumstances, except where service charges under the Landlord and Tenant Act 1985 apply.
• AC B8 — Priority Services Register: Suppliers must establish and maintain a Priority Services Register for domestic consumers in vulnerable situations, promote its existence, actively identify eligible consumers, and provide specified priority services free of charge.
• AC B9 — Security Deposits, Payment Difficulties, Disconnections and Direct Debits: Protections including restrictions on security deposits, a structured payment difficulty pathway, prohibition on winter disconnection for households with occupants under 2, over 75, disabled, terminally ill or chronically sick, and year-round disconnection prohibition for those with relevant medical conditions.
• AC B10 — Prepayment Meters: Safeguards on prepayment meter installation and switching, including explicit consent requirements, a "do not install" category, and a "further assessment needed" category covering children under 5, pregnancy, serious mental or developmental disabilities, and temporary vulnerabilities.
• AC B11 — Self-Disconnection: Obligations to identify consumers who are self-disconnecting, provide Emergency Credit, Friendly-hours Credit, and Additional Support Credit where vulnerability applies.
• AC B12 — Social Obligations Reporting: Reporting to Ofgem on matters including payment methods, payment failures, disconnections, priority services, and the number of consumers on the Priority Services Register.

Section C — Regulated Activity of Operating (C1–C2)

Section C applies to authorised persons carrying on the regulated activity of operating.

• AC C1 — Operator Standards of Conduct: Duty to behave fairly, transparently, and professionally; to co-operate with other authorised persons; and to investigate and resolve complaints referred by suppliers.
• AC C2 — Security of Supply: Duty to maintain a reliable and consistent supply of heating, cooling or hot water, taking all reasonable steps to minimise the occurrence and duration of network outages.

Key Timelines

What Operators Must Have in Place Now

The Authorisation Conditions are not aspirational — they impose specific, documented obligations that Ofgem can enforce from 27 January 2026. Operators need:

• A documented complaints handling procedure meeting all requirements of AC B4, including timescales, recording, and Energy Ombudsman escalation
• A consumer vulnerability policy (reflecting the duty in AC B1.3.4 for suppliers and the corresponding duty in AC C1 for operators) and a Priority Services Register procedure meeting AC B8, covering identification, eligibility, support arrangements, and data handling
• A fair pricing policy demonstrating how tariffs are set to be fair and not disproportionate, under AC A6 and AC A7
• A billing transparency policy meeting AC B6 requirements including actual-consumption billing standards and estimated billing conditions
• Supplier Standards of Conduct and Operator Standards of Conduct policies (AC B1 and AC C1) committing the organisation to the consumer principles and the fair treatment objective
• Back-billing procedures meeting AC B7
• For suppliers: documented heat supply agreements and deemed contract arrangements meeting AC B2; payment difficulty, disconnection, and direct debit procedures meeting AC B9; prepayment meter and self-disconnection procedures meeting AC B10 and B11; and social obligations reporting processes under AC B12
• For operators: security of supply arrangements and outage procedures meeting AC C2; and continuity arrangements, operational arrangements, and financial resilience planning meeting AC A12, A13, and A14
• Consumer-facing versions of all key policies in plain language

Enforcement

Ofgem published its Heat Networks Enforcement Guidelines on 20 February 2026. While Ofgem has indicated it will take a collaborative approach during the initial period of regulation, the guidelines make clear that enforcement action will follow where there is evidence of significant consumer detriment.

Enforcement powers available to Ofgem include financial penalties of up to £1 million or 10% of annual turnover (whichever is higher), consumer redress orders requiring direct compensation payments to affected consumers, compliance orders, provisional orders for urgent cases, and revocation of authorisation. A 30% penalty discount is available for operators who agree a settlement with Ofgem before a final order is made.

Operators with documented policies, proactive compliance monitoring, and prompt self-reporting are treated as a significant mitigating factor under the enforcement guidelines. The absence of documented policies — or reliance on policies that do not meet the Authorisation Conditions — leaves operators with no credible compliance defence.

Guidance Documents

Ofgem has published final guidance on the following areas, all of which must be read alongside the Authorisation Conditions:

• Consumer Protection Guidance (January 2026) — Standards of Conduct, complaints handling, billing and transparency, back-billing, vulnerability protections, and security of supply
• Fair Pricing and Cost Allocation Guidance (January 2026) — Tariff-setting methodology, cost allocation, counterfactual comparisons, and benchmarking
• Financial Resilience Guidance (January 2026) — Operational arrangements, material assets, availability of resources, and continuity arrangements
• Registration Guidance (January 2026) — The registration process, network information requirements, nominated operator arrangements, and the digital service
• Enforcement Guidelines (20 February 2026) — Ofgem's enforcement powers, penalty calculation, consumer redress, and the Alternative Action process

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