Are you authorised to operate heat networks?

The clock is ticking to register regulated activity (i.e. operating or supplying a heat network). But don't panic! This article sets out what you need to know about Ofgem's authorisation of heat networks regime and the action you can be taking to stay one step ahead.

Historically there has been little regulation of heat networks and Ofgem is now imposing a new authorisations regime. Any entity which operates a heat network and/or supplies heat, cooling or hot water through a heat network (regulated activity) will be required to register with Ofgem and be authorised under the new regime. For communal networks, it is envisaged that the authorised entity will be the freeholder or management company of the building in which the communal network is located.

The authorisation regime will be implemented in two steps:

Step 1: registration 

From 1 April 2025, it is a requirement that any entity carrying out a regulated activity will need to register that activity in respect of each and every network with Ofgem. This applies to both any existing activity (ie ongoing prior to 1 April 2025) and any new activity (commencing after 1 April 2025). The deadline for registration for existing and new activity is 26 January 2027. Ofgem is proposing to use a digital platform for registration. Details are yet to be confirmed but are expected to be provided in early 2026.

Step 2: authorisation

It is not enough under the new regime to simply register activity. To ensure any operator or supplier is suitable they must authorised by Ofgem. Any existing or new activity which is undertaken prior to 26 January 2027 will be deemed to be authorised. However, this is not a free pass. From 26 January 2026 Ofgem will impose its general authorisation conditions which set out how networks must be operated. Draft authorisation conditions have been published under the Heat Networks (Market Framework) (Great Britain) Regulations 2025 (Regulations). Compliance with the conditions is mandatory for all regulated activity.

Regulated activity which commences after 26 January 2027 will be required to go through a formal authorisation process. This will include providing more extensive information about the regulated activity being undertaken. Ofgem also have the power to impose specific conditions on those activities for both newly authorised activity and any activity which has deemed authorisation.

Why does it matter?

Should entities fail to register with Ofgem or comply with authorisation conditions (including the general conditions where the activity had deemed authorisation), Ofgem shall be entitled to undertake enforcement action. Such action may include imposing orders to comply with the authorisation conditions, revoking authorisation for an entity (for all or some of its regulated activities) or imposing fixed penalties. The maximum penalty will be the higher of £1 million or 10% of the authorised person's annual turnover.

What can you be doing to get ready?

Whilst Ofgem is yet to finalise a number of requirements in respect of registration and authorisation (including the use of a digital platform and monitoring requirements) you can still start to prepare.

Ofgem published within its Heat Networks Authorisation and Regulatory Oversight decision a list of information which is expected to be required to in order to register an organisation and a specific regulated activity. If you are currently undertaking regulated activity or are preparing to undertake regulated activity you can prepare by consolidating the information ready for submission. It is envisaged that the digital platform for registration will be ready early 2026.

Additionally, as mentioned above, Ofgem have also published a set of draft authorisation conditions. Operators and suppliers should review those conditions to ensure that where activity is being undertaken or is preparing to be undertaken they can comply with those conditions.

Finally, you can have your say on how the authorisations regime develops. Ofgem has issued further consultations relating to enforcement and fixed penalties and will be issuing further consultations on other aspects of the regime (including monitoring) in the future. Responding to those consultations is the best way to ensure that your opinion on the development of the authorisations regime is heard.

If you would be interested in finding out more about the regulatory regime for heat networks please contact the team above.