Heat networks: a guide to prepare for registration

What is happening?

From the 27th of January 2026, relevant heat network operators and suppliers are regulated by Ofgem and must comply with the Authorisation Conditions.

Initially all operating heat networks have been deemed to be automatically authorised by Ofgem to enable them to continue to operate. However, both Operators and Suppliers will need to comply with the Authorisation Conditions applicable to the services they are providing and are required to register their heat networks with Ofgem by 26 January 2027.

The key principles underpinning the Authorisation Conditions are:

• Consumer protection
• Technical Standards 
• Security of Supply 

and the purpose of the registration regime is to ensure that those involved in delivering heating and cooling through heat networks can evidence compliance with these principles. Therefore, Operators and Suppliers should have these principles in the forefront of their minds as they prepare for registration.

Does this affect us?

Consider whether you are regulated and to what extent. Entities can be one or both of Operator and Supplier. Broadly speaking Operators control the transfer of heat whereas Suppliers supply heating, cooling or hot water. However, classification as a Supplier is not limited to those holding heat supply agreements but any arrangement where there is a supply may be covered and this could include under leases, tenancy agreements or service charge agreements.

If a network has multiple operators, these must agree upon and notify Ofgem of a single Nominated Operator to act as the primary contact.

If we are an Operator or Supplier, what should we be doing now?

1. As noted above, first confirm your status – are you an Operator, Supplier or both?
2. Allocate internal resource and review governance – compliance with the Authorisation Conditions requires a process of review, considering options and delivering required actions. Many of our clients are pulling together legal, technical, governance and commercial input to agree a plan of action for meeting regulatory compliance requirements.
3. Review your supply arrangements – supply arrangements need to include billing information, price review mechanisms, and complaints handling procedures. Agree transitional arrangements for amending existing arrangements and ensuring new contracts meet these requirements.
4. Consider what does and does not need to be contracted – the Authorisation Conditions contain various regulatory requirements around contracts. Where Operators and/or Suppliers have third party contracts it is important to consider the extent that certain of the Authorisation Conditions need to be reflected in such contracts - for example, regulated entities are required to maintain a Business Continuity Plan so consideration will be needed as to whether the Ofgem requirement to hold this plan is sufficient or if as a matter of good practice a relevant contract should include the obligation to develop and maintain such a plan.
5. Consider cost consequences – many district heating projects have multiple stakeholders each with different roles and responsibilities and in these multi-entity arrangements the commercial impact of the Authorisation Conditions will need to be considered. For example, though the relevant Operator may be responsible for operational expenditure (though note this is a presumption that should be checked), if the obligation to comply with technical standards requires additional capital expenditure, who will be responsible (and what do your existing contracts say)?
6. Review pricing – pricing must be fair and not disproportionate. There is no predefined IRR cap but charges will be benchmarked so will need to meet reasonableness tests.
7. Consider support for vulnerable customers – if you do not already have one, establish a Priority Services Register (PSR) and consider how it will be implemented (including taking account of data protection obligations).
8. Prepare / update a Material Asset Register – by 26 January 2027, you must have a register detailing the condition and function of all critical infrastructure.

What do you recommend?

Preparation is key. It is important to familiarise yourself with the Authorisation Conditions and your current (and future) arrangements. Unfortunately, there is no “one size fits all” in respect of the way the Authorisation Conditions apply though we do expect that as further guidance is available from Ofgem and as the sector increasingly engages with the registration process market standard approaches to regulatory issues will begin to emerge.

Successful compliance will be centred on principles of transparency in relation to the reporting, monitoring and decision making. Tests of fairness and reasonableness are subjective and therefore documenting your rationale for decision making and arrangements that can be easily audited will reduce risk of non-compliance. Being able to clearly show that you have consumer protection (domestic and non-domestic) as the focus for both operation and supply will be essential.

Our team is here to help – please get in touch and we will be more than happy to discuss your specific situation. 

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