Heat networks: regulating the sector

4 minute read
16 October 2023

Under the Energy Security Bill (the "Bill"), the Government is proposing to bring in regulation of district heat networks to ensure that consumers are receiving best value for money. This follows on from a recommendation by the Competition and Markets Authority which found that some customers using heat networks were experiencing worse outcomes than the average consumer including high prices and frequent outages. The Government is proposing the implementation of heat networks zoning to aid the rollout of heat networks. On 1 September 2023, the Government published its proposals under the Bill.

What is being proposed?

Regulation of heat networks

A heat network is a distribution system of insulated pipes that delivers heat from a central source and delivers it to domestic and non-domestic buildings. Under the Bill:

  • The Government proposes to impose authorisation conditions for heat networks, which would include provision for fair and transparent price information, a high quality of service, minimum technical standards and carbon limits.
  • Ofgem would be appointed as the regulator to ensure compliance with those conditions and would be given powers to take enforcement action for not meeting the required standards.
  • The Secretary of State would have powers to impose price regulation with means such as a price cap.
  • Ofgem would have powers to investigate and intervene on networks where prices for consumers appear to be disproportionate compared with heat networks with similar characteristics or where prices are significantly higher than those consumers would expect to pay if they were served by an alternative and comparable heating system.
  • It is also proposed to give powers to Ofgem to set rules requiring heat networks to publicly disclose sufficient information to consumers to understand how much they are paying including fixed charges, tariffs, unit rates and to provide a clear explanation about how prices are set and how heat network consumers are billed.

Heat network zoning

Zoning is where central and local government work together with businesses and local stakeholders to identify and designate areas for which heat networks are the lowest cost solution for decarbonising heat. Certain buildings would then be required to join the heat network. The aim would be to give greater clarity to businesses and local stakeholders about where heat networks will be deployed.

  • The Government proposes, through regulations, to implement a nationwide methodology, designate areas as network zones and establish a Zoning Coordinator role which is expected to be fulfilled by local government. The Zone Coordinator would then designate heat network zones and enforce requirements within them.
  • Heat networks developed in zones would need to meet low carbon requirements and certain building and heat sources would need to connect to a heat network in a zone within a specific timeframe.
  • The Government has clarified that mandatory connection to a heat network would only apply to new buildings, large public sector buildings, large non-domestic buildings and domestic premises which are already communally heated within a prescribed timeframe.
  • A pilot of zoning is currently underway in 28 towns and cities in England. Evidence will be used to inform further details on their policy, particularly around resourcing for local governments (in their roles as Zoning Coordinators).


The Government has provided the first proposals under the Bill and industry is eagerly awaiting additional information from the Government. We regularly advise a range of clients (including generators, suppliers, network operators, government departments and energy traders) on wider energy regulatory matters. If you require further advice on navigating future changes to heat networks, please contact James Stanier and Russell Evans for more information.

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