Ofgem publishes heat networks enforcement guidelines and policy statements

Jeremy Chang and Matthew Calmonson of Pinsent Masons were commenting as Ofgem published its enforcement guidelines (61-page / 475KB PDF) following the implementation of new heat network authorisation conditions earlier this year.

The authorisation conditions, which took effect from 27 January 2026, mean that heat network operators and suppliers are now fully regulated by Ofgem, which has expanded its remit as Great Britain’s primary energy regulator.

District heating networks include communal heating systems that serve multiple units in a single building. However, prior to 27 January, unlike the gas and electricity sectors, which were already regulated by Ofgem, heat networks were not formally regulated. This meant that customers on heat networks did not benefit from the same consumer protections available to gas and electricity consumers. However, the Energy Act 2023 sought to change this by establishing a statutory framework for heat regulation and designating Ofgem as the regulator to oversee this section of the energy market.

The finalised enforcement guidelines, which were published on 20 February, are a product of a series of consultations carried out by Ofgem as part of devising the wider authorisation conditions and other aspects of heat network regulation which came into force earlier this year.

Ofgem’s role is to ensure that authorised suppliers and operators conduct is not unlawful, anti-competitive or otherwise harmful to consumer interests. The guidelines clarify the regulatory principles Ofgem will follow in exercising its enforcement functions and the scope of breaches it is empowered to investigate; set out how its decision-making process works and the enforcement powers available to it; and detail how breaches will be addressed and deterred.

Ofgem said the guidance aims to “promote early identification and resolution of issues, support industry compliance, and protect consumer interests” and would provide “proportionate, pragmatic regulation that supports compliance and good practice without unnecessary burdens.”

Together with the enforcement guidelines, the regulator published a separate statement of policy (23 pages / 169KB) outlining its position on when to impose financial penalties or make a consumer redress order, including the criteria, process it takes when considering penalties or orders, and how it quantifies the amount of any penalty or order. It also references its prosecution policy statement, which outlines the process Ofgem follows for criminal investigations.

Commenting on the new guidelines and policy statements, Chang, an energy infrastructure expert at Pinsent Masons, said: “Ofgem’s new enforcement guidelines and its policy statements are a helpful step forward for the heat networks sector. Their publication is timely and welcome, especially now that the new authorisation conditions have been in force since January, because operators and suppliers now have clearer sight of what Ofgem expects and how it intends to approach compliance and enforcement.”

Calmonson, an energy projects lawyer at Pinsent Masons, added: “While much of the framework looks similar to what already exists in the gas and electricity sectors, it’s important that enforcement remains proportionate. Heat networks are a much more varied market, with big utilities alongside small private operators, local authorities, universities, hospitals and developers and landlords. Networks also differ hugely in scale, age and complexity.”

Chang said the new guidelines indicated that Ofgem recognises this complexity. “The real test,” he added, “will be how it applies these principles in practice, ensuring regulation supports – rather than slows – new projects and achieving our wider decarbonisation goals.” He said it was also reassuring that Ofgem had said its priority during the initial 12 months would be to understand the sector better and gather further information, giving businesses much-needed “breathing space” to adjust to the new regulations.

Calmonson said local authorities, other public entities, residential developers and energy providers who own or operate heat networks will need to use this initial 12-month information-gathering period to get to grips with their new regulatory obligations, carry out compliance audits, identify gaps and put a compliance plan in place. “If compliance issues arise, the best approach is to act quickly, be open with Ofgem and self‑report where needed, working closely with the supply chain to ensure alignment,” he said.