Heat networks regulation authorisation application arrangements

About us

Consumer Scotland is the statutory body for consumers in Scotland. Established by the Consumer Scotland Act 2020, we are accountable to the Scottish Parliament. Our purpose is to improve outcomes for current and future consumers.

Consumer Scotland uses research, data and analysis to inform our work, applying the consumer principles of access, choice, safety, information, fairness, representation, sustainability and redress. We have a particular focus on affordability, climate change mitigation and adaptation, and consumers in vulnerable circumstances.

Consumer Scotland is the statutory advocate for heat network consumers in Scotland.

Our response

Consumer Scotland welcomes the opportunity to respond to Ofgem's consultation on heat network authorisation application arrangements. We recognise the importance of such arrangements for anyone intending to begin operating or supplying a heat network after 27 January 2027.

Welcome Ofgem's pragmatic approach whereby interim arrangements will be developed into more comprehensive requirements over time. This will allow Ofgem time to better understand what information is required to identify potential risks to consumers before heat networks commence regulated activity, before finalising the application arrangements.

Progressing the interim authorisation application arrangements separately from the Heat Network Technical Assurance Scheme (HNTAS) is also welcome as this will prevent any delays whilst HNTAS remains under development. [1] [2] However, there will be a need for the authorisation application arrangements and HNTAS to be fully compatible in their final design, and ahead of their respective introductions. Our response focuses on the information collected through the authorisation process; continuity of supply during changes to authorisation; and the importance of clear regulatory accountability. We would encourage Ofgem to keep the effectiveness of the interim arrangements under review and to provide clarity on the timescales for introducing enhanced application requirements at the earliest opportunity.

Questions

Question 1. Do you agree our proposed draft Authorisation Application Regulations meet our policy intention? If no, please give reasons.

Yes, we agree that the proposed draft authorisation application regulations reflect the policy intent.

Question 2. Do you agree with our proposed information requirements for applicants? If no, please give reasons.

We mostly agree with the proposed information requirements. We recognise the importance of keeping the application process accessible and proportionate to applicants’ time and resource demands. However, this needs to be balanced with ensuring that Ofgem receives sufficient information from applicants to be able to carry out its role effectively.

The proposed information requirements rely primarily on applicants declaring that they understand and can comply with their authorisation conditions, without requiring evidence of their readiness to do so, which places much of the onus onto the applying party

In our previous response on authorisation and regulatory oversight, we highlighted the importance of ensuring that Ofgem has sufficient information to effectively monitor the sector and identify risks to consumers. [3]

We would encourage Ofgem to consider whether some additional information could reasonably be collected at the application stage, particularly regarding arrangements for meeting consumer-facing obligations. For example, confirmation of which party, within the heat network’s operating structure, will be responsible for handling consumer complaints would help establish clear accountability from the outset in a key area of consumer protection.

While we recognise that more detailed information will be collected through registration, it is important that the application process provides sufficient assurance that appropriate consumer protection arrangements will be in place when regulated activity begins.

Question 3. Do you agree our proposed transitional provisions for heat networks with non-enduring authorisation achieve our policy intent? If no, please give reasons.

Yes, we agree that Ofgem's proposed approach to allowing heat networks with non-enduring deemed authorisation to continue operating beyond January 2028, using information already provided through registration, achieves the policy intent.

Avoiding unnecessary disruption is particularly important for heat network consumers, who typically have limited ability to take their business elsewhere if they are dissatisfied with their heat supply arrangements.

However, we note that Ofgem does not intend to undertake any additional assessment as part of this process. We would therefore encourage Ofgem to ensure that the registration information used to confer authorisation remains accurate and reflects any material changes to the heat network.

This would help maintain regulatory oversight without introducing additional administrative requirements that could unnecessarily delay authorisation.

Question 4. Do you agree with our proposed approach to transfer of authorisation? If no, please give reasons.

Consumer Scotland agrees with the proposal to require evidence of how continuity of supply will be maintained when authorisation is transferred to another entity.

In our previous response to the consultation on financial resilience, we emphasised that continuity arrangements should account for consumer information and account balances held by third parties in the event of financial failure. [4]  Although transfers of authorisation would occur in different circumstances, similar practical considerations may arise where billing or account management responsibilities change. This is particularly relevant where billing services are outsourced.

We would encourage Ofgem to ensure that the transfer process considers the wider consumer experience, rather than continuity of heat supply alone. This should include appropriate arrangements for the transfer of consumer account information, and the maintenance of any existing support arrangements that may be in place.

Consumers should also receive clear information about a change in their heat network operator and/or supplier, including who has overall responsibility for their service following the transfer. We would not expect a transfer of authorisation to result in consumers experiencing poorer service or unexpected additional costs.

Question 5. Do you agree with our proposed amendments to the guidance?

Yes, we agree with the proposed amendments to the guidance, which are designed to provide greater clarity on the application process and the obligations placed on authorised persons.

We note that the proposed guidance allows for tacit authorisation where Ofgem has confirmed that an application is complete but has not made a decision within the subsequent three-working-day period.

While this may provide applicants with certainty, it is important that the process does not create a misleading impression of the level of regulatory assurance provided by authorisation.

We would encourage Ofgem to make it clear that authorisation under the interim arrangements does not necessarily indicate that an applicant's operational or financial suitability has been verified. This will help ensure that consumers are not given false assurances about the reliability of their heat network, or the protections in place.

Question 6. Do you agree with our proposed modification of AC A04?

Consumer Scotland welcomes the extension of registration requirements to operators and suppliers authorised through the application process. The information collected will be important for Ofgem's understanding of the sector and its ability to monitor compliance.

However, we have some concerns about the proposed three-month period between commencing regulated activity and completing registration.

Although authorised persons will be required to comply with the relevant authorisation conditions from the outset, this approach may delay Ofgem receiving information necessary to identify potential consumer risks.

We would encourage Ofgem to consider whether a small amount of essential information could be collected earlier, including the number of consumers served and confirmation of the actual date regulated activity commenced.

We also recommend that Ofgem sets out how it intends to identify and follow up with authorised persons who fail to complete registration within the required timeframe. This would help ensure that consumers do not remain on networks with limited regulatory visibility.

Question 7. Do you agree with our proposed modification of AC A05?

Consumer Scotland recognises the importance of identifying a nominated operator where multiple entities are responsible for different parts of a heat network.

In our previous response on authorisation and regulatory oversight, we highlighted the potential difficulties that complex operating arrangements can present for accountability.[5]

This remains an important concern. Intelligence from Scotland's heat networks advice service has identified instances where consumers have been passed between different organisations when attempting to resolve complaints, without any organisation taking responsibility.[6]

We recognise that the nominated operator is intended to act as a regulatory contact, rather than assuming the obligations of other operators. Nevertheless, Ofgem should ensure that these arrangements support clear lines of accountability and do not create additional difficulties when consumer issues arise.

We would welcome clarification of how Ofgem will approach circumstances where multiple operators are unable to agree on a nominated operator, particularly where this could affect effective regulatory oversight.

Endnotes