1. 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. The Act defines consumers as individuals and small businesses that purchase, use or receive in Scotland goods or services supplied by a business, profession, not for profit enterprise, or public body.
Our purpose is to improve outcomes for current and future consumers, and our strategic objectives are:
- to enhance understanding and awareness of consumer issues by strengthening the evidence base
- to serve the needs and aspirations of current and future consumers by inspiring and influencing the public, private and third sectors
- to enable the active participation of consumers in a fairer economy by improving access to information and support
Consumer Scotland uses data, research and analysis to inform our work on the key issues facing consumers in Scotland. In conjunction with that evidence base we seek a consumer perspective through the application of the consumer principles of access, choice, safety, information, fairness, representation, sustainability and redress.
2. Our response
Proposed Heat Network Enforcement Guidelines
Are the enforcement powers, procedures and governance set out clearly in the Heat Network Enforcement Guidelines? If not, please specify which areas need to be clearer and why.
We are broadly content with how the powers, procedures and governance are set out in the Heat Network Enforcement Guidelines.[i] However the outline of the enforcement powers (beginning at 2.3) could be clearer. This section sets out that the powers covered by these guidelines are principally derived from three pieces of legislation: the Energy Act 2023; the Heat Network (Market Framework) (Great Britain) Regulations 2025; and the Utilities Act 2020, but only the Energy Act 2023 has its own subheading with further information. Footnotes 22 and 23 indicate where aspects of the enforcement powers derive from the Heat Network (Market Framework) (Great Britain) Regulations 2025, and setting it out this way arguably works given the relationship between those pieces of legislation. However, having no subsequent reference to the Utilities Act 2020 in the chapter feels like an oversight, and means it is not clear which aspects of the enforcement powers derive from that Act. Therefore, we would suggest restructuring this section to make the relationship to that Act clearer.
In terms of procedures, the way in which the guidelines set out the different orders, penalties and consumer redress – and how/when these will apply – is clear and instructive. We have no specific feedback in relation to the governance section and are satisfied with how that is set out.
Is the cross-reference to Ofgem’s main Enforcement Guidelines in relation to the consumer law and Competition Act cases clear and sufficient? If not, what additional information or clarification would be helpful?
Yes, the cross-reference to the main guidelines is clear and sufficient. The clarification that enforcement powers cannot be executed if the Authority is satisfied that it would be more appropriate to proceed under the Competition Act is a key point and is clearly set out here. Consumer Scotland also welcomes the definition of “sectoral cases” here in differentiating where cases relate to breaches of authorisation conditions or requirements, as opposed to cases which are enforced using competition powers.
Is there anything relevant to the heat network sector that we need to take account of in the approach we have outlined for enforcement? What is this, and where do you think it would change our approach?
Consumer Scotland recognises the benefits of adopting the structure of the Gas and Electricity Enforcement Guidelines, as this will enable the Heat Network Enforcement Guidelines to be built out from a tried and tested set of regulatory processes. A risk in this approach is if the Gas and Electricity Enforcement Guidelines are not sufficiently adapted, and therefore do not provide the sector-specific clarity to industry or consumers, but Ofgem has avoided this (for example at 2.2 of the consultation[ii]) by clearly setting out the material differences that reflect the distinct statutory framework and characteristics of the heat networks sector.
Similarly, we support the commitment to keep the guidelines under review and for these to be amended in light of further experience and developing law and practice. We propose that committing to such a review at a regular timescale, and communicating this timescale to industry and stakeholders, would instil confidence in the process. Consumer Scotland highlights that effective enforcement in the heat networks sector should be considered a work in progress, which is constantly evolving as insights into practices in the sector improve, and as heat network regulation develops.
The draft enforcement guidelines outline the requirement for heat network authorised parties to be open and cooperative with Ofgem, which includes self-reporting of potential non-compliance with authorisation conditions. Whilst it is correct that Ofgem expects this, and we support that this should not be limited to authorised parties but also any other relevant parties, there are clearly limitations to this approach. In our response[iii] to the consultation on heat network regulation: authorisation conditions and guidance on measures to mitigate the risk and impact of financial failure, we highlighted that such an approach is reliant on the entity acting in good faith, and stated that we would welcome further detail from Ofgem on its monitoring plans. We would argue that the need for further detail on monitoring arrangements is also applicable here and we recommend that Ofgem sets out these details by the end of the authorisation window in January 2027.
Consumer Scotland recognises that compliance monitoring in the heat network market will be a significant ongoing undertaking for the regulator, but we would caution against any approach which is over reliant on self-reporting of potential non-compliance.
Proposed Heat Networks Penalty Policy
Is the process for deciding whether to impose a financial penalty, and how the amount is calculated, clearly presented in the Penalty Policy Statement?
Yes, we are satisfied that these processes are clearly presented in the statement.[iv] The outline (at 4.1) of the criteria that the Authority will consider when deciding whether to impose a financial penalty is, although non-exhaustive, useful in highlighting seriousness; impact; and deterrence as three of the main considerations. Similarly the outline (at 5.3) clearly sets out that ensuring the authorised person does not benefit financially; the seriousness of the contravention; and deterrence of further misconduct, are three of the main aims of a financial penalty.
Consumer Scotland also welcomes confirmation (at 4.2) that the authorisation conditions and requirements are subject to change, although we recommend that Ofgem provides clarification on whether action can be taken retrospectively against an authorised person, and if so details on the timescales and process for this to occur.
In terms of how a financial penalty is calculated, this is presented clearly in the statement through the six step process.
Is the process for deciding whether to impose a consumer redress order, and how its requirements are determined, clearly presented in the Penalty Policy Statement?
Yes, we are satisfied that these processes are clearly set out in the statement. As per our response to question 5, the criteria that the Authority will consider when deciding whether to impose a consumer redress order is, although non-exhaustive, clearly presented (at 4.1) and useful in understanding the policy intention. Similarly, how the requirements for consumer redress orders are determined is clearly set out in chapter 8.
Consumer Scotland supports the use of consumer redress orders as a means of remedy for consumers who have suffered detriment. We accept that for various reasons calculating redress for individual consumers may not always be possible, and therefore alternative mechanisms need to be in place, but we welcome the Authority’s commitment to ensure that – where consumers have suffered loss, damage or inconvenience – every effort is made to compensate the affected consumers directly.
Are there any additional factors specific to heat networks that we should consider when deciding whether to impose a financial penalty and the amount, or a consumer redress order and the requirements?
In order to be effective, Ofgem’s approach to regulation will need to reflect the scale of the heat networks sector, with potentially thousands[v] of regulated entities across Great Britain encompassing a significant variety of commercial and operating models. We therefore welcome instances where material differences from the gas and electricity regimes are imposed, either through the Regulations or in the proposed guidelines, to deliver a particular outcome. One example of this, in the context of financial penalties, is setting a maximum penalty limit of £1 million or 10% of the authorised person’s turnover – whichever is higher – to protect against instances where turnover is low but the contravention has resulted in significant gain.
Are there any specific considerations or alternative approaches that Ofgem should consider when progressing enforcement action against publicly funded bodies?
Consumer Scotland recognises that heat network regulation cannot be the same for every authorised entity. We propose that the sector should be striving for equivalence of outcomes as opposed to standardised approaches. For example, in our response[vi] to the heat networks regulation: implementing consumer protections consultation, we did not support the carve-out from Guaranteed Standards of Performance for heat networks operating on a not-for-profit business model, as were concerned that this risked creating a two-tier market where heat networks were held to different service standards. However, in our response to the heat networks regulation: authorisation conditions and guidance on measures to mitigate the risk and impact of financial failure consultation, we accepted that registered social landlords should not be subject to supply continuity arrangements, as there are already sufficient protections in place for this elsewhere in the regulatory framework.
Consideration of how best to approach enforcement against publicly funded bodies would benefit from a similarly balanced assessment. Whilst it could be argued that such entities should be subject to the same enforcement regime, there may also be broader economic considerations which make this counter-productive. The example given in the draft penalty policy statement is the potential burden on vital public services that could result from a financial penalty. It should also be noted that a precedent exists in having different approaches to penalties for public and private bodies within the same regulatory regime, in shape of the Information Commissioner’s Office’s public sector approach.[vii]
Step 6 of the process for determining the amount of a financial penalty considers the total financial liability on the authorised person resulting from the contravention, and states that the Authority may adjust this to ensure it is reasonable in all circumstances. We welcome the commitment to consider (at 5.21) such an adjustment for local authorities or other not-for-profit entities, but our support for such an approach would be contingent on ensuring this does not come at the cost of enacting positive remedies for consumers who have experienced detriment.
Fixed Penalties
What types of breaches do you think should be subject to Fixed Penalties in the heat networks sector?
Consumer Scotland agrees that fixed penalties can be a proportionate and efficient tool for certain types of non-compliance, particularly where the breach is clear and does not require a full investigation. We also agree that fixed penalties should be used in a limited number of scenarios, including those identified in the consultation: where the breach is administrative or procedural; the facts are not in dispute; and where a swift and proportionate response is in the interest of consumers and the market.
If after the go-live of enforcement action fixed penalties are found to be a useful tool for the reasons outlined above, we would encourage Ofgem to keep the scenarios that are in scope for fixed penalties under review, with a view to adding others as appropriate.
What level of penalty do you think would be appropriate for these types of breaches?
We have not taken a view on what constitutes an appropriate level of penalty at this stage.
Are there any risks or unintended consequences Ofgem should consider in applying Fixed Penalties?
To deliver on the policy intent, fixed penalties need to be proportionate. The heat networks regulation: authorisation and regulatory oversight consultation[viii] proposed consideration of a rising scale approach to fixed penalties, in instances where the same or a similar breach continues. Consumer Scotland would suggest that there may also be merit in considering this approach in other instances, such as market segmentation - for example, whether it is proportionate for a small communal network to be subject to the same level of penalty as a much larger district heating scheme, and similar considerations. We would welcome further engagement on this point as the policy development on fixed penalties progresses.