Response to Consultation on Installation and Maintenance Licensing for Heat Networks

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.

We have a particular focus on three consumer challenges: affordability, climate change mitigation and adaptation, and consumers in vulnerable circumstances.

Consumer Scotland welcomes the opportunity to respond to this consultation on the proposed installation and maintenance licensing regime for heat networks in Scotland. Heat networks play an important role in supporting decarbonisation and delivering affordable, reliable heating, but realising these benefits depends on robust consumer protections standards and effective regulation.

As heat networks expand across Scotland, the licensing framework should support both sector growth and consumer confidence. The proposed regime should be designed to ensure safety, quality, accountability and fairness, while recognising the monopoly characteristics of many heat networks and the limited ability of consumers to mitigate poor outcomes through switching or other market mechanisms.

The introduction of installation and maintenance licences will allow developers and operators of heat networks in Scotland to apply for a licence which will grant them additional statutory rights and powers to help simplify heat network development and maintenance. These additional rights and powers, while designed to encourage investment in communities and support the growth of the sector, should also be used to lower the end costs for heat network consumers.

Consumer Scotland is generally supportive of the proposals for an installation and maintenance licensing regime set out by the Scottish Government, and we would be happy to discuss further the key priorities for consumers in the ongoing development and implementation of this regime.

Question 1: Do you agree that Scottish installation and maintenance licences should be opt in, meaning only organisations who want the associated rights and powers need apply?

Consumer Scotland agrees that Scottish installation and maintenance licences should be opt in, meaning only organisations who want the associated rights and powers need apply. We agree that this will create a streamlined system which is not unnecessarily burdensome, and which avoids duplication with Ofgem’s registration process. We believe this motivation is the correct one to support the heat networks sector in its development phase. Recognising the changes in the regulatory landscape since the Heat Networks (Scotland) Act was passed in 2021, and adjusting the approach accordingly, is a pragmatic and should deliver on the policy ambition as outlined. The closer alignment that with the regime in England and Wales, that this approach will ensure, is also welcome.

The quality of installation and maintenance is central to system reliability, affordability and consumer outcomes. Scottish Government policy has emphasised licensing and technical standards are mechanisms to support high-quality service and consumer confidence in heat networks.[i] With  participation in licensing being  optional, more detail is required on how compliance with the licencing regime will be monitored. For example, the Scottish Government should set out the checks and balances that will be in place to ensure that un-licenced parties are not carrying out works. There is a risk that some operators may remain outside the regime while still delivering services that materially affect consumers. Similarly, with an opt in approach, there is a heightened risk of developers and operators misunderstanding or not being aware of licencing requirements, leading to accidental non-compliance.

Consumer Scotland therefore recommends that with an opt in model being taken forward, exemptions should be narrowly defined and subject to regular review, to ensure consumer risks are adequately managed. We would also highlight that ‘developers’ – as referenced in the consultation document, are not subject to Ofgem registration, so there may be some additional work required to ensure that parties defined in this way are not missed.[ii]

Question 2: Do you agree that installation and maintenance licences should be granted at organisation level rather than to individual networks, meaning that organisations with multiple heat networks only need to apply for one licence?

Consumer Scotland supports licensing at organisational level in principle, as this may reduce administrative burden and support consistency of standards across multiple networks.

An organisation-level licence may help embed common technical competence, governance arrangements and maintenance standards across operators’ portfolios, which could support more consistent consumer outcomes. However, organisational licensing should not reduce oversight at network level. Consumers experience outcomes through individual networks, and risks may vary significantly between systems. A single licence should therefore not remove the need for network-specific compliance, performance monitoring and enforcement where necessary. This should be considered when developing performance monitoring and enforcement mechanisms.

Consumer Scotland recommends that organisational licensing should be accompanied by robust reporting and compliance requirements at network level, including mechanisms for regulators to intervene in relation to individual poorly performing systems wherein consumer detriment arises.[iii]

Question 3: Do you agree that licences should be applicable to any type of heat network in Scotland irrespective of size or technology?

Consumer Scotland strongly agrees that licences should apply across all heat network types irrespective of size or technology. Consumers face similar risks, such as outages, excessive costs or poor maintenance outcomes, regardless of the technology or scale of the network serving them. Excluding certain network types could create regulatory gaps and undermine consumer fairness. Moreover, a technology-neutral approach would support consistency of consumer protections and future-proof the regime as technologies evolve.

Question 4: Are there any other considerations for the scope of licensing you wish to highlight?

Consumer Scotland would highlight the importance of ensuring the scope of licensing captures both new and existing networks and avoids unintended exclusions for legacy systems, self-supply networks, or mixed-use developments.

Consideration should also be given to ensuring the licensing regime aligns with wider consumer protection regulation, including emerging GB-wide heat network protections under Ofgem, to avoid confusion, fragmentation or duplication.

Question 5: Do you agree with the additional rights and powers which will be available to licence holders?

Consumer Scotland recognises that additional rights and powers may be necessary to support the effective installation, operation and maintenance of heat networks, particularly where these relate to access rights, street works and powers needed to maintain continuity and reliability of supply. In principle, we support the availability of such powers where they are necessary to facilitate efficient network development and operation.

However, these powers should be accompanied by strong safeguards and should be clearly linked to corresponding obligations on licensees, that must also protect consumers and maintain public confidence in heat networks.

This is particularly important given the monopoly characteristics of many heat networks and the limited agency consumers may have where poor service or disruption occurs. The rights and powers may have direct implications for consumers and property owners, including disruption, access issues, service interruptions and potential costs that may be absorbed by the consumer.[iv] It is therefore important that the exercise of such powers is proportionate, transparent and subject to appropriate oversight.

Consumer Scotland would also highlight the importance of monitoring arrangements within the scope of the licensing regime to ensure that rights and powers granted to licensees are exercised appropriately and not misused. While proposals around applications and monitoring have focused largely on desk-based metrics, such as accounts and insurance, consideration should also be given to consumer-focused compliance mechanisms. This could include periodic site inspections or annual site visits, to provide independent verification of compliance in practice and help identify issues that may not be evident through document-based reporting alone. Such monitoring could help ensure powers associated with installation and maintenance are used proportionately and support early identification of poor practice, thereby strengthening consumer confidence.

We also consider there should be clear consumer safeguards associated with the use of these powers, including requirements relating to notice, communication with affected consumers, restoration following works, and mechanisms for redress where harm or detriment occurs.

Question 6: Are there any other rights and powers you feel should be considered for installing and maintaining heat networks?

Consumer Scotland would encourage the Scottish Government to consider how installation and maintenance licences could be utilised as a measure to drive improved outcomes for consumers living on heat networks. Additional options that could be considered to improve consumer experiences include:

• powers for the licence regulator to require corrective action where maintenance failures create consumer harm
• powers to obtain performance and consumer outcome data from licensees
• powers to intervene rapidly where there is serious risk to vulnerable consumers

We would be happy to discuss these options further with officials.

Question 7: Do you have any views on who the licence regulator should be?

Consumer Scotland considers the regulator should be independent, have strong technical capability, consumer protection expertise and the capacity to coordinate effectively with other relevant regulators. There may be advantages in aligning the licensing regulator closely with wider heat network regulation to minimise fragmentation and simplify accountability.

Similarly, in line with the ambition to achieve consistency with the installation and maintenance licencing across GB, there may be benefit to aligning the regulator in Scotland with that in England and Wales, for example through Ofgem.

Question 8: Do you agree that the licence application process should focus on industry expertise and financial stability?

Consumer Scotland agrees these are important components of licensing. Technical competence and financial resilience are essential to ensuring reliable service provision and reducing risk of system failure or poor maintenance outcomes.[v]

However, Consumer Scotland considers the application process should also consider applicants’ capability to deliver good consumer outcomes. This could include evidence of governance arrangements, complaint handling processes, asset management planning, and approaches to protecting vulnerable consumers.

Question 9: Do you agree that fuel poverty, greenhouse gas emissions and Just Transition are not appropriate requirements for an opt in installation and maintenance licence?

Consumer Scotland recognises these issues may be addressed elsewhere in the wider policy framework. However, we do not consider they should be entirely excluded from consideration.

While installation and maintenance licences may be narrower in purpose, these activities can affect affordability, efficiency and system performance, all of which have implications for fuel poverty and decarbonisation outcomes.[vi] At minimum, licensing conditions should be consistent with wider policy objectives around fuel poverty reduction and just transition principles, even if these are not primary licensing tests.

Question 10: Do you agree licences should be subject to general and specific conditions, and limitations, which may be modified after the licence has been granted?

Consumer Scotland strongly agrees. The sector is evolving and the regulatory framework should be capable of adapting over time. The ability to modify conditions allows the licence regulator to respond to emerging risks, changing standards and lessons from implementation. However, any modification powers should be transparent, proportionate and subject to appropriate consultation and safeguards.

Question 11: Do you agree licences should not have an end date unless revoked or surrendered?

Consumer Scotland broadly supports indefinite licences where accompanied by strong ongoing compliance and oversight. Indefinite licences may support investment certainty and reduce administrative burden for licence holders, which can benefit consumers by helping to maintain a stable, reliable and better-regulated market.

However, indefinite licences should be complemented by clearly signposted periodic reassessment or review points to ensure continued competence and compliance over time. These review points should be transparent to consumers, including clear information on when reviews will take place, what they will consider and how feedback will be acted upon. Without periodic review, there is a risk that standards could drift or emerging risks go unaddressed, potentially leading to consumer harm.

Question 12: Do you agree there should be a public register of installation and maintenance licences?

Consumer Scotland strongly supports a public register. Transparency supports accountability, consumer confidence and informed scrutiny. Public registers are a common feature of effective regulatory systems and can help strengthen trust, as well as offering a useful forum for stakeholder engagement.[vii]

Question 13: Is there any other information you think we should include on the public register of installation and maintenance licences?

Consumer Scotland broadly supports the inclusion of the information stated in the consultation document, and also suggests consideration should be given to:

• enforcement actions or sanctions, where appropriate
• links to performance or consumer outcome reporting where available
• dates of periodic reviews (past and forthcoming)

Information should be accessible and meaningful for consumers as well as industry stakeholders.

Question 14: Do you agree that there should be fees associated with recovering the costs of administering installation and maintenance licences?

Consumer Scotland recognises the rationale for cost recovery through fees for developers and operators and agrees this may be appropriate. However, fees should be proportionate, transparent and designed so they do not create barriers for smaller developers/operators, or lead to excessive costs being passed through to consumers e.g., through standing charges. Regulatory oversight should ensure consumers receive value for money and that sustainable cost recovery arrangements support effective regulation, rather than simply shifting costs onto bill payers.[viii]

Question 15: Please provide any further comments on the proposals set out in this consultation.

Across the proposals, we would emphasise four cross-cutting considerations:

• Consumer outcomes should remain central and licensing should not be viewed solely as technical regulation, but as a mechanism to support affordability, reliability and fair treatment for households.
• Monitoring and enforcement will be critical, as standards must be backed by effective oversight, including monitoring, inspections where appropriate, and impartial enforcement.
• Coordination across the regulatory landscape is essential, as alignment with wider heat network regulation, including Ofgem’s registration process role, will be important to avoid gaps or duplication.
• Existing consumers must benefit (or should not be inadvertently disadvantaged), as transitional arrangements should ensure consumers connected to legacy systems are not left behind and that protections apply across the market over time.

As statutory advocate for heat network consumers, Consumer Scotland is happy to provide further support or input to the Scottish Government as this work develops. We would be particularly keen to discuss zoning policy in Scotland and the role that Consumer Scotland can play in this process.