Response to Ofgem on Heat Networks Regulation: Consumer Protection Guidance

Consumer Scotland is the statutory body for consumers in Scotland. Established by the Consumer Scotland Act 2020[i], our purpose is to improve outcomes for current and future consumers. We are independent of the Scottish Government and accountable to the Scottish Parliament.

Our core funding is provided by the Scottish Government, and we also receive funding for research and advocacy activity in the electricity, heat networks, gas, post, and water sectors via industry levies which are derived from consumers’ bills.

Our responsibilities relate to consumer advocacy. In our 2023-2027 Strategic Plan[ii], we have identified three cross-cutting consumer challenges, which guide our work during this period. They are:

• Affordability
• Climate change mitigation and adaption
• Consumers in vulnerable circumstances

Consumer Scotland is the statutory advocate for heat network consumers in Scotland. As part of this role Consumer Scotland carries out research into the issues and experiences heat network users face, using this evidence to advocate for improvements on behalf of consumers. We also represent heat network consumers on a range of consumer, government and industry forums, including: the Heat Trust Committee, Ofgem’s stakeholder advisory group and the Scottish Government’s Heat in Buildings strategic advisory group.

Consumer Scotland also funds the delivery of consumer advice in Scotland, integrating heat network support into existing energy advice services. Consumers have access to advice and support through Energyadvice.scot from Advice Direct Scotland (ADS). Consumers in vulnerable circumstances can also be referred to additional support through the Extra Help Unit (EHU) at Citizens Advice Scotland (CAS).

Consumer Scotland welcomes the opportunity to contribute to this consultation and supports Ofgem’s ongoing work to establish its role as regulator for heat networks across Great Britain. We are actively working to influence and support the development of forthcoming heat network regulation which we think should underpin a market that delivers safe, affordable and reliable low carbon heating for consumers. It should also help to ensure that consumers are well informed and have access to advice, support and redress should they need it.

We have previously submitted responses to Ofgem and DESNZ consultations on implementing consumer protection[iii] and authorisation and regulatory oversight.[iv] We have also responded to recent Ofgem consultations seeking views on fair pricing protections[v], enforcement guidelines and penalty policy[vi] and guidance on measures to mitigate the risk of financial failure.[vii]

In addition to our contribution to developing regulation, Consumer Scotland has carried out a programme of work to understand the impact that decarbonising heating in Scotland’s buildings will have on consumers. As part of this work we have responded to the Scottish Government’s proposals for a Heat in Buildings Bill[viii] and we recently published the findings of our investigation into the green home heating market.[ix]

We have also worked closely with our third sector delivery partners Advice Direct Scotland (ADS) and the Extra Help Unit (EHU) at Citizens Advice Scotland (CAS) to better understand consumer experience through data and intelligence from the advice service.

Our response to the questions below has been framed by our Consumer Principles which are based on frameworks that have been developed over time by both UK and international consumer organisations. Reviewing policy against these principles enables the development of more consumer-focused policy and practice, and ultimately the delivery of better consumer outcomes.[x]

Consumer Scotland is supportive of the draft guidance proposed by Ofgem. We have not responded to all of the questions asked but have responded where we can add value from our experience in both heat networks and other markets. We would welcome the opportunity to discuss the content of this response in more detail.

Standards of Conduct

Consumer Scotland is broadly supportive of the draft guidance on supplier standards of conduct. Ensuring that authorised bodies and their representatives engage with and treat heat network consumers, particularly those in vulnerable circumstances, in a fair manner is essential.

Question 1. Do you find our proposed guidance on the Standards of Conduct relevant to the corresponding authorisation condition, and useful?

The proposed guidance on the standards of conduct are very relevant to the authorisation conditions. We welcome Ofgem’s guidance setting out expectations in relation to identifying the relevant responsible authorised entity; something we know is currently a significant cause of frustration and confusion for consumers living on heat networks when they need to escalate a complaint or issue. We also welcome clarity on requirements for suppliers and operators to cooperate and work together to ensure compliance and better outcomes for consumers.

The guidance sets out clear expectations on standards of conduct, specifically supplier behaviour towards heat network consumers. The corresponding authorisation conditions set out that authorised entities must behave and carry out any actions in a fair, honest, transparent, appropriate and professional manner. Consumer Scotland welcomes this approach and we believe this will help to improve consumer outcomes and raise the consistency of standards across the sector.

Question 2. What should we consider including in a future iteration of the guidance on the Standards of Conduct, to make it more useful?

We recognise that guidance on the standards of conduct will need to evolve and adapt over time. We would encourage Ofgem to work in close partnership with Citizens Advice and Consumer Scotland as statutory advocates, and with the ombudsman, using complaints data to review how impactful standards of conduct have been and using this to inform the design of future guidance.

Question 3. Can you share some examples of how you have approached consumer engagement practices, where this has improved your understanding of consumer needs?

Communication and engagement, while not normally the primary cause of consumer complaints, can play a significant part in the escalation of consumer issues and prolong any resolution and redress. Consumer Scotland’s approach to engagement practices for heat networks has been shaped by our focus on heat network consumer complaints across a range of different networks and operators.

This work has demonstrated the value of early engagement between operators and consumers during the initial stages of heat network development. Early dialogue enables developers to incorporate consumer needs into the network’s design and fosters open, ongoing communication between residents and the developer, operator, or supplier. Previous work carried out by CAS identified successful examples of community engagement that could inform how authorised entities approach consumer engagement.[xi]

Quality of Service

Quality of service is an essential component of improving outcomes for heat network consumers. This will help to ensure that consumers can effectively engage with and feedback to their operator or supplier if service does not meet their expectations.

Question 4. Do you find our proposed guidance on complaints relevant to the corresponding authorisation condition, and useful?

Consumer Scotland is supportive of draft guidance in relation to complaints, finding this both useful and relevant to the associated authorisation conditions. We also welcome Ofgem’s citing of the existing guidance on complaints handling for gas and electricity suppliers.[xii] We have previously noted that it will be important to be informed by the accumulated experience and lessons learned from the gas and electricity market for complaints handling.

Question 5. What should we consider including in a future iteration of the guidance on complaints, to make it more useful?

One of the key challenges heat network consumers often face is identifying the appropriate organisation responsible when making complaints. We are also aware through intelligence from the advice service that, this is a recurring issue and due to consumers often being passed between different bodies involved in the running of the network, no one takes responsibility for handling the complaint.

While we believe this matter will be addressed by guidance, the authorisation conditions and other elements of regulation, if it continues to be a feature of post regulatory complaints, then more prescriptive guidance may be required to address it and help to support better consumer journeys.

Question 6. Do you find our proposed guidance on assistance and advice information relevant to the corresponding authorisation condition, and useful?

The proposed guidance on assistance and advice information is both useful and relevant to the associated authorisation conditions. We welcome Ofgem’s reference to their existing guidance and expectations for consumers to be able to contact suppliers.[xiii] As with other elements of regulation, there is an opportunity to learn from prior experiences in the gas and electricity market which will help to inform and shape heat network guidance.

Question 7. What should we consider including in a future iteration of the guidance on assistance and advice information, to make it more useful?

As we noted in our response to question 5, it may be helpful for future iterations to include more prescriptive guidance which sets out how operators and suppliers can ensure that a single point of contact can address initial consumer concerns or complaints. When reviewing this section of the guidance in the future we would encourage Ofgem to engage with consumer advocacy bodies to better understand how effective the draft guidance has been at addressing this issue.    

Billing and Transparency

Ofgem’s proposed guidance on billing and transparency is a welcomed aspect of regulation as we know that billing practices across the sector vary considerably and can be a leading source of consumer complaints and concern.

Question 8. Do you find our proposed guidance on billing and transparency relevant to the corresponding authorisation condition, and useful?

We welcome Ofgem's draft guidance in relation to billing and transparency and we find this both relevant to the associated authorisation conditions and useful for addressing many of the challenges consumers may encounter.

This section of the guidance is an opportunity to ensure that consumers are signposted to the appropriate consumer advice organisations via their bills, should they need to contact them. Draft guidance should be corrected to ensure that heat network consumers in Scotland are directed to ADS as the tier 1 advice provider. Section 3.4 of the draft guidance should be updated to read:

“Including how to contact the relevant consumer advice organisation (Citizens Advice or Advice Direct Scotland)”

Similarly, section 3.10 of the draft guidance should be updated to read:

“Advice Direct Scotland for consumers in Scotland”

It is essential that guidance is updated to ensure that operators and suppliers refer consumers in Scotland to Advice Direct Scotland who are the official provider of Tier 1 advice and support for energy consumers.

Question 9. What should we consider including in a future iteration of the guidance on billing and transparency, to make it more useful?

Guidance which ensures that consumers receive clear, accurate and transparent billing is an important component of regulation and will help to drive better consumer outcomes within the sector. Consumer Scotland is supportive of the draft guidance on billing but we would encourage Ofgem to review the effectiveness of this guidance within one year of regulation, working closely with Consumer Scotland, Citizens Advice and the Ombudsman.

Question 10. Can you share some examples of best practice for billing, including any examples of templates or bills currently sent to consumers?

We have not responded to this question.

Question 11. Do you have any views on non-domestic billing guidance?

We have not responded to this question.

Back-Billing

Consumer Scotland recognises that back-billing is a significant issue for heat network consumers and we welcome guidance setting out clear expectations and a fair and transparent approach to billing in the sector.

Q12. Do you find our proposed guidance on back-billing relevant to the corresponding authorisation condition, and useful?

Consumer Scotland sees the proposed guidance on back-billing as very relevant to the authorisation conditions and is a positive step towards addressing concerns over how back-billing is currently used in the sector. We welcome this guidance as a measure to improve practices within the sector and ensure that consumers are being treated fairly. 

Q13. What should we consider including in a future iteration of the guidance on backbilling, to make it more useful?

We note that the guidance specifically references the Landlord and Tenant Act 1985, however this legislation only applies to England and Wales as the equivalent legislation in Scotland is different.[xiv] We note that Ofgem are working with UK Government to understand the interaction between this legislation and we would encourage Ofgem to engage with Scottish Government officials on the equivalent legislation in Scotland.

Heat Supply Contracts

It is essential that heat network consumers are provided with clear and accurate information about their heat network and what they should expect in relation to terms of supply.

Q14. Do you find our proposed guidance on heat supply contracts relevant to the corresponding authorisation condition, and useful?

The proposed guidance on heat supply contracts is both relevant to the authorisation conditions and useful, in terms of ensuring that suppliers provide consumers with the essential information on what they should expect from their heat network. Consumer Scotland welcomes Ofgem’s guidance in this space as we believe that this will help to raise the standard and consistency of information provided to consumers.

Q15. What should we consider including in a future iteration of the guidance on heat supply contracts, to make it more useful?

We have not responded to this question.

Q16. Can you provide any examples of best practice for heat supply contracts/agreements?

We have not responded to this question.

Q17. Do you agree with our use of “deemed contract”?

We recognise Ofgem’s rationale for the use of "deemed contract” and in principle agree with its use as defined in the authorisation conditions.[xv]

Q18. Can you provide any examples of best practice for termination of contract, including scenarios where a consumer terminates the contract or disconnects but continues to live in the property?

We have not responded to this question.

Q19. What are your views on transitional arrangements and timelines for implementing heat supply contracts?

We welcome and support Ofgem’s pragmatic approach to changes to contractual arrangements. A transitional period will help to ensure that authorised entities have sufficient latitude to make appropriate updates to contractual arrangements. Any transitional period must also provide a clear timeframe for suppliers to act. We would recommend that guidance sets out a clear requirement for suppliers to update contracts within 12 months of the deadline for authorised entities to register with Ofgem. This would provide authorised entities with sufficient time to act.

Protections for Consumers in Vulnerable Circumstances

Consumer Scotland welcomes Ofgem’s proposed guidance for consumers in vulnerable situations. We are aware from advice service data that the experiences of heat network consumers in vulnerable circumstances is often inconsistent and subpar to that of the gas and electricity market. As such, we welcome this guidance to provide authorised entities with clear expectations of what is expected of them to support consumers in vulnerable situations. 

Q20. Do you have any views on interactions between the protections for heat network consumers in vulnerable situations and existing regulations in housing, such as the social housing, leasehold and freehold, and private rental sectors?

Section 6.4 of the draft guidance highlights that there are already some existing provisions for consumers in vulnerable circumstances within the housing sector. However, it stops short of highlighting any specific provisions and the parts of the housing sector that would be relevant to authorised entities. A comprehensive mapping of this is needed to better understand these interactions and the implications for both suppliers and for consumers.

As we noted in our response to question 13, we are not aware of any work carried out by Ofgem, the UK or Scottish Governments to map out the interactions between forthcoming regulation and housing regulation in Scotland and it is imperative that this is done as soon as possible.

Q21. Do you find our proposed guidance on priority services registers relevant to the corresponding authorisation condition, and useful?

We welcome Ofgem’s draft guidance setting out expectations on priority services registers. We find this both useful and relevant to the corresponding authorisation conditions. However, we would recommend that Ofgem monitors how this guidance has been delivered in order to review PSR guidance early in the life cycle of regulation to ensure that this fully protects consumers in vulnerable circumstances.  

Q22. Do you find our proposed guidance on security deposits, payment difficulties, disconnections and direct debits relevant to the corresponding authorisation condition, and useful?

Consumer Scotland is supportive of draft guidance on security deposits, payment difficulties and direct debits. The guidance is both useful and relevant to the associated authorisation conditions. This guidance will help to protect consumers and raise the consistency of supplier behaviour across the sector.

However, as we noted in our response to the previous consultation on consumer protection, Consumer Scotland recommended that Ofgem go further and introduce a ban on disconnections for non-payment of energy costs. As such, we would recommend that Ofgem review this guidance in the early years of regulation, working with both the consumer advocacy bodies and the ombudsman to assess the impact that guidance has had and whether it needs to go further to avoid disconnections and protect vulnerable consumers. 

Q23. Do you find our proposed guidance on prepayment meters relevant to the corresponding authorisation condition, and useful?

The proposed guidance on prepayment meters (PPM) is both useful and relevant to the associated authorisation conditions. Consumer Scotland has commissioned qualitative research to better understand supplier practices, including the use of PPM. We will look to share this with Ofgem in 2026 as this may be helpful to better understand supplier practices on PPM and help shape any revisions during a future review of this guidance.

Q24. Do you find our proposed guidance on self-disconnection relevant to the corresponding authorisation condition, and useful?

Consumer Scotland is supportive of Ofgem’s draft guidance on self-disconnection. The guidance is both useful and relevant to the associated authorisation conditions.

Q25. What should we consider including in a future iteration of the guidance on protections for consumers in vulnerable situations, to make it more useful?

We would encourage Ofgem to review guidance on issues relating to consumers in vulnerable circumstances, working closely with consumer advocacy bodies and the ombudsman following the first full year of regulation to check-in on how effective this has been delivered by suppliers.

Security of Supply

Consumer Scotland is broadly supportive of the draft guidance on security of supply. It is essential to ensure that heat network consumers have a reliable supply of heating, cooling or hot water and that action is taken to mitigate any outages or interruptions.

Q26. Do you find our proposed guidance on the security of supply relevant to the corresponding authorisation condition, and useful?

Yes, Consumer Scotland finds the proposed guidance on security of supply both relevant and useful to the authorisation conditions. It sets out clear responsibilities relating to maintaining network infrastructure, minimising risks and monitoring network performance; all of which are essential to ensuring that consumers have a reliable and consistent supply of heat.

Q27. What should we consider including in a future iteration of the guidance on the security of supply, to make it more useful?

Future iterations of the guidance could look to strengthen expectations around providing consumer support. Many of the examples given in sections 7.9 – 7.12 we would consider to be the minimum expectations of consumer engagement and support. The guidance should be updated to make this clearer and ensure that all heat network consumers are provided with consistent support. 

It may also be useful at a future date to revisit guidance on security of supply once technical standards have been introduced and embedded to ensure that they are compatible and complimentary.