Heat networks regulatory framework – key updates August 2025

August saw a burst of activity from Ofgem, which published several updates as part of its ongoing development and implementation of a regulatory regime for heat networks in the UK. This article provides a short update of these developments, which are shaping the legal and operational landscape for heat network operators, suppliers and off takers, and customers across the UK.

Consultation decision on authorisation and oversight

On 8 August 2025, Ofgem provided feedback and released its decision following its consultation on the authorisation and regulatory oversight of heat networks. In general, Ofgem plan to proceed with their original proposals. The key outcomes from the consultation are:

• Confirmation of the general process for registration and authorisation for entities operating heat networks.
• Quarterly reporting requirements and the introduction of monitoring, audit, and compliance mechanisms to ensure consumer protection.
• A commitment to a risk-based approach to enforcement.
• Updates to increase the scope of one of the authorisation conditions.

You can view the full consultation decision here.

Joint response on consumer protections

On 8 August 2025, Ofgem and the Department for Energy Security and Net Zero (DESNZ) also published a joint response to their consultation on consumer protection requirements. The highlights from this response include:

• Integration of feedback from over 150 stakeholders, including housing associations, local authorities, and consumer groups.
• A likely abandonment of Last Resort Direction proposal.
• Updates to the “step-in” process to align with sector feedback.

You can view the full response here.

New consultations

Ofgem launched three new consultations (outlined below) and requests feedback from the sector to feed into ongoing development of the regulations.

Implications of the August updates and next steps

Clearly the evolution of the heat network market continues to have DESNZ’s and Ofgem’s focus and attention. Businesses operating or investing in heat networks, and prospective off takers, should take note of these updates and may want to engage with the ongoing consultations to help shape the regulations and monitor any updates. Ofgem had forecast the regulations being finalised and coming into force from January 2026.

Zoning and pricing – what next?

The UK’s push towards designating specific geographic areas as heat network zones continues to be a key regulatory issue, as the consultation reveals stakeholders are calling for standardisation and consistency across how such zones will be identified. Concerns were also raised about a potential regulatory overlap between Ofgem and Zone Coordinators (ZCs), who are responsible for designating heat network zones and enforcing requirements. Ofgem acknowledged these concerns, citing the “huge task” of delivering a new regulatory system but that they are working closely with DESNZ to develop suitable policies. Some market players have also speculated that it may be challenging for local authorities to establish teams able to fulfil the ZC role.

Similarly, pricing remains a closely monitored aspect of the emerging regime.

Ofgem’s Fair Price Consultation closed in the summer with its decision expected later this year, but the consultation and response indicates that stakeholders are seeking more guidance on how the heat networks will be charged. Ofgem has confirmed they are exploring benchmarking approaches as part of its “fairness test” and while a zero standing charge option was consulted on, it is not yet applied to heat networks. Ofgem maintains it has no current plans for a price cap but continues to assess all options.

Further clarity is expected in its forthcoming response but whatever happens, Ofgem and the government are committed to the following timeline of delivering heat networks regulation: