Heat networks are becoming a core part of the UK’s infrastructure that consumers are depending on to keep themselves warm through the winter.
Parliament has empowered Ofgem to regulate heat networks for the first time (amongst other things) by passing the Energy Act, which became law on 26th October 2023 with the aim to deliver both energy security and consumer protection.
Ofgem has announced its intention to begin work on the consumer protection aspects of heat networks regulation in ‘early 2024’, which could take the form of future licence obligations, codes or standards. This article analyses the impact of the Energy Act for regulating heat networks, and, with a specific focus on consumer privacy and transparency, examines what controls we could expect to see in the future.
What protections will the Energy Act introduce for heat network consumers?
Part 8, Chapter 1 of the Energy Act designates Ofgem as the competent authority to regulate heat networks in line with the UK’s data-driven focus on reaching Net Zero. Under its new powers, Ofgem announced, in a joint consultation with the Department for Energy Security and Net Zero (DESNZ), an intention to introduce controls around the installation of smart heat meters; transparency around consumption data and prepayment meters; and the use of priority services registers by heat network suppliers and operators.
So far, Ofgem has proposed to regulate only the transparency of billing and pricing information to customers, including requirements for data quality (for instance, complete and not misleading); plain and intelligible language; and relevance to the consumer.. At this stage, this information is a lot less granular than the detail organisations must provide to energy consumers under electricity licenses, for example. Whilst Ofgem has outlined that supplying such information through an In-Home Display or equivalent would be more transparent, it is also proposing to allow heat suppliers the option to provide such data to consumers on a website or in paper form.
Another area that Ofgem has its sights on is safeguarding vulnerable consumers. Building on voluntary initiatives introduced by the Heat Trust, Ofgem has proposed to require all heat network operators and suppliers to introduce and maintain a Priority Services Register (‘PSR’). This would contain a uniform list of customers with known ‘vulnerabilities’, such as being elderly or having certain physical or mental conditions. Heat suppliers will be required to offer these individuals tailored communication, advance notification of outages and other support, in a similar vain to energy and gas sectors.
How will these heat network changes work for consumers?
Given the different sizes of heat networks and their varied consumer profiles, further work will be needed to develop more unified requirements for vulnerable consumers. From Ofgem’s consultation paper, it is proposing to maintain a self-declaration model for the Priority Services Register, by which consumers in vulnerable circumstances make suppliers aware of their needs. Whilst this approach is necessary to avoid profiling individuals or unfairly branding them as ‘vulnerable’, heat suppliers will need to ensure not only that consumers are aware of the existence of a PSR, but also open communication and maintaining trusting relationships with energy consumers to ensure they keep it up-to-date and accurate with their conditions and personal situations.
Part of this can be accomplished by establishing effective data sharing within the heat network industry, such as between local authorities and support organisations, to better identify and accommodate vulnerable consumers’ needs. This can mitigate individuals continually needing to inform different organisations of their needs, an issue which Citizen’s Advice has recently identified in the electricity and gas context.
When can we expect these heat network regulations to happen?
Ultimately, 2024 and 2025. Consumer protection is likely to be a core focus of these rules. However DESNZ has outlined that heat networks will be regulated by a combination of licences, industry codes, and enforcement developed across, any such regulation will likely only come after the development of technical standards for the operation and performance of heat networks, which is likely to be a priority for the next few months.
To stay ahead of the game, heat network suppliers should take note of the concerns raised by Citizens’ Advice and existing practice within the energy industry, particularly when installing meters or collecting any data on energy consumers. Moreover, in advance of any obligations that could come later this year, they should act to identify their domestic consumers and develop consistent priority services register messaging, capable of providing sufficient transparency to domestic consumers. Effective customer service and a strong privacy-by-design posturing among operations can help heat suppliers and other organisations prepare for regulation further down the road.
