With only a year until Ofgem officially steps into the role of regulator for Britain’s heat network sector, it’s no exaggeration to say the industry is entering a new era. The days when heat network operators were less strictly regulated than gas and electricity suppliers are numbered. In future, we can expect to see a lot more attention paid to customer protection, and this inevitably means more scrutiny for energy providers.
Legislation defining the new market framework is expected to be fully phased in by 2026. The precise details aren’t yet known as Ofgem is still consulting with stakeholders across the industry to ensure the new rules are relevant, effective, and appropriately implemented.
Enhanced consumer protection
What we do know is that the first phase of the roll-out in Spring 2025 will include measures covering information transparency, metering, and safeguards for vulnerable customers. Citizens Advice will be appointed to provide consumer advocacy and the Energy Ombudsman will offer dispute resolution services.
Ofgem will also start collecting operational and financial data from registered heat suppliers next year, before implementing pricing rules and Guaranteed Standards of Performance (GSOPs) in 2026. Heat suppliers that fail to comply with these may have to pay compensation to affected consumers.
Back to normal energy procurement processes
Another important change will be the closing of the Energy Bills Discount Scheme (EBDS) on 31st March 2024, which is not expected to be replaced. So, it’s back to business as usual for incoming fuel tariffs. However, factors such as current conflicts in the Middle East and Ukraine mean ongoing market stability is far from guaranteed, and that should be borne in mind when entering into new contracts with energy suppliers.
So, what does all this mean in practice, and what steps should energy managers take now to prepare for the road ahead?
- Check your meters – Effective metering will play a crucial role in ensuring your organisation can meet its new regulatory obligations. Meters should be replaced by smart meters where possible. They should also be included in regular maintenance regimes and replaced when they near the end of their expected life. If they fail, bills will be inaccurate, leading to residents being over- or undercharged, and making it difficult to manage heat network financials.
Meters can also help to identify any abnormal consumption levels so you can keep your heat network functioning optimally to keep costs down for residents. And they can provide households with real-time energy usage data in line with transparency requirements. - Keep on top of tariffs – Incoming tariffs may well continue to change relatively frequently, so you should conduct regular reviews to ensure residents are charged correctly. Under the new regulations, they are expected to require 31 days’ notice of any price changes, plus any back-billing will be limited to 12 months in most circumstances.
Tariff changes often coincide with supplier changes, so setting a diary notification eight weeks before contract transitions will allow for proactive adjustments to be made. Involve your metering and billing provider as early as possible to ensure correct billing coordination. This is also a good time to confirm with residents any access agreements needed for meter-fault repairs, especially where they are vulnerable. - Keep communicating – Cooperation and communication will be vital to help ensure your residents understand how the new regulations will affect them and what their responsibilities are. This is also a ‘good-news’ opportunity that could help to strengthen relationships – the legislative changes are designed to benefit them, after all.
Keep talking to your suppliers, too. Notify them of any contract changes and lean on the ones with heat network expertise to help you prepare for the new regulations, reduce costs, and get the most out of your equipment. Don’t wait until you’re hit with a big bill or a fine to find out there’s a problem.
With tariff change notice periods for residents needing to be factored into timescales and potentially new processes needing to be set-up to allow for data transparency, energy managers should act now to check they’re following best-practice guidelines. Help is available, however. Your metering & billing and/or maintenance suppliers should be aware of what’s coming and willing to help you prepare.