Heat networks regulation: recovering Ofgem’s costs

Overview

We are consulting on our approach to recovering Ofgem’s costs for heat networks regulation and the proposals that will facilitate this. 

Who should respond

The consultation will be of interest to the heat network industry, including:

• heat network operators
• heat network suppliers
• energy services companies
• housing providers
• consumer groups
• asset owners
• metering and billing agents
• trade associations

The proposals on recovering costs will also be of relevance to the gas and electricity sector, including network companies and supply licensees.

Background

Ofgem is now the regulator for heat networks, launching new consumer protection rules as it begins regulating the sector in Great Britain from January 2026. The Energy Act 2023 provides Ofgem with the power to recover the regulatory costs associated with this new role.

Ofgem’s regulatory costs will be recovered through the licence fees paid by certain gas and electricity licensees during the initial period, and at a later date, through fees that will apply to both gas and electricity licensees and heat network authorised persons.

This consultation sets out policy proposals on the detailed arrangements to underpin cost recovery of heat networks regulatory costs.  In particular, we set out proposals on the following:

• on the detail of the blended approach for recovering the heat network regulatory cost from across heat network authorised persons and gas and electricity licensees,
• to impose a de minimis threshold
• the fee apportionment method
• fee incidence
• the frequency of payment collection