Energy UK response to heat networks: authorisation conditions

Executive Summary

Energy UK supports the introduction of the authorisation conditions and shares Ofgem’s goals to introduce robust regulations for heat networks. The introduction of regulation will help to ensure consumers are protected while creating an environment suitable for industry growth. Overall, the final drafting of the authorisation conditions provides an accessible and consolidated document for industry to follow. However, Energy UK believes there are a few key areas in which Ofgem could provide more clarity to ensure regulations are proportionate and feasible to comply with.

• Energy UK recommend moving away from the framing of “all reasonable steps”. To avoid disproportionate and unnecessary administrative burden following the legal connotations this phrase implies.
• Provision of further clarity and definition of consumers is required in the conditions to ensure all parties within tenancy agreements are clear of their responsibilities and to avoid any customer detriment this could cause.
• Clarity would be welcomed regarding the registration requirements for heat sources feeding into heat networks. 
• Ofgem should be mindful extending the fair pricing framework to larger non-domestic customers, as they are commercially experienced and well-equipped to negotiate.
• Ofgem should provide more examples and clarification on condition 10 ‘Open & Co-operative’ to help guide heat networks to engage openly on Ofgem.
• Energy UK are concerned the authorisation condition 12 ‘Operational Arrangements and Material Assets’ could interfere significantly with some financing structures in place for heat networks. This risks significantly increasing investors risk premium in heat networks or preventing investment entirely.
• Energy UK also request further clarity to the context in which it is appropriate to use deemed contacts over written supplier contracts to ensure deemed contracts are only used in extenuating circumstances.
• Ofgem should provide a more proportionate and flexible approach to the inclusion of comparison of consumption data on the bill from the previous year.
• Energy UK would caution against applying disconnection bans directly to the bulk suppliers due to their lack of any direct engagement with end-consumer.
• Greater clarity is needed from Ofgem on the expectations surrounding consumers who are currently on prepayment schemes. There is concern here that a sudden move of customers from prepayment meters to credit billing could pose significant debt risk for both customers and the local authorities and housing associations involved.
• Ofgem needs to help the industry to tackle the problem of unrecoverable debt and provide a robust debt strategy for the industry to ensure practical debt solutions for heat network customers.
• Finally, Energy UK would like to stress that it is critical that practical forums are put in place to successfully carry out post-implementation of the regulations review.