Energy UK response to Heat networks regulation: authorisation conditions and guidance on measures to mitigate the risk and impact of financial failure

Executive summary

Energy UK welcomes this consultation as providing further detail to the heat networks industry and consumers on the approach to financial failure.

Energy UK supports the decision to introduce an appropriate iteration of the Special Administration Regime for the sector. Further detail on how this process will work will be beneficial, including how the costs will be recovered. Linked to this, we also support a centrally managed arrangement for intervening and securing the continued operation of heat networks in cases where authorised entities are at risk of insolvency.

However, we would caution against the socialising of costs for this scheme across the customer base, as this is a regressive approach. A more progressive alternative would be for UK Government to fund this centrally.

Energy UK welcomes the decision by Ofgem to not require contractual step-in arrangements. Contractual step-in arrangements should be implemented on the basis of commercial agreement rather than regulatory requirement.

Energy UK believes that these proposals, and the regulatory landscape more generally, needs to be kept under review as the sector grows, in terms of whether they are adequately managing the activity and risk of insolvency in the market as expected.