Captive Customers: Why Heat Network Regulation Is Long Overdue — And What It Means for Industry

19 May

When you move into a home heated by a heat network, you can’t switch from the heat supplier that comes with the property. That critical fact – that heat network consumers are captive customers – is the reason formal regulation is finally arriving, and why getting it right matters so much.

From 27 January 2026, Ofgem began bringing heat networks under its regulatory umbrella for the first time. Until now, the estimated 480,000[1] to 900,000[2] homes connected to heat networks across Great Britain (the range itself a symptom of how poorly understood this market has been) - have operated in a market with, in the words of Consumer Scotland, "major gaps in consumer protection[3]."

Heat networks can bring significant benefits for consumers and society. Even where networks are powered by conventional sources, it is more cost efficient and energy efficient to distribute heat in the form of hot water from one central source via insulated pipes to, for example, 1,000 flats than install 1,000 individual heat generation units[4]. And when they deliver locally-sourced renewable heat, heat networks become the most cost-effective and low-carbon heating solution available for densely populated urban areas. Renewable generation can also help reduce reliance on fossil fuel alternatives and protect households from fluctuating oil and gas prices.

The potential cost savings to consumers and businesses as well as the necessary infrastructure investments needed can help stimulate local economies. Other benefits include:

o improved safety by removing gas combustion from individual dwellings;

o grid stability by reducing peak electricity using large-scale hot water storage; and

o reduced fuel poverty.

In recognising all the proven and potential benefits, the government has set itself the target to double the amount of heat demand delivered by heat networks (in England) to 7% by 2035 and to provide 20 per cent by 2050.[5] The UK government’s Heat Network Transformation Programme (HNTP) invests over £500m to develop and improve heat networks. This includes the Green Heat Network Fund (GHNF), offering capital grants in England. In Scotland, the standalone Scottish Heat Network Fund (SHNF) provides equivalent support – both covering up to 50% of eligible capital costs for low-carbon transitions. Other financial support mechanisms are available.

The policy support and financial commitment is unambiguous, but the current reality is that around 67% of heat networks depend on mains gas[6] and only a small minority use renewable energy. Less obviously, but just as importantly, is that assumed consumer benefits are elusive for many heat network customers – and there is also strong evidence of outright consumer harm.

Whilst consumers on heat networks are slightly more likely to say they are satisfied with their heating and hot water system compared to those who are not on a heat network, this ‘satisfaction’ metric camouflages a range of serious indicators.

UK Government and Scottish Government investigations show that consumers have faced dramatic, unannounced price rises; large retrospective bills arriving without warning; standing charges higher than comparable gas or electricity tariffs; and heating outages with repair costs passed directly to residents [7]. Citizens Advice has reported that, despite eye-watering price hikes they were unable to plan for, some consumers have been threatened with disconnection without any option of repayment plan[8]. Others have faced retrospective tariff increases and disconnection if they were unable to pay.[9]

Key service delivery problems demonstrate how vulnerable heat network consumers are:

o Outages

DESNZ has reported that 50% of heat network consumers have experienced at least one outage in the last 12 months versus 29% of non-heat network consumers. A sharp rise from 37% reported in a 2017 study.[10]

o Billing and information gaps

Most heat network pay for the heat energy they use, and this is measured directly by a property-level meter. But nearly 50% of all heat network operators say that some or all of their customers are not billed based on direct consumption. Instead, these customers may pay on the heat energy used by the whole building divided by the number of occupants, a set price or some other method of calculation[11]. Older heat networks are more likely to use these non-metered billing strategies and research has found that non-metered consumers are less likely to understand what they are paying for and worry that they are subsidising others on the same network[12]. 19% of heat network consumers have their heating and hot water costs bundled in with their rent and a further 13% pay via a central service charge. This means that 32% of het network consumers do not pay for their heat energy separately[13]. Consumer Scotland identifies billing information as a major area of consumer detriment.

o Lack of contracts

Only 35% of heat network consumers received a contract document, versus the much higher rate among non-heat network consumers – and only 31% of operators reported providing one (DESNZ)[14].

o Lack of consumer awareness

Research carried out by the Competition and Markets Authority (CMA) in 2018 found that most heat network operators and managing agents do not provide pre-contractual information about the network such as a heat supply agreement (contract). Citing this evidence, Consumer Scotland has said: “Without enough information or the awareness that they should seek out information, consumers are not able to make informed choices about the properties they are moving into.”[15]

o Redress

Despite the obvious consumer harm documented by DESNZ, Consumer Scotland, Citizens Advice and the CMA, heat networked consumers find it harder to seek redress. Overall, they complain significantly more often than other energy consumers and are significantly less likely to report a satisfactory outcome.[16]

The core problem is structural. Consumer Scotland notes that heat networks operate as natural monopolies. Research consistently shows that buyers and renters receive little or no information about heat networks from estate agents, developers or letting agents before they sign. Many consumers don't even realise they're on a heat network until something goes wrong. By then, of course, they're already locked in.

Both the UK and Scottish Governments see heat networks as key to achieving net zero, but unless there are tangible improvements in consumer protection, rapid growth may lead to consumer harm and erode trust. The opportunity is real – but so is the risk of it going wrong at scale.

Enter Ofgem's Authorisation Conditions: a detailed framework of binding obligations that heat network operators and suppliers must now meet, covering everything from billing accuracy and metering standards to complaints handling, protection of vulnerable consumers, and transparency requirements. Standards are serious, the obligations substantive, and compliance is expected.

rb&m has been at the heart of consumer protection in this sector for over a decade. As the Heat Trust's only appointed auditors since the voluntary scheme's inception, we were closely involved in building the audit framework, ran every iteration of it, and most recently co-delivered the gap analysis that mapped many of Heat Trust's existing rules against Ofgem's new Authorisation Conditions – work commissioned by Heat Trust in partnership with Ofgem.

As Ofgem's formal regime embeds, heat network operators across the UK face a substantial challenge. Many – if not most – will be starting with limited real experience of regulation or of compliance audit. Only a small minority of heat networks have benefited from voluntary membership of Heat Trust. And whilst Ofgem's Authorisation Conditions build on the Heat Trust Scheme Rules, the differences are material – and Ofgem's expectations as a statutory regulator with enforcement powers will be substantially more demanding. The switch to compulsory regulation will require honest self-assessment, and often, significant changes in operational, process and record-keeping will be essential.

Through this series of articles, we'll be unpacking exactly what the new requirements mean in practice: what operators must do, where the common compliance gaps are, and how to close them. We'll draw on our experience auditing real networks, real documentation, and real consumer interactions – not just the regulatory text.

The captive customer problem isn't going away. But with properly targeted Ofgem regulation enforced across the whole sector, heat networks should finally realise their full potential: establishing a stable, trusted environment that protects consumers with fair pricing and reliable service while unlocking the billions in private investment[17] needed.

rb&m are independent consumer protection consultants and auditors appointed as sole auditors to the Heat Trust scheme. rb&m delivered the Ofgem/Heat Trust gap analysis in 2025 and can help Heat Trust members and non-members get ‘regulation ready’ using targeted audits to measure company practice against Ofgem’s Authorisation Conditions.

A series of articles on Ofgem's heat network regulation follows.

[1] Energy UK (https://www.energy-uk.org.uk/publications/towards-a-roadmap-for-heat-networks/ )

[2] Social Market Foundation (https://www.smf.co.uk/publications/a-fairer-deal-for-heat-networks/ )

[3] Consumer Scotland. Challenges facing heat network consumers in Scotland. January 2026.

[4] UK Heat Networks: market overview (https://www.gov.uk/government/publications/uk-heat-networks-market-overview/uk-heat-networks-market-overview-accessible-webpage )

Green Heat Networks Fund Scheme Overview (https://assets.publishing.service.gov.uk/media/698c8e34bb6023ea0f7123ac/GHNF-scheme-overview-feb-2026.pdf )

UK Warm Homes Plan – Chapter 5 (https://www.gov.uk/government/publications/warm-homes-plan/warm-homes-plan-html#chapter-5-unlocking-the-potential-of-district-heating )

[5] UK Warm Homes Plan – Chapter 5 (https://www.gov.uk/government/publications/warm-homes-plan/warm-homes-plan-html#chapter-5-unlocking-the-potential-of-district-heating )

[6] Heat Network Consumer and Operator Survey 2022 (https://assets.publishing.service.gov.uk/media/64ccc0bb995827000dc1e8ec/heat-network-consumer-and-operator-survey.pdf )

[7] Consumer Scotland. Challenges Facing Heat Network Consumers in Scotland. (https://consumer.scot/media/d0iccbax/challenges-facing-heat-network-consumers-in-scotland-a-review-of-recent-evidence-1.pdf)

[8] Citizens Advice. Priorities for heat networks consumer protections. Debt and affordability. (https://assets.ctfassets.net/mfz4nbgura3g/5rKMhe7hN4Jq7FZdIqwJvq/0e827bc5a5fc0a3a6790b1cba0ea792b/Paper__Heat_networks__Priorities_for_Consumer_Protection.pdf )

[9] Citizens Advice. System Critical: No Margin for Error in New Heat Network Rules. (https://www.citizensadvice.org.uk/policy/publications/system-critical-no-margin-for-error-in-new-heat-network-rules/ )