GovWire

Heat networks are a form of decentralised energy distribution, where heating, cooling or hot water are circulated from central sources of generation to multiple points of use. This can include domestic dwellings, public and commercial buildings. Heat networks have, to date, been largely unregulated, despite being an essential utility. This means that, currently, heat network customers have significantly fewer rights and protections compared to other utility services.The proposals would establish a structure of regulation for the heat networks market, and provide that anyone carrying out these activities (subject to narrow exceptions) needs an authorisation granted by the Gas and Electricity Markets Authority, in practice Ofgem, as the regulator for heat networks.

The IA estimates a total cost of 578.5 million (2023 prices, discounted over 30 years to a 2024 present value base year) and a monetised benefit to consumers resulting from guaranteed standards of performance of 564.7 million, resulting in a net present value figure of -13.8million (-10.2 million in 2019 prices, 2020 present value base year). The costs include the set-up and ongoing costs of the regulatory structure (455 million) and a 123 million cost to heat network operators in the form of familiarisation and compliance (71 million) and additional maintenance costs (52 million). The EANDCB figure of 10.8 million (2019 prices, 2020 present value) reflects the above business costs and includes the estimated compensation payment to heat network customers where a heat network supplier fails to meet the guaranteed standard of performance. The evidence and analysis supporting the EANDCB and the SaMBA are sufficient.There are some areas of the broader assessment that could be strengthened, including aspects of the cost-benefit analysis and, particularly, wider impacts.