Installation and maintenance licences for heat networks

As we have detailed earlier in this document the UK Government and Ofgem proposals for GB heat network authorisations will cover many of the same areas that heat network licences under the 2021 Act were intended to cover. Considerations such as proportionate monitoring and reporting of the financial health of heat networks, standards of conduct, quality of service, fair pricing, handling of vulnerable customers, billing and step in to cover market failure will all be regulated by heat network authorisations. We consider that the proposals by UK Government and Ofgem will ensure much of the original policy intention of the licensing regime under the 2021 Act is met.

There are some aspects of the 2021 Act licences which will not be fully delivered by heat network authorisations, however. The 2021 Act required heat network licence applications to assess the impact on fuel poverty, greenhouse gas emissions and Just Transition. We do not propose to include these requirements for the installation and maintenance licensing regime. As noted above the intention is the installation and maintenance licences should be opt in, meaning any additional requirements we attach to licences will only affect those who choose to apply in the first place. We feel this would unfairly create additional regulatory requirements for licence applicants and disadvantage Scotland’s heat network sector in favour of other parts of Great Britain. We also believe it would be more appropriate to address the important matters of fuel poverty, greenhouse gases and Just Transition via alternative regulations using powers available under the 2021 Act, such as heat network consents or permits, which can more effectively target the design and development of individual projects.  This approach is explained in more detail in the section ‘Background and Change of Approach to Licensing’.

We propose that the application process should ensure the appropriate level of scrutiny for licence holders, without duplicating requirements between Scottish and GB regulation or overburdening the sector. We will continue to engage with Ofgem and UK Government to ensure interoperability between the Scottish and GB regulatory requirements.

We propose that all installation and maintenance licence applications are assessed by the Scottish licensing regulator and should consider the following:

1. The applicant’s knowledge, expertise and experience of the heat network sector. This could be evidenced by:

• The applicant providing details of the number of heat networks they have in Scotland, UK or outside UK and/or,
• the application must be accompanied by a statement from the applicant outlining the relevant expertise or qualifications of key person(s) within the organisation.

2. The applicant’s financial position, which could be evidenced by:

• Company accounts or statements.
• Having sufficient financial resources available for repairing any unexpected damages whilst performing any of the duties associated with the licence, such as damages to other utility providers’ infrastructure, pipes or cables.
• Insurance policy to cover any damages caused to third parties and/or public liability, such as unnecessary damages to a third party’s land or property.

3. The applicant’s willingness and ability to comply with the conditions of their licence as set by the regulator.
   • The applicant should confirm their acceptance and adherence to the conditions of their licence, prior to its commencement.

This approach is also consistent with the assessment considerations for the installation and maintenance licence being introduced by UK Government. More information is available on the UK Government website.

The regulator may periodically review performance and standards associated with conditions of their licence and request updated or additional information to support this review. The regulator may also carry out site visits to ensure compliance with their conditions of licence.

The regulator, once appointed, will determine how they will receive and process applications. This will more than likely be in a digital format with accessible and inclusive alternatives offered to enable the information to be provided such as applicant’s name, contact details and the assessment criteria as set out above. It will also include any other information deemed necessary by the regulator in relation to the terms and conditions of the licence.