Housing association residents connected to heat networks will not be entitled to compensation payments under proposals published by the energy regulator, Ofgem.

The proposals state that commercial heat network operators and local authorities must pay compensation to residential customers and microbusinesses £45 per day for unplanned interruptions to their heating supply, up to a cap of £720.

Heat network providers must also recompense customers for multiple interruptions in a year with Ofgem proposing £80 payments for customers by four 12-hour supply interruptions in a year.

The plans have been put forward by Ofgem, which published its proposals for regulating heat network operators at the end of last year as part of a joint consultation with the Department for Energy Security and Net Zero (DESNZ).

However, Ofgem said housing associations customers should be exempt from compensation payments as their heat networks are managed by not-for-profit organisations.

As not-for-profits Ofgem said their business models are “very different” to commercial energy companies, as housing associations invest money to provide affordable homes and invest in local communities.

Instead, housing associations will need to submit an improvement plan to Ofgem if their heat networks do not meet overall performance standards.

In the consultation Ofgem said: “We think an improvement plan may be a more appropriate incentive to deliver the outcomes we are seeking for consumers on this type of heat network.

“Improvement plans would be tailored on a case-by-case basis and would depend on what standard a heat network failed to meet. We would expect the provider to come forward with details as to how the heat network will address the reason for failing to meet a standard and within what timeframe.”

Ofgem said improvement plans would be “ambitious” and “strictly enforced”.

Despite the exemption for landlords, Ofgem suggested that local authorities with council housing may be forced to make compensation payments to their heat network customers.

“This [exemption] would apply to registered social landlords who are not-for-profit but not those who are deemed local authorities”, the consultation said.

Tom Naughton, Chief Operating Officer at heat network consultancy FairHeat, said: “We support the introduction of new consumer protection regulations for customers connected to heat networks.

“In addition to the new customer protections coming forward FairHeat is helping the government to introduce the new Heat Network Technical Assurance Scheme (HNTAS) to ensure heat networks meet a minimum level of performance and reliability.

“Not-for-profit organisations (except those deemed local authorities) are said to be exempt from having to pay compensation, it is instead proposed they be required to meet overall performance standards and to submit an improvement plan to meet them.

“FairHeat has proved the value in improving standards of performance through the optimisation of several existing heat networks for social housing providers where we have cut gas usage by up to 60%, saving residents thousands of pounds and securing government funding to help pay for the works.

“Enabling not-for-profit landlords to concentrate efforts on improving heat networks rather than paying compensation will help more customers and also have a bigger impact on the lives of those customers.

“It’s crucial social housing providers and private developers understand the new regulations coming into effect and know that government funding is available for providers to improve the performance of their heat networks.”

As well as publishing this joint consultation with DESNZ, Ofgem is also consulting on the need to improve heat network performance and reliability.

Both consultations close on Friday, January 31^st at 11:59pm.

Ofgem’s new regulations for heat networks are expected to be introduced later this year.