As we approach the end of 2025, it's a good time to reflect on what has been a significant year for change in the utilities sector. We asked Louise Manfredi, CEO at Leep Utilities, and her wider team, to talk us through some of the changes we’ve seen, and what we’ll see in 2026.
It’s been a challenging last year for everyone
It’s been tough for developers across the board, and housebuilders in particular have faced headwinds ranging from planning delays and rising infrastructure charges to having to adopt and adapt to new environmental legislation and considerations. These challenges have impacted financial appraisals for new homes; meanwhile larger projects requiring substantial water or power connections have also encountered constraint issues that have slowed or delayed developments and increased project costs.
For utilities providers, a big challenge has been the significant water and electricity price rises we’ve continued to see. It has put additional pressure on service delivery, with the need for a greater focus on supporting vulnerable customers, while also maintaining service standards in an environment of increasing operating costs.
In short, it's been a year of balancing competing demands in an increasingly complex utilities landscape.
Technology is reshaping water networks
Talking with Brian Loft, Leep’s director of operations, one of the most significant and exciting developments this year has been the acceleration of Advanced Metering Infrastructure (AMI) adoption across the water sector. AMI gives providers the ability to almost instantly identify behind-the-meter leaks, reducing environmental waste and preventing customers getting huge bills for water they haven't used. For developers, it also means that onsite incidents, like machinery damage to water pipes, can be spotted as soon as they happen, significantly reducing the impact on building project costs and timescales.
The water industry is moving towards a model where every drop of water on a network is accounted for. As Brian notes: "The onus is increasingly on water companies now in terms of water resource management plans, waste of water, and what we call water balancing. This is particularly important in water-restricted areas where regulatory scrutiny is intensifying. Techniques such as bulk metering and real-time monitoring represent a significant shift from traditional twice-yearly meter readings, and these approaches will continue to be key as we enter the next year.”
Electricity networks are evolving rapidly
On the electricity side, it’s interesting to see the rapid evolution towards microgrids for local generation and storage solutions. This shift is being driven by multiple factors: the transition away from older gas-powered combined heat and power (CHP) plants, increased power demands as a result of the electrification of heat, and the need to reduce impact on an already constrained grid.
Brian explains: "More and more people are looking to behind-the-meter solutions to drop the cost of ownership for their electricity networks. This is going to continue to grow next year, as developers realise that it enables them to increase the viability or value of a site, or reduce the ongoing cost of ownership, or meet planning restrictions."
However, this will create new challenges for the industry. For example, safety protocols will need updating – utility companies will no longer be able to assume a site is safe to work on just because it's off supply – battery storage and solar power elements may still be operating and producing power. Networks will need enhanced monitoring to track behind-the-meter generation, as well as needing to balance this growth in new infrastructure with maintaining reliability.
More regulatory change is on the horizon
The regulatory environment continues to evolve, constantly and quickly across all utility sectors. Vicky Bell, our director of regulation and compliance, has been tracking numerous developments of this year that will continue to impact the industry in 2026.
Vicky says: “For water, the government is expected to respond by year-end to recommendations in the independent commissioner's report. We might see the streamlining of the licencing process, which would help utilities companies to bring projects and sites on board much quicker – it’s beneficial to everyone. Changes to the water quality sampling regime for New Appointments and Variations (NAV) companies could similarly speed up processes and reduce costs for developers looking to use alternatives to the incumbent utilities provider in an area.”
The potential 'right to connect' reform is something that will need to be kept on the radar. This could allow incumbents to refuse new connections in certain scenarios – possibly where water resources aren't sufficient to support new developments. As a result, it will become even more crucial for developers to put utility infrastructure planning up-front and centre of planning.
We will also see the introduction of Ofgem's regulatory framework for heat networks at the beginning of 2026. As Vicky notes: “We’ve had insights into Ofgem's thinking through various consultations, but final decisions on customer protections, pricing expectations and licensing requirements are still awaited from the remaining consultations this year."
Heat networks need to grow in number and sustainability
In the heat sector, one of the most complex industry challenges for the next year (and beyond) is the significant level of change and growth needed to meet the government’s net zero transition targets. In addition to many new installations, existing heat networks powered by combined heat and power plants (CHP) will need to be upgraded.
Brian Loft explains: "The problem is that CHPs produce electricity for resale as well as generating heat, and generally it’s these economics that make the CHP financially viable. Transitioning to more sustainable heat alternatives, like water source or air source heat pumps, which don’t produce power for resale, impacts that financial model.”
Fourth and fifth-generation heat networks are gaining traction as alternatives, potentially powered by recovered heat from wastewater or waste heat from facilities like data centres. But the path forward is complicated by unclear or shifting regulatory frameworks, making it challenging for developers to commit confidently to long-term projects.
Customers will expect more from utilities companies
As we enter next year, developers will have to continue navigating a complex interplay of regulation, technology and commercial pressures. We’re seeing high demand among developers for solutions and partners that can help with this, with increasing numbers choosing independent network operators over traditional incumbents, particularly in terms of responsiveness and commercial flexibility.
Matthew Ling, Leep’s director of business development, says: “Developers are discovering that independent networks exist as viable options. Once they understand the benefits – from a more agile and flexible commercial approach that maximises asset valuation, through to the ability to support innovative solutions like microgrids and renewable integration – the true value of working with a NAV becomes clear. Many of the utilities challenges developers face will remain into 2026, so we expect the interest in NAVs and network adoptions to continue to grow.
For developers, planning ahead and early engagement have never been more critical. As Vicky noted earlier, the sheer number of potential upcoming legislative changes underscores the importance of talking to a utility provider from the earliest stages of development.”
Looking forward to new year of growth and impact
As we continue the push towards the UK’s net zero targets, and a more responsible and environmentally conscious utilities sector, I know the industry will face more challenges in 2026. Grid capacity and connection constraints will remain, and we’ll see tighter regulatory scrutiny and stronger enforcement. But if utilities companies can work even more closely with customers to navigate these challenges – through innovation, technology deployment and genuine partnership – we see significant opportunities for the whole sector.