Guide

Gas supply and shipper licensing

How to obtain a gas supply, shipper, transporter, or interconnector licence from Ofgem. Covers licence types, exemptions, application process, fees, standard conditions, HSE safety case requirements, and penalties for non-compliance. Applies to Great Britain only.

Energy & Utilities UK-wide
UK-WIDE

Great Britain only

This guide applies to England, Scotland, and Wales only. Northern Ireland has a separate gas licensing regime regulated by the Utility Regulator (NIAUR), not Ofgem. If you operate in Northern Ireland, contact the Utility Regulator for licensing requirements.

If you want to supply gas to consumers, transport gas through pipelines, arrange gas shipments, or operate cross-border gas interconnectors in Great Britain, you need a licence from Ofgem (Office of Gas and Electricity Markets).

Operating without the required licence is a criminal offence. This guide explains:

  • The four types of gas licence and when you need each
  • Who is exempt from licensing requirements
  • How to apply and what it costs
  • Ofgem's assessment criteria
  • Standard licence conditions you must comply with
  • HSE safety case requirements for gas transporters
  • Penalties for non-compliance

Types of gas licence

The Gas Act 1986 establishes four types of licence for different activities in the gas supply chain. You need the licence that matches your proposed activities - many businesses hold multiple licences.

Which licence do you need?

Your required licence depends on your business model:

  • Selling gas to consumers - You need a Gas Supplier licence and usually a Gas Shipper licence (or contract with a licensed shipper)
  • Operating gas pipelines - You need a Gas Transporter licence
  • Arranging gas transportation only - You need a Gas Shipper licence
  • Operating cross-border pipelines - You need a Gas Interconnector licence

Many energy companies hold both supplier and shipper licences. Some vertically integrated businesses hold all four licence types.

When you do not need a licence

Unlike electricity generation, the Gas Act 1986 provides limited exemptions from licensing. Most exemptions relate to:

  • On-site generation and use - Businesses generating and using gas on their own premises (e.g., anaerobic digestion for on-site use)
  • Specific exemption orders - The Secretary of State can grant individual exemptions in specific circumstances
  • Very small-scale activities - Activities below thresholds set out in exemption orders

If you are unsure whether you need a licence, contact Ofgem before starting activities. Operating without a required licence carries criminal penalties.

Applying for a gas licence

Gas licence applications are submitted to Ofgem through their online portal. The process requires demonstrating your competence, financial resources, and fitness to hold a licence.

What Ofgem assesses

Ofgem will assess your application against these criteria:

  • Financial standing - Can you meet your obligations to customers and network operators?
  • Technical competence - Do you have the systems and expertise for your proposed activities?
  • Fitness to hold a licence - Are your directors and key personnel suitable?
  • Compliance arrangements - Can you meet licence conditions from day one?
  • Business plan viability - Is your business model sustainable?

There is no automatic (tacit) approval - Ofgem must explicitly grant your licence. The typical determination period is 6-9 months, though complex applications may take longer.

Licence fees

You must pay application fees when submitting your application, and ongoing annual fees once licensed.

Planning your costs

Budget for these costs when planning a gas supply or shipping business:

  • Application fees: £350-£1,050 (non-refundable)
  • Legal and advisory costs: Preparing a compliant application typically requires professional support
  • Annual licence fees: Ongoing cost based on your business size
  • Industry code costs: Participation in industry codes has membership fees
  • Compliance systems: Investment in systems to meet licence conditions

The application fee is non-refundable even if your application is refused. Make sure you can demonstrate you meet Ofgem's criteria before applying.

Standard licence conditions

All gas licence holders must comply with Standard Licence Conditions (SLCs). These are common obligations that apply to all licensees of each type, with some conditions varying by licence category.

Key obligations for all licence holders

  • Industry code compliance - Participate in and comply with relevant industry codes (Uniform Network Code, Supply Point Administration Agreement, etc.)
  • Information provision - Provide information to Ofgem on request
  • Financial reporting - Submit required financial information
  • Compliance with directions - Follow Ofgem directions under the licence
  • Ring-fencing - Maintain separation of regulated activities (transporters)

Additional supplier obligations

Gas suppliers have additional obligations to protect consumers:

  • Customer service standards
  • Complaints handling procedures
  • Price cap compliance (domestic customers)
  • Vulnerability obligations
  • Energy efficiency obligations

Ofgem can modify standard conditions with consultation. Special conditions may also be added to individual licences.

Safety case requirements (gas transporters)

If you hold or are applying for a Gas Transporter licence, you face additional requirements from the Health and Safety Executive (HSE). You cannot convey gas without an HSE-accepted safety case.

Coordinating with Ofgem and HSE

Gas transporter applicants must satisfy both regulators:

  • Ofgem: Grants the gas transporter licence
  • HSE: Accepts the safety case before you can operate

Plan your timelines accordingly - you cannot start conveying gas until both approvals are in place. HSE assessment is rigorous and may require multiple iterations of your safety case.

Understanding price controls

Gas network operators (transporters) operate under Ofgem's price control framework. This affects network charges and shapes the commercial environment for suppliers and shippers.

Impact on your business

While price controls directly regulate network operators, they affect all participants:

  • Suppliers and shippers: Network charges you pay are determined by RIIO allowances
  • New transporters: Your allowed revenues would be set through RIIO determinations
  • Investment planning: Price control periods provide 5-year visibility of network costs

The current RIIO-GT3 period (April 2026 to March 2031) focuses on managing the energy transition while maintaining network reliability as gas demand is expected to decline.

Penalties for non-compliance

Operating without a licence or breaching licence conditions carries serious consequences. Ofgem has extensive enforcement powers.

Avoiding enforcement action

Reduce your compliance risk by:

  • Getting licensed first: Never start activities before receiving your licence
  • Building compliance into operations: Invest in systems and training from day one
  • Monitoring for issues: Self-report problems to Ofgem promptly
  • Engaging with consultations: Stay aware of licence condition changes
  • Learning from enforcement: Review Ofgem enforcement decisions to understand expectations

Ofgem publishes enforcement decisions, providing guidance on what constitutes breach and how penalties are calculated.

Steps to obtain a gas licence

  1. Determine which licence types you need

    Map your proposed activities to licence types. Most gas retailers need both supplier and shipper licences. Transporters need transporter licences and HSE safety case acceptance.

  2. Assess if any exemptions apply

    Check if your activities fall within specific exemption orders. If uncertain, contact Ofgem for guidance before proceeding.

  3. Prepare your business case

    Document your financial standing, technical competence, key personnel, proposed systems, and business model. This forms the basis of your application.

  4. Develop compliance arrangements

    Design your systems for meeting licence conditions from day one. Include industry code participation, customer service, complaints handling, and reporting capabilities.

  5. Submit application to Ofgem

    Complete the online application with all required evidence. Pay the application fee (£350-£1,050). The fee is non-refundable.

  6. Respond to Ofgem queries

    Ofgem may request additional information or clarification during assessment. Respond promptly and fully to avoid delays.

  7. For transporters: submit safety case to HSE

    Gas transporter applicants must also submit a safety case to HSE. This is separate from the Ofgem licence process but both are required before operations.

  8. Receive licence decision

    Typical determination period is 6-9 months. Ofgem either grants the licence (with standard/special conditions) or refuses with reasons.

  9. Meet ongoing compliance obligations

    Once licensed, comply with all licence conditions, industry codes, annual fee payments, and regulatory reporting requirements.

Ongoing compliance obligations

Holding a gas licence is just the start. You must maintain compliance throughout your operations:

Regular requirements

  • Annual fees: Pay Ofgem's annual licence fee when invoiced
  • Regulatory returns: Submit required data and reports on time
  • Industry code compliance: Maintain active participation in required industry codes
  • Customer standards: Meet all customer service and vulnerability obligations (suppliers)
  • Safety case updates: Resubmit to HSE when operations change materially (transporters)

Change notifications

Notify Ofgem of significant changes to:

  • Company ownership or control
  • Key personnel (directors, compliance officers)
  • Financial standing or business model
  • Scope of licensed activities