Heat networks regulation: consultation on fair pricing protections

Ofgem are consulting on a new fair pricing framework for heat networks. This consultation comes as part of a new regulatory regime for heat networks to ensure heat network consumers have equivalent protections to other household energy consumers. 

The consultation 

Ofgem’s consultation sought views on a new fair pricing framework, including its structure, objectives, principles, and a 'fairness test' for implementation. It consulted on cost allocation proposals, methods for price and profit comparisons, options for publishing price data centrally, and on their approach to price investigations. The consultation built on proposals included in the 2023 consumer protection consultation and the 2024 implementing consumer protections regulation consultation. 

This is one of several consultations we are expecting through 2025/26 from the Department of Energy Security and Net Zero (DESNZ) and Ofgem as they continue to design the regulatory regime.

It was important that housing associations had their views heard through the consultation process. Social housing providers are an important stakeholder in these consultations, with around 150,000 housing association households in England connected to a heat network. There is also a relatively higher presence of heat networks in the supported and older peoples’ social housing sector. We submitted a response on behalf of the sector, in partnership with the Chartered Insitute of Housing and The Heat Network.

How do the proposals in the consultation affect housing associations? 

The proposals set out in the consultation will affect housing associations. Those who provide heat networks to their residents will have to demonstrate that customers pay reasonable and fair prices that are easy to understand and compare.  

There will also be new requirements to report data and provide customers with price comparisons. The proposals suggest the cost of compensation for consumers should not be met by other heat network customers.  

Ofgem wants to take an approach to regulation that reflects market segmentation and is seeking views on how this should work in practice. This is particularly important for smaller providers or housing associations with only a small number of networks. 

In response to the consultation questions, we said:

• It is essential that data and evidence is available before pricing principles are developed and put into place. Without this evidence, it will be unclear if bills are being fairly priced.
• The risks of price increases for consumers should be considered. Heat networks in social housing are run not-for profit and there will be substantial costs implementing individual metering, new requirements and the Heat Network Technical Assurance Scheme (HNTAS).
• We need more clarity on the definitions of key terms. This includes what we mean by ‘fair’. We know it’s difficult to define in a diverse market, but we need to understand what a fair price looks like, and for who. It’s also essential we understand what is meant by ‘not for profit’ and ‘small heat network’.
• Benchmarking and how prices are communicated to customers are important, but complicated. Residents of social housing are very diverse, and there will be different communication styles that suit different audiences, especially for supported and older people’s housing.
• DESNZ and Ofgem should consider how existing fuel poverty support schemes can better support heat network customers. What is classed as affordable for one person will not be for another, especially if we consider fuel poverty, additional health needs or families with young children.
• The regulatory framework for heat networks should not duplicate existing legal obligations and rights under regulations for social housing or legislation for landlords. There are a range of regulatory and legal protections that relate to contractual agreements between landlords, tenants and leaseholders including those covering service charges.

NHF members can read the full response using the links below.

Next steps 

Ofgem will be publishing a response to this consultation, and we will update this page with their response.  

This consultation is one of several expected on heat networks regulation. We will be updating our members when further consultations are published. 

If you have any questions, please contact us using the details below.  

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