Why is the Government consulting on Fair Pricing?

The Government wants to ensure consumers pay fair and not disproportionate prices. It intends that these new regulations will help prevent disproportionate pricing, incentivise efficiency, ensure an appropriate quality of service. It does not want consumers not to be unduly disadvantaged compared to those on alternative heat sources.

The Heat networks regulation: fair pricing protections consultation was published 30 April and closes on 9 July 2025.

Why should social landlords respond?

Landlords should study the details in the consultation and consider the questions posed to understand what is proposed in these new fair pricing requirements. Landlords should respond to this consultation to help Ofgem understand the practical problems they may face and to help it understand where these requirements are not suited to social landlords. The Heat Network is helping its members understand what is proposed and to respond. It is also developing its response. Some landlords may find it helpful to endorse its response when it is published rather than try to answer all the questions.

What are the key aspects of the Fair Pricing consultation?

The key aspects relate to the Fair Pricing Framework Principles:

• Cost-reflective pricing that reflects the underlying cost of providing heat for consumption levels of consumers
• Cost efficiency
• Fair and reasonable returns (can include some level of profit) to encourage sector confidence and investment
• Affordability so as to maximise consumer benefit in pricing decisions
• Regulatory control to ensure there is oversight and control even when management is outsourced. “The organisation (i.e. landlords) will be held directly accountable for the actions or omissions of the outsourced party”
• Price transparency.

While it is principle based, ‘fair’ and ‘disproportionate’ have not been predefined.

What other aspects are covered by the consultation?

Cost Allocation – it is not proposed to prescribe how tariffs should be set since the market is too complex. However, operators / landlords will not be allowed to pass GSOP payments, compensation, fines, penalties, and other redress through to consumers. While guidance is proposed to help operators set tariffs and to comply, the challenge for social landlords is how to provide for these costs.

New Authorisation Condition requiring the authorised person to ensure cost allocation practices are consistent with the cost allocation guidance on Fair pricing principles.

Price Comparison & Benchmarking – this looks at a total effective price faced by consumers and is likely to use three models:

• External benchmarks (against gas / heat pumps)
• Landlords past prices
• Comparator benchmarks (archetype groups or predicted pricing)

Profitability Analysis – largely ‘for-profit’ operators

Central Price Transparency – price information to be clearly presented and easily accessible to the public. The intention is that customers will have a better understanding and be more empowered to challenge bills. Likely to be combination of models: segmented average, pooled average, RAG rating – lots of pros & cons for each model.

Price Investigations – This aspect starts from January 2027.

What should social landlords do now?

In addition to reading the consultation and considering the questions, landlords should review their own systems to assess how suitable they are to meet the proposed fair pricing requirements. This will help them identify what information and data they have and what they might need to collect. They should also review how they bill customers and the information they provide because it will important for them to have a simple explanation for residents. How they record, manage and deal with customer complaints will be important under the new regulations.

What help is available?

The Heat Network is a forum to discuss and share good practice about district and communal heating within social housing. It brings together its own communal heat experiences, shares lessons and some short guidance documents to help colleagues across the sector. It also acts as a conduit for social housing input into national heat network policy.

Ofgem held 2 webinars (21 May and 4 June) to explain this consultation and to help heat network operators respond. Recordings are available for previous webinars. Ofgem is also working with The Heat Trust members to help develop on guidance to support authorised persons to comply with its authorisation conditions. This will be an opportunity for the sector to help Ofgem identify which topics would be most helpful and its format.

The NHMF organised a workshop at its Conference dedicated to the Heat Network Regs and these consultations with presentations by The Heat Network, DESNZ, Fairheat, and a social landlord. This workshop enabled social landlords to understand what will be required by these new regulations and will help comply and the slides can be found HERE.

The NHMF promotes best practice in social housing maintenance and is committed to championing innovation to deliver excellence in maintenance and asset management. An organisation automatically becomes a member when it subscribes to the M3NHF Schedule of Rates and selected modules. Its Best Practice website publishes briefings on asset management and repairs and maintenance, including links to all the relevant legislation and guidance.

DESNZ’s Newsletters keep landlords up to date and notify them of webinars, training, and other help that the Government is providing to help the sector understand and comply with the new Heat Network Regulations. Heat Network Efficiency Scheme (HNES) Round 10 to be launched on 4^th August (closes 19^th September). Grants to help operators of existing heat networks and communal heating systems improve their efficiency, including part-funding the installation of targeted and cost-effective improvement measures to improve performance. Contact: hnes@gemserv.com for application details (new for Round 10).

The NHMF acknowledges the help and advice from Rachael Mills, The Heat Network.