Tariffs · Standing Charges
Heat network standing charges — what Ofgem's rules permit
Standing charges on heat networks are permitted under Ofgem regulation, but only where the costs recovered through them are legitimate, documented and transparently communicated. Undocumented standing charges are a compliance risk under the fair pricing framework.
What a standing charge can legitimately recover
A standing charge recovers fixed overhead costs associated with maintaining supply, regardless of consumption. Costs that may legitimately be included:
- Network infrastructure maintenance and routine servicing (not capital replacement)
- Metering and monitoring system costs attributable to the supply function
- Administrative costs directly related to billing and customer management
- Insurance costs attributable to the heat supply operation
- A reasonable allocation of management costs where a managing agent is involved
What a standing charge cannot recover
- Capital replacement or major component renewal — these are capital costs, not operating costs
- Costs unrelated to heat supply (general property management, building maintenance)
- Historic deficit recovery unless transparently disclosed and agreed with residents
- Profit margin beyond what can be justified as reasonable for the service provided
Transparency requirements
Even before the full fair pricing framework is in force, Ofgem's authorisation conditions require that charges are transparent. Residents must be able to understand what they are paying for. A standing charge described only as "service charge" with no breakdown does not meet this standard.
Annual review
Standing charges should be reviewed at least annually against actual costs. A charge that has not been reviewed in more than 12 months, or that is not tied to a documented cost base, is a compliance risk. See tariff methodology for how to structure this review.
Frequently asked questions
Is there a maximum standing charge Ofgem will permit?
No cap has been set. The test is whether the charge is justifiable based on documented costs, not whether it meets a specific ceiling.
Can residents challenge a standing charge?
Yes. Residents can complain to the Energy Ombudsman. If a standing charge cannot be justified with documented evidence, the operator is exposed to an adverse ruling.
My standing charge hasn't been reviewed in several years. What should I do?
Review it now. Recalculate it against your actual documented costs. If it needs to change, communicate the change to residents with proper notice. This is significantly better than Ofgem or the Ombudsman raising it first.