Ofgem Fair Pricing Requirements for Heat Networks

Regulatory framework

Heat network operators in Great Britain are subject to Ofgem's authorisation regime under the Heat Networks (Market Framework) (Great Britain) Regulations 2025 (SI 2025/269), made under the Energy Act 2023.

Authorisation condition A6 — Fair Pricing

Authorisation condition A6 applies to all authorised persons carrying on the regulated activity of supply. It requires that charges imposed on applicable consumers are fair and not disproportionate. Ofgem interprets this standard in accordance with its Heat networks regulation: fair pricing and cost allocation guidance (January 2026).

Authorisation condition A7 — Cost Allocation

Authorisation condition A7 requires that charges imposed on applicable consumers are structured, and are attributable to costs, in a way that is consistent with the outcome of charges being fair and not disproportionate, having regard to the guidance published by Ofgem on cost allocation. In practice this means operators must:

• Attribute costs to the heat supply function on a documented and defensible basis
• Ensure their standing charge and unit rate each recover only the costs properly allocated to them
• Be able to demonstrate that their cost allocation is consistent with the outcome of charges being fair and not disproportionate

The Heat networks regulation: fair pricing and cost allocation guidance (January 2026) sets out Ofgem's expectations of how operators should structure and document their cost allocation. Operators should ensure their tariff documentation is consistent with this guidance and can be produced on request during regulatory review.

January 2027 deadline

All operators must hold Ofgem authorisation before January 2027. Tariff documentation forms part of the authorisation evidence base. Operators without compliant pricing documentation risk failing to secure authorisation.

For detail on the methodology used to produce compliant tariff documentation, see Heat Network Tariff Methodology.