Government consultation on fairer energy prices for heat network customers

The Department for Energy Security and Net Zero (DESNZ) and Ofgem are seeking views on new plans for heat network customers to receive fairer prices for cleaner heating.  

Last updated: 27 October 2023

The Energy Bill, which is currently before Parliament, will introduce new regulations for heat networks. The Department for Energy Security and Net Zero and Ofgem is consulting on the new regulatory framework. This is the first consultation in a series to help design the regulatory framework.

The consultation announced on 4 August 2023 was open until 27 October 2023 and we’ve put together a response based on feedback from NHF members. This is something we’ve been speaking to the government about since the beginning of the energy crisis.

Thank you to all members who sent us their views on the proposals in the consultation to help inform our response. The briefing we produced to help prepare responses summarises the proposals in differing levels of details.

Summary of our response

In our response we have identified key areas that are important to ensure the proposed regulations are implemented in a way that is practical and reasonable for housing associations, to ensure that the sector can comply with the new regulations and can continue to support their social housing residents on heat networks. 

Our key asks 

We would welcome the opportunity to work closely with DESNZ and Ofgem to raise awareness of the proposed regulations among the social housing sector. The proposed regulations represent a significant shift in the way heat networks are operated and will create additional financial and administrative burdens for social housing providers who run heat networks. Awareness of the proposed regulations remains low in the social housing sector. It is critical that DESNZ and Ofgem undertake further, sector-specific engagement ahead of regulation to raise awareness in the sector and to ensure the sector’s experiences and concerns about heat networks are taken into account as regulation is developed. This will ensure the proposed regulations work for social housing providers, who manage 50% of all heat networks in the country. We have been collaborating with other organisations (the Heat Network, the Local Government Association, the National Housing Maintenance Forum and the Chartered Institute of Housing) to amplify messaging across the social housing sector. We welcome all opportunities to engage directly with DESNZ and Ofgem.   

Housing associations need a proportionate approach, reasonable timeframes, clear guidance and support. The proposed regulations represent a significant shift in the way the heat network sector is currently regulated, and will lead to additional financial and resource burdens. Most housing associations do not have dedicated heat network teams, and will be operating their heat networks with low budgets and low staff resource. Housing associations also face a number of competing priorities, making the proposed ‘transitional arrangements’ unrealistic for the social housing sector. A proportionate approach with reasonable implementation timeframes and clear guidance and support would help to ensure that all housing associations are able to become fully compliant with the proposed regulations. Without this approach, there is a serious risk that the social housing sector will simply stop building heat networks as the compliance costs are too high. 

Proposed regulations need to take into account – and be streamlined with – existing social housing regulations to avoid duplication of efforts. The social housing sector is already heavily regulated. More needs to be done to streamline the process for social housing providers and enable them to ‘fast track’ some elements of the proposed regulations due to their obligations under the Social Housing Regulator. This would reduce the administrative burden of the new regulations and would ensure that a proportionate and reasonable approach is taken. 

The impact of proposed regulations on social housing providers and their residents’ needs must be taken into account. Housing associations tend to run their heat networks on a not-for-profit basis, so while the sector is supportive of increased consumer protection, the significant additional costs associated with regulation and compensation payments would have to be passed on to residents. The cost of regulation needs to be limited to avoid leading to increased costs for heat network customers, particularly social housing residents who are often on low-incomes and can be in vulnerable circumstances.   

We understand the benefits of meters but they are not right for everyone. Many housing associations are still trying their best to meet their meter installation obligations under the Heat Network (Metering and Billing) Regulations (HNMBR), often due to residents refusing access. Any new obligations will create additional pressure, leading to potentially unsustainable costs for housing associations. Any changes to the HNMBR should be accompanied by clear criteria and if the open class is reformed, we would like to see the exempt class expanded in conjunction with this.