Key points
- Fair pricing is authorisation condition A6: prices to consumers must be fair, and you must be able to demonstrate that they are
- Cost allocation is authorisation condition A7: where costs are shared across a network, they must be allocated on a fair and transparent basis
- Both are evidenced through documentation, not operational practice alone, and must be met by 26 January 2027
Fair pricing is one of the obligations that operators most often underestimate. It is easy to assume that as long as prices feel reasonable, the condition is met. Under Ofgem’s regime that is not the test. The fair pricing condition asks you to charge fair prices and to be able to prove that they are fair, which is a documentation obligation as much as a commercial one. This guide explains what conditions A6 and A7 require and how operators evidence them. For the full picture, see our guide to the heat network authorisation conditions.
What fair pricing means under the Ofgem regime (A6)
Authorisation condition A6 is fair pricing. In plain terms, the prices you charge consumers must be fair, and you must be able to demonstrate that they are. The condition puts the burden on the operator. It is not for the consumer to prove a price is unfair; it is for you to be able to show that it is fair.
That has a practical consequence. Fair pricing is less about hitting a single approved number and more about having a clear, documented and defensible basis for the prices you set. You should be able to explain how a price is built up, what it covers, and why it is reasonable for the consumers who pay it. If you cannot set that out in writing, you are likely to struggle to satisfy the condition, even if your prices are in fact fair.
This is also why fair pricing sits so close to billing. A fair price that is communicated through an unclear bill undermines the consumer’s ability to understand what they are paying for. The two obligations reinforce each other, which is why operators tend to develop a fair pricing policy alongside compliant billing rather than treating them as separate workstreams.
Cost allocation and transparency (A7)
Authorisation condition A7 is cost allocation. Where costs are shared across a network, they must be allocated on a fair and transparent basis. On most heat networks, costs do not map neatly to a single dwelling. Fuel, maintenance, standing charges, metering, and losses across the network all have to be divided among the consumers connected to it. A7 is about making sure that division is fair and that it can be seen to be fair.
A6 and A7 work as a pair. A6 governs the price the consumer ultimately sees. A7 governs how the underlying costs are split before that price is set. A fair final price normally depends on a fair and transparent allocation of the costs behind it, so most operators address the two together. The key word in A7 is transparent: it is not enough to allocate costs in a way you consider fair internally; the basis for that allocation should be capable of being explained and evidenced.
How operators evidence fair pricing
Meeting A6 and A7 is, in practice, about records. Several authorisation conditions are satisfied less by activity and more by having the right documentation in place and keeping it current, and fair pricing is firmly in that group. The evidence operators typically maintain includes the following, and operators who prefer to keep it current in a live register rather than a static file can do so in the AXIS compliance portal:
- A written pricing policy that explains how prices are set, what they include, and the principles applied to keep them fair
- A documented cost allocation basis that shows how shared network costs are divided among consumers under A7
- Bills and pricing information that present this clearly to consumers, so the fairness of a price is visible and not buried
- A record of any reviews or changes to pricing, so you can show the basis was kept current rather than set once and forgotten
These records do more than satisfy A6 and A7. They also support the billing and price transparency obligations and feed into registration with Ofgem, where you confirm that consumer protection arrangements are in place.
Common pitfalls
The most common mistake is treating fair pricing as a feeling rather than an evidence obligation. Prices may well be fair, but without a written basis there is nothing to show Ofgem if asked. A second pitfall is allocating shared costs in a way that has grown up over time and never been documented, which fails the transparency element of A7. A third is keeping pricing and billing in separate silos, so the bill the consumer receives does not actually reflect or explain the pricing policy behind it.
How fair pricing connects to registration and the wider conditions
Fair pricing does not sit on its own. It is part of the broader set of authorisation conditions that every operator must meet, and it overlaps directly with billing and price transparency. When you register, Ofgem expects to see that consumer protection arrangements, including fair pricing and clear billing, are in place rather than aspirational. For the wider context of what compliance involves, start with our overview of heat network compliance.
Like the other conditions, fair pricing is an ongoing obligation. The deadline to be authorised is 26 January 2027, but Ofgem can ask you to demonstrate compliance at any point after that. Operators who document their pricing basis now will be able to answer that request quickly; those who have not will be assembling evidence under pressure.
Frequently asked questions
What is fair pricing under the Ofgem heat network regime?
Fair pricing is set out in authorisation condition A6. It requires that the prices you charge consumers are fair and, just as importantly, that you can demonstrate they are fair. It is not enough to believe your prices are reasonable. You must be able to show, with evidence, how your prices are built up and why they are fair to the consumers who pay them.
What is the difference between conditions A6 and A7?
A6 is fair pricing: the prices charged to consumers must be fair and demonstrably so. A7 is cost allocation: where costs are shared across a network, they must be allocated on a fair and transparent basis. A6 is about the price the consumer sees; A7 is about how the underlying costs are divided up before that price is set. The two work together, because a fair price usually depends on a fair and transparent allocation of costs.
Does Ofgem set a fixed heat network tariff or price cap?
The fair pricing condition does not prescribe a single fixed tariff that every operator must charge. It sets a standard: prices must be fair and you must be able to demonstrate that they are. That means the focus is on having a clear, documented and defensible basis for your pricing, rather than matching one set number. You should treat fair pricing as an evidence obligation as much as a pricing one.
How do I demonstrate that my heat network prices are fair?
You demonstrate fair pricing through documentation: a written pricing policy that explains how prices are set, a transparent record of how shared costs are allocated under A7, and bills that clearly show consumers what they are paying for. Several authorisation conditions are met less by activity and more by having the right records in place and keeping them current, and fair pricing is one of them.
When does fair pricing need to be in place?
The compliance deadline for the authorisation conditions, including A6 and A7, is 26 January 2027. Operating a heat network without authorisation after that date is a criminal offence. Fair pricing is an ongoing obligation, so Ofgem can ask you to demonstrate compliance at any time once you are authorised, not only at registration.