Heat in the service charge? You are probably a heat supplier

Last checked against Ofgem's published guidance on 15 September 2026. Not legal advice; see disclaimer and sources.

Many blocks of flats with a shared boiler don’t bill for heat at all. The gas bill goes into the service charge budget and leaseholders pay their share. That arrangement now sits inside Ofgem’s heat network regulation.

Why the service charge doesn’t take you out of scope

A heat network is a system supplying heating, cooling or hot water from a central source to more than one end user. The organisation that contracts to supply that heat to consumers is the supplier; the one that runs and maintains the plant is the operator. Property management training now tells block managers that recovering gas costs through the service charge makes the landlord or management company the heat supplier. Unverified against the Regulations by us: this is how The Property Institute’s course describes it. Narrow exemptions exist, for example some houses in multiple occupation; don’t assume one applies to you without checking.

Ofgem’s own reporting guidance takes it as read that some suppliers bundle heat into rent or service charges, and tells them how to report anyway. Verified: regular data reporting guidance, paras 2.21–2.22.

What “bundled charges” means for your return

The guidance uses “bundled” for heat charges included in wider costs such as rent or service charges. The rules, data point by data point:

• Customers in debt (quarterly): report the number of domestic customers who have met the debt trigger even where the charge is bundled. If some customers are billed separately and some bundled, split the count. Verified: Table 6, p18.
• Standing charges (quarterly): if the standing charge is part of a wider service charge, report only the element relating to the heat network, in pence per day. Verified: Table 8, p22.
• Flat fees (quarterly): same rule, in £ per day. Verified: Table 8, p23.
• Total charges to domestic customers (quarterly) and the 6,000 kWh reference customer (annual): you’ll need the heat element to answer these sensibly. The guidance does not spell out a method. Verified that the data points exist (Table 8, pp23–24); the method is yours to document.

Working out the heat element

Ofgem hasn’t published a formula. Whatever you do, write it down and apply it consistently every period, because a change in method looks like a change in price. A defensible approach for a typical block:

1. Take the heat-related costs in the service charge budget: fuel (gas or electricity for the plant), plant maintenance and servicing, metering and billing costs, the heat share of insurance, and any repairs fund contribution earmarked for the plant.
2. Divide by the number of dwellings, weighted the way the lease apportions the service charge, to get each dwelling’s annual heat element.
3. Express it as a daily flat fee (annual ÷ 365) if there is no metering, or as a standing charge plus unit rate if there is.

Keep the workings with each quarter’s records. If you’re not sure which costs belong, that’s a question for your accountant or solicitor, not for this site.

Practical consequences

• You’ll need a complaints log that separates heat complaints from general block complaints, using Ofgem’s six categories.
• Service charge arrears are heat debt for reporting purposes where the heat element of the arrears is over £200 and three months old. Track the heat element of arrears, not just the total.
• If you use heat meters or heat cost allocators, Ofgem wants the counts and the kWh totals annually.

The checker

The free checker asks whether heat is billed separately, bundled, or both, and flags every data point where you need the heat element before you can report.