Ofgem announced plans for more low or no standing charge energy tariffs last year, and has today opened a consultation on how this would work
Energy suppliers will have to offer tariffs with low or no standing charges under plans published by Ofgem today.
Standing charges pay for the fixed costs of supplying your home with gas and electricity. It is added to your energy bill, regardless of how much energy you use. Standing charges currently cost the typical dual fuel household an average of £338 a year.
Ofgem announced plans for more low or no standing charge tariffs last year, and has today opened a consultation on how this would work. Some suppliers already offer low or no standing charge tariffs, but the plans announced by Ofgem would make it so every energy firm has to offer them from winter 2025/26.
However, these tariffs typically come with higher unit rates, so are normally best for households that use less energy. Ofgem previously warned that high energy users could see bills rise if some or all of the costs of standing charges were moved to unit rates.
The options under consideration for zero standing charge tariffs include introducing a single unit rate, meaning the same unit rate would apply at all levels of energy consumption. Ofgem could also introducing falling block tariffs, where customers would pay a higher unit rate until a certain amount of energy is used, and then a lower rate after.
The final option is rising block tariffs, where customers pay a lower unit rate until a certain amount of energy, and then a higher rate after. The energy regulator is also looking at if minimum usage requirements will be needed, to ensure the basic costs of supplying energy to homes or businesses are covered. The consultation is open now and will close on March 20, 2025.
Charlotte Friel, Ofgem Director for Retail Pricing and Systems, said: “We know that many people are concerned about their standing charge, and feel frustrated they are not able to reduce this part of their bill. We have heard loud and clear that many customers want the option of an energy tariff with a reduced or no standing charge. So we are looking at how we can offer this within the energy price cap for next winter.
“Our job is to protect customers, and we need to be careful about charging people more who are already struggling to afford their bills. And while some argue the standing charge should be scrapped altogether, this would leave some of the most vulnerable energy consumers who use a lot of energy worse off, because the cost would then have to be added to the unit rate. But by offering more choice, we’re ensuring people can pick the tariff that suits their needs best, and keep bills as low as possible.”
