All energy suppliers to offer lower standing charge tariff by January, regulator plans

All household energy suppliers in Britain should introduce at least one lower standing charge tariff by the end of January, according to plans set out by the industry regulator.

Ofgem, which has been considering complaints that low energy users are unfairly penalised by the fees, says it is aiming to give consumers more choice.

But it admitted that the move was unlikely to reduce overall bills as reduced standing charges would likely be reflected in higher charges for units of energy used.

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Standing charges are fixed daily fees added to unit prices households pay for gas and electricity.

They are designed to cover costs of connecting to the energy system and investment in new infrastructure.

The latter element is being cited as an increasing threat to bill levels given the need to prepare the electricity network for the green energy future demanded by the government.

Ofgem dropped initial plans that could have seen the charges ditched entirely for some energy deals, in return for customers paying higher unit prices instead.

Tim Jarvis, director general of markets at Ofgem, said: “We’ve listened to thousands of consumers that wanted to see changes to the standing charge and taken action.

“We have carefully considered how we can offer more choice on how they pay these fixed costs, however we have taken care to ensure we don’t make some customers worse off.

“After examining all the options available to us, we believe that the right way forward is to require all major suppliers to offer at least one tariff with a lower standing charge.

“This will deliver the choice we know customers want, without having a detrimental impact on customers that have high energy needs.”

But he added: “We cannot remove these charges, we can only move costs around.

“These changes would give households the choice they have asked for, but it’s important that everyone carefully considers what’s right for them as these tariffs are unlikely to reduce bills on their own.”

A final decision is due by the end of the year and could be introduced from late January.

It’s described by the regulator as a short-term measure as a review is carried out over how to best pay for the grid upgrades needed, including storage.

The move was announced as around 34 million households prepare for a 2% rise in the energy price cap from 1 October.

The 20 million on a fixed rate tariff will not be affected by the shift.

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While high wholesale costs for gas have driven bills up sharply since Russia’s invasion of Ukraine in 2022, the costs of government policy are making up a greater proportion of bills for both households and businesses.

The expansion of the warm home discount was the main factor behind October’s cap increase.

Emily Seymour, Which? Energy editor, said of the standing charges proposal: “For most of us, energy unit rates will make up the majority of our bill and standing charges will be a low proportion of the total.

“But for very low energy users, the daily standing charge will make up a larger amount of your bill and you could save money with one of these new tariffs as you will pay a lower standing charge every day.

“To figure out which type of energy tariff is best for them, people should look at their annual energy usage to see how much of it is typically made up of standing charges and how much is energy unit costs to see whether their usage is low enough to benefit from these new tariffs.”