The regulator first floated the idea of no-standing-charge tariffs in December 2024 and has opened a consultation on the subject today (20 February).
Standing charges for both gas and electricity are applied daily, regardless of how much energy the customer uses. Ofgem’s proposals are based on introducing an option under the energy price cap to include ‘zero-standing-charge tariffs’ alongside existing tariffs.
The regulator said it wants the tariffs to be available in time for winter 2025. Tariffs with standing charges and lower unit prices would still be available, and consumers would be able to choose the right tariff for their needs .
According to calculations by Uswitch, under Ofgem’s price cap, standing charges have risen 43% since 2019. The price comparison website calculated that dual-fuel households on default tariffs are paying £338 per year in standing charges on average.
The money from standing charges is used to cover the cost of supplying energy to homes and businesses, as well as the costs of building new network infrastructure and keeping the power on when energy suppliers go bust. But the fees disproportionately affect lower-usage households, as these fixed costs make up a higher proportion of their overall bill.
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Richard Neudegg, director of regulation at Uswitch.com, said: “Consumers shouldn’t be under the illusion that, under the price cap, Ofgem will be able to reduce the much-hated standing charges without a trade-off elsewhere in the rates. If there is an option with lower standing charges under the price cap, there will be higher consumption-based charges instead. Comparing options will continue to be essential, as different options will work best for different households.
“The public debate over standing charges has become louder in recent years – with so many households reverting to being on default tariffs, where the standing charges are effectively set by Ofgem’s price cap.”
Emily Seymour, Which?’s energy editor, said: “Standing charges are the fixed daily charge you pay to your energy company to cover the cost of being connected to the energy network. These charges are in addition to the unit rate and you pay them, regardless of how much gas or electricity you use.
“For most of us, unit rates will make up the majority of our bill, but for low energy users, the daily standing charge will be a larger proportion of your bill.
“These proposals would give consumers more choice and control over their energy bills, but the benefits will depend on your energy usage. If you’re a very low energy user, you may save money overall. However, if you use your gas and electricity every day, then you’ll pay a similar amount to any other variable tariff.”
