Energy firms could be made to offer no standing charge plans: what it means for bills

• Ofgem plans to introduce low or no standing charge tariffs by winter 2025

• Standing charges are a fixed daily fee that all customers pay, regardless of usage

• Under the new plans, customers can opt for tariffs without standing charges

• While the changes may not save everyone money, they offer greater flexibility, especially for lower-energy users

• Experts welcome the move, but some energy firms warn it could create challenges 

Energy regulator Ofgem has announced new plans that will make energy suppliers offer tariffs with low or no standing charges.

This will allow energy customers the option of low or no standing charges, instead of paying these charges daily as part of their usual energy bill.

The consultation for the change is currently underway, with Ofgem aiming to implement these tariffs by the winter of 2025. Here is everything you need to know about it…

Standing charges are a fixed daily fee that all energy customers pay, regardless of how much energy they use.

These charges contribute to the cost of maintaining the infrastructure needed to supply energy to homes and businesses, including building new networks and ensuring the supply remains reliable even if energy suppliers go bust.

But standing charges have long been a point of contention. Critics argue they are unfair because they disproportionately affect those who use less energy.

For example, individuals who use minimal electricity or gas end up paying a significant portion of their bills toward the standing charge, even if their actual energy consumption is low.

Charlotte Friel, Ofgem’s director for retail pricing and systems, acknowledged this concern, saying, “We know from the huge response we’ve had that many feel standing charges are unfair.

“However, we also know that vulnerable, high-energy users – including those who rely on medical equipment at home or low-income families in poorly insulated houses – would suffer disproportionately if these costs were added to the unit rate for everyone.”

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The new plan, which Ofgem is still consulting on, will give consumers a choice. Under the proposals, customers can opt for a tariff where the standing charge is reduced or eliminated entirely.

Instead, these costs will be incorporated into the unit price for energy, meaning that customers who use more energy will pay more overall, but those who use less will not be burdened by high standing charges.

Ofgem believes this will give people more control over their energy bills and how they pay for their energy use.

The regulator also said that, although these tariffs may not result in savings for everyone, the goal is to offer more flexibility, allowing customers to choose the option that best suits their usage patterns and needs.

MoneySavingExpert.com founder Martin Lewis has welcomed the proposal, calling it a positive step forward. “Standing charges are by far the most complained-about part of an energy bill,” he said.

“It costs in excess of £300 a year just to have the facility of gas and electricity, even if you don’t use any. These charges are a moral hazard, disincentivising lower energy users from cutting their bills.”

Lewis also suggested that Ofgem should automatically place vulnerable customers, who don’t use much energy, on low or no standing charge tariffs, using an opt-out mechanism to ensure they don’t miss out on savings.

But the new proposal has sparked concerns within the energy sector. Dhara Vyas, CEO of Energy UK, which represents energy companies, warned that these changes could create additional challenges and risks for energy suppliers.

She raised concerns that the increased complexity of choosing between tariffs could lead to confusion among consumers, potentially resulting in people being placed on less suitable plans.

While the consultation is still in its early stages, Ofgem’s move to offer low or no standing charge tariffs represents a significant shift in how energy costs are structured, with the potential to make energy bills fairer for customers who use less energy.

It remains to be seen how the final rules will be implemented, but the shift towards more flexible pricing options is a step toward greater control for energy consumers.

What do you think about Ofgem’s plans to introduce low or no standing charge tariffs? Do you welcome the choice, or are you concerned about the potential impact on energy bills? Let us know your thoughts in the comments section.