Ofgem’s plans for ‘low or no standing charge’ energy tariff

Ofgem, the UK’s energy watchdog, has announced plans to introduce a ‘low or no standing charge’ to potentially reduce household energy bills.  

What’s a standing charge?  

A standing charge is a fixed daily amount applied to your energy bill, which helps cover the costs of supplying energy to homes and businesses.  

But some people consider these charges unfair, as they remain the same for all customers, regardless of how much energy they use.  

For those who use less energy, a larger proportion of their bill goes towards the standing charge compared to those who use more. 

Under Ofgem’s new plan, customers will be able to have these charges included into their unit rates instead, meaning no separate daily standing charge would apply. 

When will the tariffs be available?  

Ofgem is consulting on the proposal, but aims to make the new tariffs available by winter 2025, allowing customers to choose a tariff that may better suit their energy usage. 

Why is Ofgem suggesting these changes? 

The plans follow calls from energy secretary Ed Miliband for Ofgem to take action on rising energy costs.  

Forecasts have also been made that energy bills could rise by an average £85 a year from April, due to a 5% rise in the energy price cap. 

Energy debt reaches record high 

The announcement comes amid growing concerns over energy debt, which has reached a record high. The average debt owed to energy suppliers now tops more than £1,500 – having increased by £300 in just 12 months.  

As many as one in five people owe their provider money. 

Ofgem says it’s received feedback from many people who feel standing charges are unfair.  

But the regulator’s also aware that some vulnerable groups, such as people relying on medical equipment or low-income households with poorly insulated homes, may be unreasonably affected by the change, if the costs were added to the unit rate for everyone.  

What’s the potential benefits?  

Ofgem suggests that offering a ‘low or no standing charge’ option could give people more flexibility and control over how they pay for their energy.  

“We’re looking closely at how these tariffs will work in practice, but everyone will need to carefully consider which option best suits their needs,” said Charlotte Friel, director for retail pricing and systems at Ofgem.  

What’s the concerns?  

But the plan has received some criticism. Energy UK, which represents energy suppliers, warns it could increase the “complexity” for customers because people would need to make an active decision about which tariff is most suitable for them.  

There’s also the risk that some customers could end up on a plan that doesn't meet their needs. 

Energy UK also called for action to help those in debt and make energy bills more affordable. 

What help’s available?  

The government has injected an extra £1bn into the warm homes discount scheme, a one-off £150 payment towards your energy bills. 

Most energy companies have some funds set aside to help those who are really struggling. You might be able to set up a payment plan for what you owe.  

If you’re vulnerable, check if you can join the priority services register so you can get additional support from your energy supplier.  

Read our guide on what to do about energy arrears.  

Do you need extra support? 

Energy debt is one of the main reasons why people ask us for help – around one in three people who turn to us have fallen behind on their energy bills. 

We can look at grants you might be eligible for, as well as provide free debt advice and check you’re getting all the benefits you qualify for.