Ofgem launches review of energy bill standing charges

The UK’s energy regulator Ofgem has announced a new review into standing charges added to electricity and gas bills. The review aims to gather public input on the costs and explore potential alternative options.

Standing charges are daily fees energy suppliers charge customers regardless of energy usage. They cover network maintenance, meter readings and social and environmental schemes. Some suppliers offer tariffs without standing charges but with higher initial usage rates.

Ofgem wants feedback from consumers, the energy sector, consumer groups and charities. The regulator says that removing standing charges could mean higher usage costs to cover the same expenses. This could incentivise less energy usage but disadvantage those unable to reduce consumption like the elderly or chronically ill.

Meanwhile, Ofgem is expected to announce next week that the energy price cap will be increased to 28.94p per unit of electricity and 7.42p per unit of gas from the start of next year. It means that the typical household’s bill will rise from £1,834 per year to £1,931, according to analysts at consultancy Cornwall Insight.

Peter Smith from fuel poverty charity National Energy Action (NEA) said:

“Standing charges aren’t just a matter for the energy suppliers or the energy regulator. How much people pay is often due to government policy. If there was the political will to prioritise these issues in the Autumn Statement, the UK government could cut standing charges to zero for prepayment customers this winter. This would particularly benefit those who are more likely to have missed out on support last winter like the £400 discount Energy Bill Support Scheme and who are much more likely to in debt or struggling now to afford their bills. In the longer term, more policies should be paid out of taxation and Ofgem should be encouraging suppliers to reflect a customer’s usage when they recover these charges, or a customer’s payment method, which fuels they use, or their ability to pay.”

The review into standing charges will inform Ofgem’s 2024 consultation and subsequent policy. Until then, Ofgem will continue engaging stakeholders. Members of the public can respond to Ofgem’s discussion paper by January 19, 2024.