People have just a couple of days left to submit their views on proposed changes to energy standing charges before the online Ofgem consultation closes. The energy regulator has put forward a range of suggestions which could see households save between £20 and £100 on annual standing charges.
Even if someone does not use any gas or electricity, they pay around £338 each year on standing charges. The money is used to maintain the network and provide nationwide services 24 hours per day, however, campaigners have long-called for changes to the way it is calculated.
The average household energy bill is set to rise by £149 from October 1 when the price cap increases by 10 per cent from £1,568 to £1,717. Customers on a standard variable tariff that pay for their electricity by direct debit will pay a standing charge of 60.99p per day and 31.66p for gas – this varies between regions, a full list can be found here.
It’s important to remember that the price cap does not limit a household’s total bills, people still pay for each unit of gas and electricity they use. This means the more energy you use, the higher the bill, similarly, the less you use, the lower the bill.
Review of standing charges
Last year Ofgem started a review of standing charges which began with an online consultation that received more than 30,000 responses from customers, consumer groups, charities and others.
Now it has published an options paper on ways to reduce standing charges for households, called ‘domestic standing charges’.
Standing charges are set by your energy supplier and are also included in the energy price cap. Your supplier will charge you this cost each day, even if you do not use any energy on that day. The charge covers the cost to maintain the energy supply network, take meter readings, and support government social and environmental schemes, like the Warm Home Discount scheme.
Ofgem explained: “The options in the paper could reduce the standing charge by between £20 and £100 per year by transferring parts of these fixed supplier costs to the unit rate (the price paid for every unit of energy used).
“We know that if these changes are made it could affect people who cannot safely reduce the amount of energy they use. This could be because of their dependence on life-saving medical equipment or living in a low standard of housing with poor insulation.
“We are asking energy suppliers to offer energy tariffs that have no or low standing charges as well as their current tariffs. This will mean that energy efficient households will be able to choose a tariff that rewards them for using less energy. It will also mean that other energy customers can also choose from more tariffs that meet their needs.”
The options paper also sets out long-term considerations relating to the assignment of network costs, as a part of a broader review of how electricity and gas system costs are recovered from users.
You can read the options paper and submit your views on standing charges via the Ofgem online form here.
Jonathan Brearley, chief executive of Ofgem, said: “We know that this rise in the price cap is going to be extremely difficult for many households. Anyone who is struggling to pay their bill should make sure they have access to all the benefits they are entitled to, particularly pension credit, and contact their energy company for further help and support.”
He also urged consumers to “shop around” and consider a fixed-rate tariff that could save money.
“We are working with Government, suppliers, charities and consumer groups to do everything we can to support customers, including longer term standing charge reform, and steps to tackle debt and affordability,” he added.
The price cap will be in place from October 1 to December 31, 2024.