Energy providers could be forced to offer tariffs with low or zero standing charges, the regulator Ofgem has said. This move could give customers greater choice and reduce energy bills for some households, particularly those with low usage.
Some energy suppliers already offer this option, but it is not a requirement under current regulations. If implemented, the latest proposal would introduce greater consistency across the market.
It comes after tens of thousands of customers replied to Ofgem’s request for input on standing charges. Many asked for standing charges to be removed entirely, the regulator said, arguing this would make it easier for them to manage their bills and repay debt.
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Standing charges aren’t bad news for all customers, though. Vulnerable customers with high energy usage could see their bills soar if these fixed costs were moved over to unit rates. Someone who needs to power medical equipment, for example, could be better served by a tariff which includes standing charges.
The regulator isn’t proposing abolishing current tariffs. Instead, it is looking at introducing a greater degree of choice. If the proposals are implemented, the Ofgem price cap could be reformed to include an additional option.
Tim Jarvis, director of general markets at Ofgem, said: “Many people feel very strongly that standing charges are unfair and prevent them from being able to manage their bills effectively.
“We want to give consumers the ability to make the choice that’s right for them without putting any one group of consumers at a disadvantage.”
Energy bill debt has risen to unsustainable levels
As well as outlining its proposal on standing charges, Ofgem has set out plans to increase and standardise the support offered to those struggling with energy debt.
Debt and arrears on energy bills have now reached almost £4 billion, according to the regulator. Much of this debt was built up during the energy crisis, but Ofgem says it has become unsustainable and requires a “bespoke, one-off solution to tackle it”.
One initiative could include a “debt guarantee” to improve the standard of service offered by suppliers when supporting people in debt. Ofgem says this will result in “consistent, compassionate and tailored support” for customers.
Suppliers may also be required to accept debt repayment offers from reputable third parties, including debt advice agencies or consumer organisations.
Will energy prices fall in 2025?
Energy bills have surged in the final months of the year, after the energy price cap rose by 10% at the start of October. This took the annual dual-fuel bill for an average household paying by direct debit from £1,568 to £1,717.
The actual amount you pay depends on various factors, including how much energy you use, meaning some people could pay more than this. Energy prices will rise again in January, this time by 1.2%.
Until recently, experts then expected bills to fall in the spring. However, energy consultancy Cornwall Insight (which is well-regarded for its accurate forecasts) recently changed its guidance to say bills are now likely to rise by another 1% in April.
The consultancy says market turbulence will push the average annual bill up to £1,762 for a typical dual-fuel consumer. It blames the Russia-Ukraine conflict for the ongoing uncertainty, as well as Donald Trump’s re-election and the potential impact on gas exports from the US.
“In addition, there is also the prospect of reforms adding extra costs to the price cap, which would represent at least another £20 on annual bills,” it adds. This could take bills to £1,782 – a 2.5% increase compared to January.
Beyond that, prices are currently expected to fall in July.