Energy standing charges to be reviewed amid calls from Martin Lewis and MSE for them to be lowered
Energy standing charges, which make up around £300 of most people's yearly bills, are to be reviewed by the energy regulator. Ofgem has asked bill payers, suppliers, charities and consumer groups for their views on how an alternative system could work.
Update: Tuesday 28 May 2024: While the gist of this MSE News story on energy regulator Ofgem's standing charges review still stands, you can no longer respond to the call for evidence as the review closed on 19 January 2024 – though we're still awaiting Ofgem's final response.
From 1 April, standing charges rose: from 53p a day to 60p a day on average for electricity; and from 29p a day to 31p a day on average for gas. Ofgem announced the new July Energy Price Cap on Friday, which confirmed standing charges are to remain at this level until 30 September 2024. This is bad news for higher energy users, as standing charges remain high.However, Ofgem has confirmed that unit rates will fall on 1 July 2024, meaning households should see an average 7% fall in energy bills. See our Energy Price Cap guide for more on how this works, as well as our Energy Price Cap Calculator for how much you'll pay from July.
MoneySavingExpert.com (MSE) and its founder Martin Lewis have long campaigned for standing charges to be lowered, arguing that they unfairly penalise households on lower incomes and those looking to cut their usage – see Martin's 'Why are energy standing charges so high? What can be done?' blog for more info.
You can now submit your views on standing charges directly to Ofgem
The regulator says it is aware of the "huge amount of debate" around standing charges in recent months, adding that "now is the right time" to look at the issue again.
As a result, it's asking for views on standing charges and for suggestions on how it can be changed. MSE will formally respond to Ofgem's call, but you can make your views heard as well.
Commenting on the regulator's move on Twitter, Martin said:
Martin and MSE have been campaigning for standing charges to be lowered
Standing charges are the daily cost you pay for the facility of having gas and electricity, even if you don't use any. The charges have increased significantly over the past two years, and can vary hugely depending on where you live.
The average household currently pays 53p a day for electricity and 30p a day for gas – adding, on average, an extra £303 a year to your energy bill. And for those who pay on receipt of bills, these costs are even higher.
High standing charges discourage people from cutting back on energy use
As MSE has pointed out previously, high standing charges discourage people from cutting back on energy use – as there is only so much they can save from doing so.
In our June 2023 poll, nine in ten MoneySavers told us they think standing charges should be lowered or scrapped entirely. Alternatively, a proportion of the standing charge could be moved onto the unit rate, as Martin suggests in his blog. This would mean cutting usage has more impact on cutting bills – empowering people to take action that's good for themselves and likely the environment too.
Martin Lewis, founder of MoneySavingExpert.com, has previously said: "Outrageously, most people will pay £300 per year just for the facility of having gas and electricity, even if you don't use any. This is due to the high energy standing (daily) charges. These are a moral hazard and should, at the minimum, be substantially reduced."Keeping the standing charge high means lower users can save proportionately less and less by reducing usage – that disempowers them – and is a disincentive to energy reduction generally, which is not great for the environment.
"It also means that prepayment users can find themselves in energy debt in the summer, because they're not using energy but the meter is still ticking over because of the standing charge – a terrible, unnecessary situation for the payment type used by many of the most vulnerable."
Share this guide?
8 October 2024
Clever ways to calculate your finances
