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 today (Thursday 16 November) asked bill payers, suppliers, charities and consumer groups for their views, asking how an alternative system could work.
From 1 April 2024,
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.
You can do this by emailing StandingCharges@ofgem.gov.uk or by calling 020 7901 1000 to give your views by 19 January 2024.
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.
Since 1 October 2023, those on prepayment meters have been paying lower standing charges than those on other payment methods, after the Government's commitment to end the 'prepay premium'. However, this support is due to expire at the end of March 2024, and it's not yet clear what will happen to prepay standing charges after that.
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."
The latest expert predictions suggest electricity standing charges will go up again in April 2024
The latest Price Cap predictions from energy analysts Cornwall Insight, published today, suggest electricity standing charges will rise from 53p a day on average to 61p a day from 1 April 2024 (though this will be offset for some by a predicted drop in the unit rate).
Standing charges on gas are predicted to remain at 30p a day until the end of 2024. You can see the full predictions for the next year in our What is the Price Cap? guide.
Ofgem will announce the official Price Cap rates for the period 1 January to 31 March 2024 on Thursday 23 November.