Should Energy Bills Have a Standing Charge?

A standing charge is a fixed daily amount UK households pay for accessing electricity and gas. This charge is there no matter how much energy you use. The money goes towards maintaining the energy network, meter readings, and managing the suppliers. However, many people feel that standing charges are unfair. Critics say they hurt low-energy users and vulnerable households.

The Ofgem energy price cap controls default tariffs and includes standing charges. Some energy suppliers, however, provide tariffs that do not have standing charges. They move those costs into higher unit rates instead.

Why Do Energy Bills Include a Standing Charge?

A standing charge tariff helps to cover fixed costs that come with energy supply. This includes:

• Energy network maintenance– This means taking care of things like power lines and gas pipes.
• Meter readings and billing– This involves handling prepayment meters, direct debit payments, and online accounts.
• Supplier administrative costs– This includes the costs of customer service and running the business.
• Government support schemes– These are programs such as the Warm Home Discount Scheme and help for customers with health needs.

Comparison: Standing Charges vs. No Standing Charge Tariffs

Key takeaway: Homes that use a lot of energy might like a standing charge tariff. On the other hand, homes with low energy usage might do better with a no standing charge tariff, even if the unit rates are higher.

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Why Standing Charges Are Controversial

Arguments Against Standing Charges

❌   Unfair to low-energy users– Customers who use a small amount of electricity or gas pay the same daily standing charge as those who use a lot.

❌   It’s hard for vulnerable households– People who use prepayment meters and need heating just part of the year, like in summer, could find it tough to pay for fixed costs.

❌   Doesn’t reward energy efficiency– A household can lower their energy usage, but the standing charge stays the same.

Arguments in Favour of Standing Charges

✔   Covers important infrastructure costs– Helps energy suppliers keep grid connections, even for homes that use very little energy.

✔   Predictable costs for high-energy users– Homes that use a lot of energy might save moneywith lower unit rates on standing charge tariffs.

✔   Supports long-term stability– Fixed costs help pay for government support schemes, like assistance for vulnerable households.

Impact of Standing Charges on Different Households

Are Standing Charges Increasing?

Current Standing Charges in the UK (2025)

Source: Ofgem, February 2025

High standing charges can affect customers who do not use much energy. This issue has led people to call for changes in the UK energy market.

Alternatives to Standing Charges

1️⃣   No Standing Charge Tariffs

• Customers pay for the energy they use, but the rates are much higher.
• This option is ideal for people who use less energy, own second homes, or have short-term rental properties.

2️⃣   Fixed Daily Unit Rate Instead of Standing Charge

• Instead of a daily standing charge, customers might pay a small amount included in their unit rate.
• This would spread fixed costs more fairly.

3️⃣   Lower Standing Charges for Vulnerable Households

• There are special low standing charge tariffs for customers who are part of government support schemes, like the Warm Home Discount Scheme.
• This helps users of prepayment energy tariffs avoid paying high fixed daily charges.

What Does Ofgem Say About Standing Charges?

Ofgem wants to study standing charges and look at new ways to set prices.

• January 2025:Ofgem started a discussion about high standing charges.
• April 2025:Ofgem will share new rules for energy suppliers.
• December 2025:There may be changes in the UK energy market to help create fairer tariffs.

What to Expect in 2025:

• Some energy companies could lower standing charges each day when they receive customer complaints.
• You might find new standing charge options through an energy comparison service.

FAQs About Standing Charges on Energy Bills

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