Energy Price Cap And Standing Charges: Why Costs Are Rising

Energy bills in the UK energy market include two main costs. The first is the unit rate. This is the price you pay for each kilowatt hour (kWh) of energy you use. The second cost is the standing charge. This is a fixed daily amount that helps cover the costs of maintaining the energy supply network.

The energy price capfrom Ofgem decides how much you pay for each unit of gas and electricity. It also sets the daily standing charge. Even with changes in wholesale energy prices, many standing charges are still high. In some places, they have even gone up.

This has caused concerns, especially for vulnerable households and those who use prepayment meters. They often deal with higher unit rates and have fewer options for their tariffs.

What Is a Standing Charge & Why Do Energy Bills Include It?

A standing charge is a daily fee that energy companiesput in your energy bill. You have to pay this charge even if you do not use much energy. It helps to cover some costs.

• Energy network maintenance – This means checking that the electricity and gas supply systems are working well.
• Meter readings & account administration – This includes managing billing, online accounts, and costs from energy suppliers.
• Government levies & social schemes – This is about funding projects for renewable energy, saving energy, and helping households in need.

Standing charges apply to all customers. This covers those who pay by direct debit, those who use a prepayment meter, and those who have a standard variable tariff.

Why Are Standing Charges Increasing?

Despite the drop in wholesale energy prices, standing charges remain high due to several reasons:

1️⃣   Rising Energy Network Costs

The UK’s energy supply network is costing more to maintain due to inflation. Suppliers pass these extra costs to all households. This practice keeps the standing charges high.

2️⃣   Supplier Failures & Debt Recovery

Over 30 energy companies shut down from 2021 to 2022. This created billions of dollars in unpaid bills. To manage these expenses, Ofgem allowed higher standing charges.

3️⃣   Government Levies & Social Schemes

• The Warm Home Discount Scheme and other government support schemes get money from standing charges.
• Customers with prepayment energy tariffs often pay higher standing charges to help cover these costs.

Main point: Even if you don’t use much energy, there will still be a basic cost for your energy supply because of standing charges.

Compare Energy Prices

Thinking about changing your energy provider?

Compare Now

How the Energy Price Cap Affects Standing Charges

Current Ofgem Energy Price Cap Standing Charges (April – June 2025)

• The charges for service vary based on your location. People in Scotland, England, and Wales may have different rates depending on their network expenses.
• If you have a prepayment meter, you might face higher unit rates, even if your standing charges are similar to those for direct debit customers.

The energy price cap helps keep standing chargesfrom rising too much. However, they remain one of the highest fixed costs for homes.

Standing Charges for Prepayment Meters vs Direct Debit Customers

• Direct debit customers enjoy the lowest standing charges and unit rates.
• Prepayment energy tariffs are the most expensive. They come with high unit rates and fixed costs.
• Standard credit customers may have lower standing charges, but their unit rates are higher.

If you have high standing charges, you may be able to pick a cheaper tariff. Make sure to look for any exit fees and check the length of the contract before you change.

How Seasonal Energy Use Affects Standing Charges Throughout the Year

Many households believe that standing charges are based on energy usage. However, these fixed costs stay the same all year long. They do not change, no matter how much energy is used in any part of the year.

• In the winter months from October to December, you will use more energy for heating, but the standing charges won’t change.
• During summer months, even if you only use a small amount of gas and electricity, standing charges will still apply.
• Electricity bills remain the same. If your usage goes down, both the daily unit rate and standing charge will stay fixed.
• There is a 5% VAT on standing charges. This tax is added to all energy bills.

Standing charges are important, but using less energy and finding long-term solutions can help you save money.

How to Reduce the Impact of High Standing Charges

Even though standing charges are fixed costs, families can take steps to reduce their total energy bills.

• Check if you can get help from the government. The Warm Home Discount Scheme and Winter Fuel Payment can help lower your bills.
• Compare different plans. Some energy providers have lower daily standing charges but higher unit rates.
• Use a smart meter. This tool tracks how much energy you use. It can help you not to pay too much on guessed bills.
• Review the supplier’s rules for standing charge choices. Some suppliers have plans with no standing charge, but this means you will pay higher unit rates.

Even small savings can be important when you need to pay standing charges. A good way to lower your total costs is by comparing energy tariffs.

Managing High Standing Charges Under the Energy Price Cap

• Standing charges are high due to debts from suppliers, costs for the network, and fees from the government.
• People using prepayment methods and standard credit usually pay the highest standing charges.
• Even with government support schemes, these charges increase energy bills.
• Changing suppliers or searching for plans with lower standing charges can help reduce overall energy costs.

It’s important to understand how standing charges work. These charges are controlled by the energy price cap. Knowing this helps people select their energy supplier and tariff wisely.

FAQs About Standing Charges & the Energy Price Cap

Compare Energy Prices

Thinking about changing your energy provider?

Compare Now