Ofgem launches consultation for launch of lower standing charge tariffs

Ofgem has announced the launch of a consultation over its proposed introduction of low or no standing charge tariffs.

The consultation runs until March 2025 and gives companies within the energy industry the opportunity to provide opinions on the potential changes.

Ofgem’s consultation proposes the following options (though it’s unclear whether more than one would be chosen):

1. A tariff which charges the same rate for both gas and electricity regardless of level of energy use, along with a low or zero standing charge. However, it’s likely that unit rates would be higher than those of normal standard variable tariffs.
2. A tariff that starts with a high unit rate which then drastically reduces once you’ve used a certain amount of energy (similar to Utilita’s no standing charge tariff).
3. A tariff that works in the opposite way, where the unit rate starts low and then increases once you’ve used a certain amount of energy.

Ofgem is aiming for the new tariff(s) to be available for the 2025-26 winter.

Richard Neudegg, director of regulation at Uswitch.com, comments: “Ofgem’s consultation about possible zero or low standing charge tariffs options by next winter might bring in a good option for some lower consumption households. But as ever, the devil will be in the detail.

“Consumers shouldn’t be under the illusion that under the price cap Ofgem will be able to reduce the much-hated standing charges without a trade-off elsewhere in the rates. If there is an option with lower standing charges under the price cap, there will be higher consumption based charges instead. Comparing options will continue to be essential, as different options will work best for different households.

“The public debate over standing charges has become louder in recent years - with so many households reverting to being on default tariffs, where the standing charges are effectively set by Ofgem’s price cap. 

“Consumers can take action now to reduce what they pay for their energy. There are a range of fixed deals on the market, which can help households beat the January cap and the predicted price rise in April, and often come with lower standing charges than the cap.

“Under Ofgem’s price cap, standing charges have risen 43% since 2019 and disproportionately affect lower-usage households, as these fixed costs make up a higher proportion of their overall bill. 

“On the January price cap, dual-fuel households on default tariffs are paying £338 per year on average in standing charges.”

Can customers get no standing charge tariffs now?

Yes, but there is only one supplier that currently offers them. Utilita, which focuses on serving customers on prepayment meters, does not ask customers to pay standing charges.

This proposal should give customers much more choice when it comes to choosing the tariff that works for them.

How else can I save money on my energy?

If you're on a standard tariff and haven't switched in a while, you're probably overpaying for your energy. It's worth running a comparison to see what deals are available and how they stack up against what you're currently paying. While we won't be featuring no standing charge tariffs yet, it's worth seeing what's out there.