Millions of UK households could see their annual energy costs fall by around £100 under a major new rule change being considered by the regulator Ofgem. The proposal targets standing charges, a fixed daily fee on energy bills that has nearly tripled since 2019, drawing criticism for disproportionately impacting low users and older people.
The Burden of Tripling Standing Charges
Standing charges, which cover suppliers' fixed costs and network maintenance, have soared from an average of roughly £110 per year in 2019 to £320 under the current Price Cap. This fee is paid daily, regardless of how much gas or electricity a household consumes. Consumer champion Martin Lewis, founder of MoneySavingExpert.com, has repeatedly criticised the system, labelling it a "moral hazard" that discourages energy saving. He has highlighted how it particularly penalises older individuals who may use gas solely for winter heating but must still pay the daily charge throughout the summer.
Ofgem's Proposed Solution and Potential Savings
In response to mounting pressure, Ofgem is now consulting on rules that would compel every major energy supplier to offer at least one tariff with a significantly lower standing charge by January 2026. An Ofgem spokesperson indicated that if approved, these new tariffs could be available early next year.
The consultation will determine the exact reduction, but initial estimates suggest standing charges could be cut by the equivalent of £150 to £200 per year. This would reduce the average annual standing charge from £320 to somewhere between £170 and £120. For many households, this could translate to a net saving of approximately £100 on their total yearly energy bill.
Who Wins and Who Should Be Cautious?
The primary beneficiaries of this shift will be lower energy users, for whom standing charges constitute a substantial part of their bill. However, Ofgem and the Department for Energy Security and Net Zero have noted that the fixed costs of maintaining the energy network must still be covered. Consequently, on these new low-standing-charge tariffs, the costs are likely to be redistributed into higher unit rates for the gas and electricity actually used.
This means the new tariffs may not be suitable for high-consumption households, who could end up paying more. The government department stated it aims to ensure these fixed costs are "shared fairly" across consumers. The move represents a significant potential shift in how energy bills are structured, offering more choice but requiring careful selection based on individual usage patterns.
