Money Wellness
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calendar icon04 Apr 2024

Calls for Ofgem to reduce high standing charges on energy bills

 Energy Secretary Claire Coutinho has written to the regulator Ofgem asking it to tackle the issue of high standing charges, which make up around £334 of most people's annual bills.This comes just days after MoneySavingExpert.com (MSE) founder Martin Lewis met with the minister to talk about the issue.

Even though the price cap is set to slash around £350 of annual energy bills, standing charges are still increasing.  According to the charity National Energy Action, the average standing charge for dual-fuel customers paying by direct debit will be 83% higher than it was in April 2019.

What are standing charges?

A standing charge is a fixed daily amount you have to pay for energy, no matter how much you use. It even applies to properties that are empty for part of the year – a holiday home, for example. It’s added to most gas and electricity bills.

How much have they risen?

As of 1 April 2024, electricity standing charges have risen from 53p a day on average to 60p a day. For gas standing charges, they’ve risen from 30p a day to 31p a day.

Why have standing charges risen?

The costs are rising because energy firms are passing on costs through daily fixed standing charges, and not through unit rates.

Some of this is because of Ofgem rules, such as its demand that energy firms recover certain costs through standing charges, like costs such as covering the cost of running networks, the roll out of smart meters, and support schemes, such as the warm home discount. 

In an open letter to Ofgem, Ms Coutinho advised that the regulator must:

  • Standing charges need to be as low as possible .Ms Coutinho said: "There is concern about how standing charges going up may limit consumers' ability to reduce household costs. And in addition to minimising costs, some of the growing number of energy users striving to consume energy more efficiently and help towards achieving net zero see standing charges as a disincentive towards doing so." 
  • Make bills more understandable, including transparency on how costs are calculated. Ms Coutinho said that its  important customers are made aware of why they pay standing charges and what they are used to fund.
  • Make effort to help suppliers offer a diverse range of tariffs, including options with lower standing charges. In this demand, Ms Coutinho noted the "disproportionate impact" standing charges have on vulnerable households and those in rural communities.  

 Fallen behind with your energy bills?

If you’ve fallen behind with your energy bills, the first thing you should do is get in touch with your supplier. Some offer grants to help customers who are really struggling or you may be able to agree a payment plan for the amount you owe.

If you're vulnerable, it’s also worth finding out if you can sign up to the priority services register. This is a free scheme that provides access to extra help from your energy supplier. Find out more about the priority services register

Read our guide on what to do about energy arrears.

 

Avatar of Lydia Bell-Jones

Lydia Bell-Jones

With a background in banking, Lydia has been writing professionally for over five years. She is passionate about helping people improve their personal finances and has a particular interest in the connection between money and mental health.

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