Ofgem announces plans to introduce lower standing charge tariffs

Energy regulator, Ofgem  has announced a new requirement for suppliers to offer at least one lower standing charge tariff to their customers.

The regulator has published a consultation on requirements for suppliers to offer a lower standing charge tariffs.. Under the plans, these tariffs would be available to customers in every region of Great Britain (England, Scotland and Wales) by January 2026. This follows the launch of the regulator’s wide-reaching review of how essential costs are shared across the system.

Households will be given more choice in how they pay the fixed costs currently covered by the standing charge under plans put forward by the energy regulator.

Standing charges cover the fixed costs of delivering energy to peoples’ homes and businesses, including the cost of essential maintenance and infrastructure upgrades.

While the regulator is clear that it cannot remove the costs that make up the standing charge from the system and can only move from one part of the bill to another, it has carefully considered how to offer more choice for how customers pay these costs.

Ofgem has today published a consultation on introducing new rules that will require suppliers to offer a lower standing charge tariff, which will make the option available to all customers in every region of Great Britain. If implemented, the tariffs will be offered by all suppliers by the end of January 2026, and will be available to all consumers on different payment methods.

However, the regulator has made clear that this change is unlikely to reduce bills, as tariffs with a lower standing charge will have a higher unit rate. So, once available, customers should consider their circumstances and seek advice from their supplier or consumer groups.

Tim Jarvis, Director General, Markets, at Ofgem said “We’ve listened to thousands of consumers that wanted to see changes to the standing charge and taken action. We have carefully considered how we can offer more choice on how they pay these fixed costs, however we have taken care to ensure we don’t make some customers worse off.

“After examining all the options available to us, we believe that the right way forward is to require all major suppliers to offer at least one tariff with a lower standing charge. This will deliver the choice we know customers want, without having a detrimental impact on customers that have high energy needs, like those who rely on energy for medical reasons.

“The sector has already shown us it’s possible with some suppliers voluntarily offering low or no standing charge tariffs, but we need to see widespread availability across the market so this choice is available to everyone.

“The costs covered by the standing charge ultimately must be paid. They cover the costs of transporting energy to your home or business, and ensure we continue to invest in the networks, so they are future ready, and we have a stable and secure energy system. We cannot remove these charges , we can only move costs around. These changes would give households the choice they have asked for, but it’s important that everyone carefully considers what’s right for them as these tariffs are unlikely to reduce bills on their own.”

Minister for Energy Consumers Martin McCluskey said “Consumers should have freedom and choice when choosing an energy tariff that works for them.

“This proposal will make more tariffs available on the market, giving people more options to pay lower standing charges if that suits their needs. It is an important step towards building an energy market that puts families first and we will continue to look at how we can go further. That’s why we are working with Ofgem to make sure the fixed costs in the energy system are shared fairly.

“This government is standing up for billpayers – from expanding the Warm Home Discount to 2.7 million more households this winter, to holding suppliers to account for delivering a fair deal to their customers, to helping millions of families heat their homes more affordably through our Warm Homes Plan, which will be published in October.”

Independent Age Policy Manager David Southgate said “Older people on low incomes have consistently expressed their frustration with standing charges that can be unfair and excessive. Which is why we welcome Ofgem’s proposal for energy providers to deliver low standing charge tariff options from next year. For this policy to be a success, the  regulator must ensure that suppliers make these tariffs easily accessible and provide the full picture regarding the benefits and drawbacks of switching to one.

“While welcome, this reform does not address the affordability crisis. The weather is starting to get colder and last winter was especially brutal for older people in financial hardship. We regularly heard from people in later life that were sitting in cold damp homes or visiting public places to stay warm. The UK Government cannot allow this to happen again.

“They were right to expand the eligibility criteria for the Winter Fuel Payment, but now it’s time to start lifting people out of fuel poverty. To do this, the UK Government should introduce a discounted energy social tariff that will finally make standing charges and unit rates more affordable for those in greatest need.”

Richard Neudegg, Director of Regulation at Uswitch.com, said “More options for customers is a good thing. Energy deals with lower standing charges may be worth considering for households that use less energy, although are still unlikely to be the best choice in most circumstances.

“Ofgem is proposing to require suppliers to offer a tariff with a standing charge at least £150 less than in the price cap rate — around half of the expected standing charge in the coming year — but the unit rates will be higher than the price cap rate to compensate.

“These tariffs would be available to customers on all payment types, including with smart and traditional meters, although eligibility is proposed to be limited to ensure empty second homes don’t take advantage.

“While we await to see the detail, a typical lower use household paying £1,266 a year on the price cap from October, might save around £55 a year taking Ofgem’s proposed lower standing charge option, taking into account how unit rates might be upweighted. That compares with a higher saving of £167 typical lower-use households might pay on the cheapest fix available on Uswitch today.

“Ofgem’s plan is also only at the consultation stage, so there’s no guarantee that these tariffs will be available by January 2026. If they do become available, it will still be really important that consumers compare them with the fixed deals available to them, as lower usage households are likely to save more choosing the most competitive tariffs available.”