Plans for new energy tariffs with no standing charges

Energy firms will be forced to offer customers tariffs with no standing charges, under a proposed shake-up of bills by regulator Ofgem.

All households pay the fixed daily charges covering the costs of connecting to a supply, but there have been widespread calls for these fees to be scrapped.

Ofgem is proposing suppliers offer one price-capped tariff that includes the standing charge, and another that loads these costs on energy usage charges instead. Customers could choose which suits them best.

The planned overhaul, for next winter, also raises the possibility of some unpaid bills that built up during a recent high-price crisis to be written off.

When Ofgem asked for the public's views on standing charges it received an unprecedented response of 30,000 submissions.

The majority were against standing charges - fixed fees, typically totalling more than £300 a year, that are paid irrespective of how much energy households use.

Under Ofgem's price cap, standing charges have risen by 43% since 2019.

Those with low energy usage, such as people who live alone, argued that even if they further reduced how much gas and electricity they used, they saw little difference in their bills. They wanted more control over their bills.

However, those with high energy needs could see a big rise in bills were these charges to be included in the price of each unit of energy used. It would mean higher bills for people with disabilities who have to charge up specialist equipment.

"We hear from people who've turned off their heating, ration their hot water, and avoid charging essential mobility devices, yet still feel like they're fighting a losing battle with their energy bills," said Alex Belsham-Harris from Citizens Advice.

Ofgem's proposed solution is to tell energy firms to make a dual pricing offer - one with, and one without, a standing charge. The tariff without a standing charge would have a higher price for each unit of energy. Both would fall under the existing price cap system.

Such tariffs already exist, but only from a handful of suppliers and are not available to everyone.

The amount of money owed to suppliers by customers has nearly doubled in two years, now totalling about £3.8bn.

The regulator is also setting out a plan for next winter that would deal with some of this debt, built up during a period of high prices, that has little chance of being repaid.

It is planning a "debt guarantee" to improve the standard of service offered by suppliers supporting customers in debt, which it said would give households "consistent, compassionate and tailored support".

Suppliers could also be required to accept debt repayment offers from reputable third parties such as debt advice agencies or consumer organisations.