Ofgem proposes zero standing charge tariffs

The announcement follows an extensive consultation process that revealed widespread consumer concerns regarding standing charges on energy bills.

One of the central proposals is the introduction of zero standing charge tariffs. While some energy suppliers currently offer low or no-standing charge tariffs, Ofgem aims to expand this option across the market, giving consumers more control over how they manage their energy costs.

This initiative stems from feedback received from tens of thousands of consumers who expressed that reducing or eliminating standing charges would significantly ease their financial burdens.

However, the regulator faces a complex challenge. Although the removal of standing charges may benefit many customers, including those in debt, there are concerns regarding vulnerable consumers who rely heavily on energy for medical needs.

If fixed costs presently covered by standing charges are shifted to unit rates, their bills could rise sharply. Therefore, Ofgem emphasises the importance of providing consumers with choices tailored to their individual circumstances.

In addition to revising standing charges, Ofgem has unveiled a comprehensive debt strategy to address the escalating debts within the energy sector, which have been exacerbated following the increase in energy prices during the global energy crisis. The debt owed by consumers has soared to approximately £3.82bn as of September 2024, marking a staggering 91% rise over two years.

The proposed strategy aims to create a structured approach to supporting customers in debt. Ofgem intends to establish new standards for energy suppliers to ensure consistent assistance for customers struggling to pay their bills. This will involve collaborations with charities and debt support agencies to assess consumers’ abilities to pay and provide adequate guidance on available support options.

Tim Jarvis, Ofgem’s director of general markets, stressed the urgency of addressing these issues, stating that many households are still feeling the financial strain from the energy crisis. He highlighted the need for a balanced approach that protects vulnerable groups while accommodating those seeking more manageable billing strategies.

The regulator has also indicated plans to tackle the significant debt accrued during the energy crisis with bespoke measures aimed at creating a long-lasting impact on the cost of energy bills. Any scheme introduced would be designed to be cost-neutral, benefiting all consumers by contributing to reduced overall debt costs over time.

In response to these developments, Miatta Fahnbulleh, the minister for energy consumers, expressed her support for Ofgem’s initiatives, which she believes will empower households and enhance their control over energy spending.

These proposals represent an ongoing effort by Ofgem to reform the energy market and provide better outcomes for consumers, especially those in vulnerable situations. With rising living costs and the painful legacy of the energy crisis still affecting many, the regulator’s plans may offer a glimmer of hope for a more sustainable and equitable energy market in the future.