Standing charges pay for the cost of transporting energy to people’s homes, security of the supply, investment in the energy network and some bill support schemes.
From 1 October, the charges will typically cost 53.68p a day for electricity and 34.03p a day for gas for those paying by direct debit.
However, these fees vary depending on where billpayers live. In North Wales and Merseyside, the cost will be nearly 70p a day for electricity.
Over the last year, Ofgem has been considering how to change the system after widespread concern from billpayers. The regulator’s initial public consultation received an unprecedented response.
“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,” said Tim Jarvis, from Ofgem.
Under its plans, now subject to consultation:
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All suppliers in England, Scotland and Wales must offer a low standing charge tariff to customers. Some providers already offer this as an option, but it would be universal
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All billpayers will have the choice to move to such a tariff by the end of January
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The new tariffs will be available to customers irrespective of how they pay their bill, such as by direct debit or quarterly on demand
“The costs covered by the standing charge ultimately must be paid. We cannot remove these charges, we can only move costs around,” added Mr Jarvis.
“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.”
People who cut their energy use should see a bigger reduction in bills than would be the case without these changes, he said.
Suppliers will be able to decide whether to also offer zero standing charge tariffs, with much higher unit rates.