ENERGY suppliers will soon be required to offer tariffs with lower standing charges under new rules confirmed by Ofgem.
However, the regulator has dropped its original plan to remove the fixed costs completely from some deals.
1
Ofgem said it wants to give consumers more choice on how they pay standing charges, with the plans set to allow households to pay the costs as part of their unit rate by lowering the daily fixed amount.
If given the go-ahead, the new tariffs could be available by the end of January.
Standing charges are applied daily, regardless of how much energy the customer uses, and are used to cover the cost of supplying energy to homes and businesses.
They also cover the costs of building new network infrastructure and keeping the power on when energy suppliers go bust.
Critics argue these charges unfairly impact low-energy users, as they make up a larger proportion of their bills.
Ofgem stressed these charges cannot be removed entirely and that they can only be moved from one part of the bill to another, which means they are unlikely to mean lower energy costs.
It said it dropped earlier plans for tariffs with zero standing charges and much higher unit rates, as this could have unfairly impacted consumers with high energy needs, such as those who rely on power for medical reasons.
It is also looking to introduce a minimum usage on to the new tariffs so that those with second homes or properties left vacant for long periods do not disproportionately benefit.
Ofgem is now launching one final consultation on the plans, with aims to make a decision by the end of the year, paving the way for the new tariffs to be available to everyone across Britain by the end of January.
Tim Jarvis, director general of 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.”
But he added: “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.”
Energy bills set to rise in October
It comes ahead of a 2% rise in energy costs when the next price cap change takes effect on October 1, which will see the bill for a typical household rise from £1,720 to £1,755 a year.
Martin McCluskey, minister for energy consumers, 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.”
Ofgem said the new lower standing charge tariff mandate would be likely to only be a short-term measure while it moots permanent changes to allocate costs within the system, as the UK shifts towards renewable energy.
Energy companies like Ovo are calling for a social tariff to provide cheaper energy bills to those who need it most.
A report by Green Alliance found that a social tariff could lift more people out of fuel poverty than existing schemes.
One option would match the cost of current schemes and reduce fuel poverty by 12%, helping over a million families.
A broader tariff could cut fuel poverty by 19%, rising to 26% with better energy efficiency in rented homes.
A targeted tariff focusing on the poorest households could reduce fuel poverty by 42%.
The report showed that 67% of the public support introducing a social tariff.
What energy bill help is available?
There’s a number of different ways to get help paying your energy bills if you’re struggling to get by.
If you fall into debt, you can always approach your supplier to see if they can put you on a repayment plan before putting you on a prepayment meter.
This involves paying off what you owe in instalments over a set period.
If your supplier offers you a repayment plan you don’t think you can afford, speak to them again to see if you can negotiate a better deal.
Several energy firms have schemes available to customers struggling to cover their bills.
But eligibility criteria vary depending on the supplier and the amount you can get depends on your financial circumstances.
For example, British Gas or Scottish Gas customers struggling to pay their energy bills can get grants worth up to £2,000.
British Gas also offers help via its British Gas Energy Trust and Individuals Family Fund.
You don’t need to be a British Gas customer to apply for the second fund.
EDF, E.ON, Octopus Energy and Scottish Power all offer grants to struggling customers too.
Thousands of vulnerable households are missing out on extra help and protections by not signing up to the Priority Services Register (PSR).
The service helps support vulnerable households, such as those who are elderly or ill.
Some of the perks include being given advance warning of blackouts, free gas safety checks and extra support if you’re struggling.
Get in touch with your energy firm to see if you can apply.