Standing charges to be ditched by energy regulator

Energy companies in the United Kingdom will be required by next winter to offer tariffs that do not have standing charges, according to the nation's energy regulator, Ofgem.

While some suppliers already offer options with standing charges of zero, Ofgem's new mandate will require all energy companies to provide such fee-free tariffs alongside their standard rates, which currently include mandatory daily connection charges regardless of consumption.

The regulatory change comes as household energy debt has reached crisis levels, with unpaid bills soaring to 3.8 billion pounds ($4.84 billion) in September, a 91-percent increase from two years ago.

"Many people feel very strongly that standing charges are unfair," said Tim Jarvis, the director-general of markets at Ofgem. "We want to give consumers the ability to make the choice that's right for them without putting any one group of consumers at a disadvantage. And by having a zero standing charge tariff, we would create that choice for everyone."

Standing charges, similar to phone line rental fees, are controversial daily charges that customers must pay for their gas and electricity connection, regardless of how much product they use. The fees have drawn widespread criticism, because they disproportionately affect lower-income households, which spend a larger portion of their income on energy.

The fees fund essential industry operations, from maintaining gas and electricity infrastructure to smart meter installations, and also helped cover costs from the collapse of 30 energy suppliers in 2021 and 2022, reported The Guardian newspaper.

Jarvis added: "We know that many households continue to struggle with bills after the events of the energy crisis, which is why earlier this year, we took steps to consider all the issues around affordability and debt, including the impact of the standing charge. Today, we're setting out the next steps in what Ofgem can do to meet these challenges, as part of our work to make sure the energy market is working in consumers' interests."

While many consumers have called for the complete abolition of standing charges, Ofgem rejected the option, noting it could harm vulnerable households with high energy needs, particularly those using medical equipment, because their bills would increase if these costs were shifted to usage rates.

Consumer advocate Martin Lewis acknowledged that while Ofgem's reforms are a step forward, more substantial changes would require intervention from the government.

"Standing charges are a (338-pounds-a-year) poll tax on energy bills," Lewis said. "They also punish customers that only use gas for central heating in winter, many of whom are elderly, by making them pay for every day in summer."

jonathan@mail.chinadailyuk.com