- New plans could see more energy deals launched and debt driven down
Energy firms will have to offer customers gas and electricity deals with no standing charges by next winter, regulator Ofgem is proposing.
Standing charges are daily bills paid regardless of how much gas and electricity is used, and total £388 for the average home.
These charges are hated by many households, as they cannot be avoided by simply using less energy, and can tip homes into debt.
Some energy firms already offer deals with no standing charges, but these are rare.
The trade-off with these deals is that the unit rates – the price of energy used – tend to be higher.
Ofgem’s consultation today says that many consumers want standing charges removed from energy bills completely.
Feeling the chill: Standing charges are loathed by many for adding unavoidable costs to bills
An Ofgem statement said: ‘Tens of thousands of consumers responded to our call for input on standing charges, with many asking for standing charges to be removed altogether, saying that reducing or removing standing charges would make it easier for them to manage their bills or pay back debt.’
The regulator will launch a consultation in early 2025 that will propose all energy firms have to offer price-capped deals with no standing charges, alongside existing deals that include them.
However, Ofgem said that banning standing charges would mean energy bills would rise for groups that tend to use a lot of energy, such as the elderly and disabled.
‘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.’
Peter Smith, the director of policy and advocacy at the fuel poverty charity National Energy Action, said: ‘Households that use prepayment meters are particularly impacted by the continuation of high standing charges.
‘When their credit has been used up, standing charges accrue as a debt on the meter that must be cleared in full before accessing energy again.’
Energy debt hits record levels
Ofgem is also proposing action to help clear record levels of energy debt, which rose to £3.82billion in September – up 91 per cent in two years.
The average home in energy debt owes £1,541.
The regulator is not suggesting that energy firms wipe this debt.
Instead, it wants to tweak how energy debt is handled by gas and electricity firms, which it hopes will cut £1billion from the debt pile.
For example, Ofgem is suggesting new standards that require suppliers to give consistent and thoughtful support to customers in debt.
The regulator also wants to set up a scheme to improve how customers in debt are treated by energy firms.
It also wants to make energy suppliers accept debt repayment offers from reputable third parties, such as debt advice agencies or consumer organisations.
Ofgem hopes this would make it easier for households struggling with their bills to get help.