Energy companies may soon be required to offer household tariffs free of standing charges as an alternative to existing ones, under plans by regulator Ofgem. The watchdog is proposing that suppliers should have to offer “zero standing charge” tariffs alongside other tariffs by next winter, in a bid to tackle the growing issue of household energy debt.
It also wants to introduce new standards to make it easier for customers who are struggling to pay their bills to receive support. Under Ofgem’s price cap, standing charges have increased by 43% since 2019, and from January will cost dual fuel households an average of £338 a year.
These charges disproportionately affect those who use less energy, as the fixed costs constitute a larger proportion of their overall bill. Since October 1, households on a standard variable tariff paying for their electricity by direct debit have paid on average 24.5p per unit, with a standing charge of 60.99p per day.
For gas, the average has been 6.24p per unit with a standing charge of 31.66p per day. From January 1, average standing charges will decrease slightly to 60.97p per day for electricity and 31.65p per day for gas. Standing charges cover the fixed costs to suppliers of providing energy to homes. Some suppliers already offer low or no standing charge tariffs, which are at least 10% below the price cap, but they are not universally available.
While these tariffs do come with a lower standing charge, they have a higher unit rate. This means they are more likely to benefit customers who use less energy. However, high energy users, often due to medical and health reasons, would see a significant increase in their bills. Therefore, it’s crucial for households to retain tariff choice.
Ofgem’s director general of markets, Tim Jarvis, has acknowledged the ongoing difficulties faced by households with energy bills in the aftermath of the crisis. Jarvis revealed, “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.”
Jarvis further outlined Ofgem’s approach: “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.”
Addressing the issue of standing charges, he added, “Many people feel very strongly that standing charges are unfair and prevent them from being able to manage their bills effectively.”
Aiming to offer more flexibility and fairness, Jarvis stated, “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.”
Energy bill support already available
Up to £300 payment
Over one million pensioners are set to receive up to £300 this winter. According to the government website, you can receive the Winter Fuel Payment this winter if you were born before September 23, 1958. It is also only available to those living in England and Wales.
Furthermore, after changes by the new Labour government, claimants must also receive payments for one of the following benefits:
- Pension Credit
- Universal Credit
- income-related Employment and Support Allowance (ESA)
- income-based Jobseeker’s Allowance (JSA)
- Income Support
Grants from suppliers to help with energy debts
If you are in debt with your energy supplier, the first thing you should is contact them to go through your options. There’s a chance you may be able to set up a payment plan within your means.
However, if you feel that isn’t possible you can always look at getting a grant to help pay it off. Various suppliers have their own grants and support funds to help their customers.
It’s important to note that if your supplier is not listed below, you may still be able to get a grant from the British Gas Energy Trust which can provide financial support regardless of whether you’re a British Gas customer or not – however, you will need to get debt advice from a debt adviser before applying.
Here’s a breakdown of all the suppliers offering grants to their customers:
- British Gas Energy Support Fund
- Scottish Power Hardship Fund
- OVO Customer Support Package
- E.ON Energy Fund
- EDF Energy Customer Support Fund
- Octopus ‘Octo Assist Fund’
- Shell Energy Support Fund
Warm Home Discount
The government’s Warm Home Discount energy scheme could see millions of people get £150 off their electricity bill. The Warm Home Discount is a payment applied to a household’s energy bill to help them better afford heating during the colder winter months. Those who qualify for the discount will receive a letter from October onwards which will detail the discount as well as provide any further action that needs to be taken.
You can receive the Warm Home Discount if you either receive the Guarantee Credit element of Pension Credit or are on a low income and have energy costs (or meet your supplier’s criteria for the scheme in Scotland). The discount is not available for billpayers in Northern Ireland.
You could also qualify for the warm home discount if you receive one of the following benefits and tax credits:
- Housing Benefit
- Income-related Employment and Support Allowance (ESA)
- Income-based Jobseeker’s Allowance (JSA)
- Income Support
- The ‘Savings Credit’ part of Pension Credit
- Universal Credit
- Child Tax Credit
- Working Tax Credit