Ofgem moves to require low standing-charge energy tariffs to aid pensioners
Watchdog would mandate at least one tariff with reduced daily standing charges, shifting cost to higher per-unit energy prices; eligibility tied to annual usage patterns and 90-day benchmarks.
Ofgem has unveiled proposals that would require energy suppliers to offer at least one tariff with a low standing charge, a move the watchdog says could help pensioners and other households that are careful with their energy use. The plan would also open possibilities for second homes and seasonal users to qualify for reduced daily charges. Suppliers would be expected to have such a tariff available by the end of next January, according to the regulator.
Standing charges are fixed daily fees that households pay regardless of energy use. Under the current price cap, gas standing charges run about 29.82p per day and electricity standing charges about 51.37p per day, which translates to roughly £320 a year in standing charges for many households. The new tariffs would lower the standing-charge component but would likely raise the price per unit of gas and electricity. The net effect on annual bills would depend on how much energy a household uses. For illustration, if a tariff cut halves the standing charge, the total cost of energy consumed could rise even as fixed charges fall. On a typical October price-cap basis, a household spending £1,754 a year on energy, with £320 of that as standing charges, would see the standing-charge portion drop but the unit-rate portion rise—potentially pushing total annual costs higher in some scenarios unless usage declines significantly. If a household reduces consumption by a third on a traditional tariff, the annual bill would drop to about £1,276, whereas under a reduced-standing-charge tariff the bill could be around £1,223, a roughly £53 saving over the year.
Pensioners who heat only the rooms they are in are expected to benefit more from the new tariffs than larger families where heating is used throughout the home. Dr Craig Lowrey, principal consultant at analyst Cornwall Insight, said the lower standing-charge option could provide a more straightforward way to manage bills for those who cap their energy use. Households that spend little energy over long periods—such as second homes or seasonal properties—could also benefit if their annual consumption meets the regulator’s eligibility rule.
Under Ofgem’s proposal, customers would be eligible for a lower-standing-charge tariff only if, every year, they use at least as much energy as the average household typically consumes in 90 days. The rule is designed to reduce the risk that second-home owners disproportionately benefit. Standing charges vary regionally because of differing infrastructure and transport costs, so the new tariffs would also vary by area.
EDF already offers a fixed tariff with a lower standing charge, providing £100 off standing charges relative to what customers would pay under the price cap. The unit rates for gas and electricity in such schemes track the price cap and adjust quarterly, meaning the overall bill will still be influenced by market movements even as the fixed daily charges are reduced.
The proposal signals a shift in how energy bills could be structured, trading lower fixed charges for higher unit prices. Ofgem emphasizes that average annual bills on the new tariffs would not be lower than those on existing tariffs, reflecting the balancing act between fixed and variable costs. The regulator plans to publish further details in the coming months and expects suppliers to offer at least one low-standing-charge option across their individual product ranges.
The policy aims to give consumers more options to tailor bills to their energy-use patterns, particularly for pensioners and others who heat smaller spaces or have periods of low activity at home. However, the impact will hinge on how much energy households actually use and how price caps and unit rates evolve over time. As the end of January deadline approaches, industry observers will be watching closely to see how suppliers structure these tariffs and how eligibility checks will be implemented in practice.
Overall, Ofgem’s approach reflects ongoing efforts to address fixed-cost charges that can limit a household’s ability to reduce bills through conservation alone. By introducing a low standing-charge option, the watchdog hopes to deliver more predictable costs for light and careful users while maintaining competitive pricing through unit rates that reflect market conditions.
