Ofgem proposes tariffs with low standing charges to help pensioners cut bills
Regulator would require at least one tariff with reduced standing charges, potentially shifting costs to higher per-unit rates.
Ofgem on Friday unveiled proposals to require energy suppliers to offer at least one tariff with low standing charges, a move intended to help pensioners and other low-usage households trim their bills.
Standing charges are fixed daily fees that cover the cost of delivering energy to homes and certain supplier and government costs. Under the current price cap, a household pays 29.82p per day for gas and 51.37p per day for electricity, regardless of how much energy is used. Even with no energy use, the annual standing charge would approach £300.
Ofgem will require suppliers to offer at least one low standing charge tariff, but has not specified the precise design. The watchdog has said that average annual bills on the new tariffs will not be lower than the old ones, implying that the lower standing charge would be offset by a higher price per unit of energy.
Example calculations based on October price cap figures illustrate how the shift would work. If a tariff halves the standing charge, the typical household would see the energy-cost portion rise from £1,434 to £1,594, while the total annual cost would move in line with higher unit prices. If a household reduces energy use by a third on the traditional tariff, the bill would fall to about £1,276 a year, but under a reduced standing-charge tariff the annual cost would be about £1,223 – a saving of £53.
EDF already offers a fixed tariff with a lower standing charge, showing that a lower fixed cost can accompany unit rates that track the price cap and change quarterly.
Who will benefit? Those who use low levels of energy or live alone are most likely to benefit, including pensioners who heat only the rooms they are in. Second homes or households with long periods of no energy use could also benefit, but eligibility rules aim to prevent disproportionate gains for those who are not using energy year-round.
Dr. Craig Lowrey, principal consultant at Cornwall Insight, notes that a lower standing-charge tariff may provide a simpler way to manage bills for those reducing consumption, though it shifts costs for heavier users.
Eligibility and regional variation. Ofgem proposes that customers 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 policy is designed to limit windfall gains for second-home owners. Standing charges vary widely by region because of the differing costs of maintaining infrastructure and delivering energy, and the new tariffs will reflect those geographic differences.
This initiative sits within wider efforts to make bills more predictable and to encourage efficient energy use, especially among pensioners and households that keep heating modest. The regulator intends to have the new tariffs available by the end of next January, giving suppliers time to implement.
