Another scandal is brewing around standing charges on your energy bills

Spineless energy regulator Ofgem is failing to scrap the unjust flat-rate daily standing charges on energy bills. Currently, it’s running another consultation on this, with a purported “zero standing charge option” on the table. However, one campaign group has said the regulator is only “pretending” to get rid of it. This is because, in actual fact, it’s not abolishing this at all. In reality, it’s simply proposing to hide this in another part of the publics’ energy bills.

So once again, it’s set to do nothing to curb the soaring and unaffordable costs of households’ energy bills. After all, that would be too much like curtailing surging energy company profiteering – something Ofgem isn’t really seriously prepared to do.

Ofgem standing charges: disproportionately hitting the poorest households

As Ofgem explains:

A standing charge is one of the costs that is included in your electricity and gas bill. It is also included in the energy price cap.

Your energy supplier will charge you a standing charge cost each day, even if you do not use any energy on that day. The amount you pay will depend on your supplier, how you pay for your energy and where you live within England, Scotland or Wales.

Notably though, the standing charge is an extremely unfair flat-rate levy on customers, disproportionately impacting the poorest households. Crucially, the charge is cementing fuel poverty – as a previous survey from campaign group Organise highlighted. Writing on its findings from polling the impact of the charge on 45,000 people, the Canary’s Steve Topple detailed that:

standing charges impact adequate heating for 90% of people, with:

• 84% forced to cut heating, showers, baths, washing, and drying.
• 72% left in debt or unable to top up a prepayment meter.

Those on prepayment meters are one group hit hard by standing charges.

534,462 electricity customers and 269,351 gas customers were cut off between January and March 2023. However, this Ofgem data only covers 4% of households, so ignores millions of other low income struggling households. This includes the two million homes without gas supply that pay the higher electricity standing charges and unit costs.

And because of the way it works, the standing charge also makes up a disproportionate amount of low energy users’ bills.

Naturally, these typically tend to be poorer households who can’t afford to use as much in the first place. In other words, the higher proportion of what they pay for their bills goes towards the standing charges. It can even literally mean that those who haven’t used any energy for months build up this inflated cost.

It’s why many people think Ofgem should abolish the standing charge altogether. Yet, the regulator has instead resisted all calls to do so to date.

Overwhelming public demand to scrap the standing charge

Since late 2023, Ofgem has been consulting on standing charges. It closed its first consultation over it in January 2024. Over 30,000 members of the public responded to this, which the regulator itself acknowledged:

demonstrated the strength of feeling among the public for change

Crucially, prominent among these changes was for Ofgem to completely scrap the standing charges. Instead, respondents said it should shift:

these costs to energy suppliers to absorb using profits

Then, it followed this up with a second consultation which closed in September 2024. More than 20,000 people again flooded Ofgem’s inbox calling for it to do away with the charge. Largely, this was thanks to a campaign by Fuel Poverty Action, Green New Deal Rising, and the Peace and Justice Project.

Despite the enormous public demand for this, Ofgem is still obstinately refusing to do so. It has put forward an alternative proposal which it’s now once again consulting on.

It’s calling this a “zero standing charge energy price cap variant”. However, the name is deceiving, because it amounts to little more than moving money around. In reality, it’s only offering to shift this cost onto the unit price of customers’ bills – so in effect, the standing charge will still exist.

Another consultation…

So now, Fuel Poverty Action is once again stepping up, alongside the Energy For All campaign, and are asking the public to do the same.

The groups have put together a template letter for people to fill out and send to Ofgem in response to the consultation. As it notes in this, it has also put this together since Ofgem has made the consultation itself complex and inaccessible:

We need you to tell Ofgem what they are proposing is not good enough. They are trying to make it hard for people to respond with a long and complicated form. If you’ve not got much time, we’ve made it easy by drafting a letter that you can adapt

The Word document form for it runs to 44 pages, packed full of largely impenetrable information.

Fuel Poverty Action and Energy For All’s letter breaks through the bluster and makes clear, actionable demands for Ofgem to get:

our money back from profiteering energy firms and brings our bills down. It also suggests a zero-standing charge option that includes free essential energy to protect everyone, Energy For All.

In other words, it’s telling the regulator in no uncertain terms what it really should be doing. That is: protecting customers from parasitic energy companies.

Lining the pockets of the big energy corporations

Gallingly, Ofgem has framed the standing charges cost as a necessity, stating in its consultation that:

Standing charges represent costs of the energy system that do need to be paid for. Therefore, in designing a zero standing charge energy price cap variant we are considering how these costs are paid for, not whether they are paid.

Of course, it’s failing to mention that what these standing charges also do is facilitate energy companies making enormous profits.

Fuel Poverty Action’s letter emphasises this very incongruity given a recent cronyist move by Ofgem. Specifically, it notes that:

You claim all these costs are essential, but that’s not true. You’ve just gifted network firms an extra £3.9 billion. Now you need to give us our money back by taking this money off our standing charges. There are sufficient £billions in excessive profits, subsidies and overheads to wipe out standing charges completely.

This was in reference to a loophole in regulations which meant the companies that own our energy infrastructure benefitted from an overestimation of borrowing costs.

Meanwhile of course, energy companies have also been raking in gargantuan profits too. Notably, since the energy crisis began, 20 energy giants from oil and gas majors, to suppliers, and companies controlling the grid, have made more than £484bn in profits.

The figure is based on a recent analysis by the End Fuel Poverty coalition – which the Canary has updated with since declared year end results. While some are still outstanding for 2024, companies including Shell, Equinor, Drax, and Cadent have made more £85bn of this last year alone.

Take three on telling Ofgem where to stick its standing charges

Ultimately, Fuel Poverty Action and Energy For All’s letter eviscerates the very basis of Ofgem’s argument that these are necessary costs in the first place – since customers are already paying far more for the unit price than it actually costs companies to produce energy:

We are generating a lot of electricity at less than 8p a unit but the Ofgem Price Cap is up again to 27p a unit plus 54p a day standing charges.

In short, the regulator has no intention of truly abolishing the standing charges. Rather, it simply plans to shift the costs onto the consumer elsewhere in their bill. Of course, this, on top of Ofgem raising the energy price cap again and costing households on average an extra £100 per year is another kick in teeth.

So, Fuel Poverty Action and Energy For All’s are urging as many as possible to once again flood its inbox and demand it ditch the standing charges for good. The public has until 20 March to send the letter to Ofgem, when it will close the consultation.

Of course, after ignoring multiple consultations calling for just that, it’s unlikely that this will make Ofgem meaningfully change its ways. After all, it has repeatedly shown itself less intent on protecting people from profiteering corporations, than it is at operating as a fundamental instrument propping up the energy privatisation racket.

However, with the campaign groups’ letter, the public can at least tell the sham regulator where to go on its latest corporate cronyist con.

Featured image via the Canary