Lower standing charge tariffs – will they reduce your energy bill?

Ofgem, the UK's energy regulator, has published a consultation that will require energy suppliers to offer tariffs with lower standing charges. The changes could be implemented as early as January 2026 and are designed to give households more choice and control over their bills.

While the move aims to help customers, particularly those with low energy usage, it has been met with a mixed response. Concerns have been raised that some households could end up paying more as a result. In this article, we explain what standing charges are, how the new tariffs might work, and what the potential downsides could be.

What are standing charges

A standing charge is a fixed daily fee that you pay to your energy supplier, regardless of the amount of gas or electricity you use. This fee covers the cost of supplying your home with energy, including the maintenance of the pipes and cables that deliver it.

A small part of the standing charge also goes towards government social and environmental schemes. The exact amount you pay can vary depending on your supplier, your location, and your chosen payment method.

Why is Ofgem reviewing standing charges?

Energy costs have been increasing for most households over the course of a number of years and with the new energy price cap rise on the horizon, customers are looking for ways to reduce their ever-increasing bills. The obvious and most useful way to reduce costs is to reduce your usage or by shifting usage to off-peak times of the day. However, Ofgem is keen to address the fact that some energy customers are unable to reduce their bills any further by these means alone and are calling for some movement on standing charges.

How will lower standing charge options for gas and electricity work?

In essence, energy suppliers would create at least one tariff option that includes a lower standing charge, allowing customers to choose this option where it suits their needs. However, lowering this fixed fee isn't straightforward, as suppliers still need to cover their costs. To balance this, a lower standing charge will likely be paired with a higher unit rate for the gas and electricity you actually use. Suppliers could also choose alternative methods to ensure that these tariffs do not hinder their ability to cover the costs of supplying a property. And this is where some of the criticism arises.

Ofgem’s consultation paper also suggests that suppliers could apply certain conditions to these tariffs to ensure they help the right people. These could include:

• Minimum usage requirement
• Limited access based on customer profile eg: prepayment customers only

On one hand, a minimum usage requirement could ensure that less affected customers, such as those with second homes or properties that are never or seldom occupied, are unable to benefit. However, it may also prevent single occupancy properties where an individual wishes to reduce their costs by minimising usage, benefiting neither. Prepayment customers usually have access to fewer options when it comes to reducing their overall energy bills, other than reducing usage, so targeting this group with a low standing charge tariff could make a difference to those who need it most. This would only be the case if minimum usage requirements or higher consumption charges do not outweigh the benefit.

There has been criticism from charities that Ofgem’s consultation does not go far enough to prevent hardship for households who continue to struggle, despite reducing consumption to a minimum. Director of Energy at Citizens Advice, Gillian Cooper commented, “There’s a real risk that those with higher energy needs, like some older or disabled people, could end up paying more if they choose one of these tariffs, so it’s crucial people are supported to make the right choice when this option becomes more widely available from January."

National Energy Action, another charity, responded, "Overall, there is a risk that all of the above causes even further disengagement or distrust in what is considered by many to be a baffling market already."

How to reduce your energy bill

Energy bills are set to increase at the beginning of October when the price cap rises again. The impact of this, combined with the onset of colder temperatures, means that households may face higher bills, putting a strain on their finances. Cutting down on energy usage is by far one of the most impactful ways to reduce bills. However, where this is not possible, finding the best energy tariff and seeking support where available can help lessen the financial burden.

You can read more about energy tariffs and how to fix these in our article, “Should I fix my energy tariff?”, where we also look at how the energy price cap increase in October may affect your bills. If you are in need of support to reduce or pay your energy bills, you will find a number of suggestions in our article, "What to do if you're struggling to pay your energy bills". You can also access information from Citizens Advice on grants and benefits to help you pay your energy bills.