Martin Lewis reacts to standing charge update from regulator

Martin Lewis responds to Ofgem’s plan to introduce zero standing charge tariffs.

The energy regulator’s proposed plans would require suppliers to offer a zero standing charge tariff option under the price cap to all customers from next winter. The new tariff would be offered alongside existing tariffs, giving consumers the option to choose what is right for their household.

Martin Lewis, founder of MoneySavingExpert.com, said: “While today's Ofgem announcement on standing charges isn't the best possible outcome, it's the best outcome that Ofgem can deliver unilaterally, to do more would require government intervention – and that hasn't happened.

"Standing charges are a £338 a year poll tax on energy bills, a moral hazard disincentivising lower users from cutting their bills. They also punish customers that only use gas for central heating in winter, many of whom are elderly, by making them pay for every day in summer. It's by far the biggest single subject of complaint I get from the public about energy bills.

"The best outcome would be to slash standing charges within the Price Cap, yet as that'd mean the cost of each unit of energy needed to increase, it'd require the Government to put in special support for vulnerable high energy users – such as those charging electric wheelchairs, or those with illnesses that require a very warm home. That hasn't happened (yet?).

"Instead, I'm pleased its alternative path follows our submission suggestion of a dual Price Cap, one as now, a 'higher standing charge, lower unit rate', and a new 'no standing charge, higher unit rate' version that'll benefit lower users.

"Yet the Price Cap was designed to be a safety-net tariff for customers who don't or can't engage in switching. The problem with presenting a choice of Price Caps is many vulnerable people won't make that choice. So I will be making representation to Ofgem to ensure firms are mandated to default lower-use Price Cap customers on to the no standing charge tariff – or at least do that for those on the Priority Services Register."

The announcement on standing charges is joined by proposals to tackle rising debt among energy customers.

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