No standing charge tariffs: zero standing charge gas and electricity plans explained - what it means for you

• Ofgem is proposing ‘zero standing charge’ tariffs to tackle rising household energy debt
• These tariffs would eliminate daily fixed fees, benefiting low-energy users
• Ofgem is also introducing new standards to help struggling customers access tailored support
• The regulator aims to improve supplier assistance with a "debt guarantee" and ensure consistent service
• The proposed changes aim to reduce the long-term energy debt burden on households

Energy companies will be required to offer household tariffs with no standing charges as an alternative to their current options under new plans from regulator Ofgem.

The regulator aims to have "zero standing charge" tariffs available alongside other options by next winter as part of efforts to tackle rising household energy debt.

Ofgem is also proposing new standards for suppliers to simplify the process for customers who are struggling to pay their bills, making it easier for them to access support.

Here’s what the proposed changes would mean for you.

What would a ‘zero standing charge’ tariff look like?

Standing charges are fixed daily fees that energy suppliers charge customers, regardless of how much energy they use. They cover the cost of supplying energy to a household, including maintaining infrastructure like pipes, wires and meters.

These charges are added to your energy bill every day, even if you don't use any energy that day. A "zero standing charge" tariff would eliminate this daily fixed fee.

Instead, the energy supplier would only charge you for the amount of energy you use, typically with a higher unit rate (the cost per kilowatt-hour of energy used) for the electricity or gas consumed.

Some suppliers already offer low or no standing charge tariffs, which are at least 10% below the price cap, but they are not universal.

Under Ofgem’s price cap, standing charges have risen by 43% since 2019, and from January will cost dual fuel households an average of £338 a year.

They disproportionately affect those who use less energy as the fixed costs make up a higher proportion of their overall bill.

A "zero standing charge" tariff could be beneficial for households with low energy usage, as they would only pay for what they consume, without the additional cost of the standing charge.

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Will standing charges be removed completely?

Ofgem said tens of thousands of consumers responded to its call for input on standing charges, with many asking for them to be removed altogether, saying that this would make it easier for them to manage their bills or pay back debt.

But while removing standing charges entirely might seem appealing, especially for those with lower energy usage, there are several reasons why slashing them outright could have unintended consequences.

With no standing charges, suppliers often offset the cost by raising the unit rates, which would benefit low-energy users, but it could hurt households with higher energy consumption.

For example, those with high energy usage for medical and health reasons would see their bills rise significantly, meaning it is important for households to retain a choice of tariff.

What else is Ofgem proposing?

Ofgem also set out plans for a “debt guarantee” to improve the standard of service offered by suppliers supporting customers in debt, which it said would give households “consistent, compassionate and tailored support”.

Suppliers could also be required to accept debt repayment offers from reputable third parties such as debt advice agencies or consumer organisations.

It also warned that the level of debt built up during the energy crisis had become “unsustainable”, saying it required a “bespoke, one-off solution to tackle it that will drive down the costs of debt in the long term for the benefit of all consumers”.

What do you think about Ofgem’s proposed changes to energy tariffs and debt support? Will the "zero standing charge" option benefit your household, or could it lead to higher costs for some? Share your thoughts in the comments section?