Ofgem proposes zero standing charge on household energy bills

Ofgem are looking to scrap standing charges for millions of energy customers and the regulator is planning to launch new support for those who are struggling to pay their debt.

There could be a new scheme which will see some customers having their debt wiped clean or have repayments which will be matched to help them clear their arears.

Money Advice Trust who are a charity behind National Debtline say the average arrears for energy customers has increased by 37% over the past year to £1,541.

Cornwall Insight analysts are warning the changes could end up adding £20 a year for millions of household bills to pay for the changes.

Steve Vaid, chief executive of the Money Advice Trust, the charity that runs National Debtline, said, “It’s really positive to see that Ofgem has listened to our calls and recognised the need for a dedicated scheme to help people repay unaffordable energy debts, through debt write-off and repayment matching.

“Offering people help to repay in this way could lift millions of people out of debt, and will have wider benefits for consumers and energy suppliers.

“Ofgem must now work closely with suppliers and charities to bring the scheme into effect as soon as possible next year.”

Ofgem has decided that all energy companies should be offering a zero standing charge tariffs.

The standing charge is a fixed fee that averages 92p and is then added to household bills just for being connected to the grid and the regulator is saying this could save a typical household £388 per annum.

Dr Craig Lowrey, principal consultant at Cornwall Insight, said, “We anticipate that zero-standing charge tariffs would come with higher unit costs, in order to cover the maintenance of the network and other expenses that would normally be included in the standing charge.

“As such, these tariffs may not be immediately ideal for vulnerable groups, especially those living in less energy-efficient homes or with higher energy needs.”

Martin Lewis has been campaigning for energy companies to scrap the standing charges.

Lewis said, “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.”