Standing charges are a controversial tax that every UK household must currently pay as part of their energy bill. However, a recent major review launched by Ofgem could change this!
Under new proposals, households could soon be paying different standing charges, depending on their wealth or income. This means the same daily rate that everyone currently pays may change. And the rich could soon pay more for their energy!
What is a Standing Charge?
The standing charge is a fixed fee that appears on every energy bill. The charge is currently about 50–60p per day for electricity and slightly lower for gas. All households must pay this, no matter how much energy they use, even if they use no energy at all! The charge covers essential infrastructure costs such as maintaining power lines, gas pipes, and other grid investments.
Why are Flat-rate Standing Charges Unfair?
Fuel poverty campaigners have been arguing that the standing charge system is unfair for some time.
Since the start of the 2021-2022 energy crisis, these charges have increased dramatically. Gas standing charges have risen by 16%, but electricity standing charges have soared by 150%!
Although these rises affect every UK home, they impact low-income, energy-efficient, and single-person households the most. Especially those who need energy for medical care, live in energy-inefficient homes, or have pre-payment meters.
Back in 2024, a spokesperson for the End Fuel Poverty Coalition said:
“Standing charges are an unfair flat tax on every energy consumer. Every household pays through the nose just to be connected to the grid, even if they use no energy.’
Jonathan Bean from Fuel Poverty Action also added at the time:
“Millions of us are suffering energy starvation due to high standing charges that leave no money for heating, hot water or power. Many on prepayment meters get cut off. This cruel energy system needs urgent reform by the new Government.”
How are Ofgem Proposing to Review the Standing Charge?
Ofgem’s new review proposal is expected to address these issues by exploring options to make standing charges fairer.
Key ideas include:
- Exploring income-based or wealth-based standing charges
- Using council tax bands as a measure for household wealth
- Introducing variable charges depending on peak-time energy use
This could result in wealthier households being asked to pay higher standing charges. However, lower-income homes might finally feel some relief from these automatically fixed costs.
Ofgem’s CEO, Jonathan Brearley, spoke about his concern for how rising energy bills hurt the poor more than the wealthy:
“If unchecked, rising fixed costs could exacerbate inequalities. We want to at least ask the question — whether we can allocate costs more progressively.”
Why Should Ofgem Reform Standing Charges Now?
The need for a standing charge reform coincides with a massive investment in the UK’s energy grid. Building the necessary infrastructure for renewable energy sources, like wind and solar, is unfortunately raising fixed costs on energy bills. This even occurs during summer, when variable costs like gas or electricity usage fall.
Without regulator intervention, the same high-standing charges will apply to everyone. This will be regardless of how much power a household uses or even if they can afford to pay for the charges. Critics also warn that if the current model continues, it will punish low-use households and discourage home energy efficiency.
Why Does Making Standing Charges Fairer Matter?
Despite falling wholesale energy prices, household bills are still £400–£500 higher than they were before 2021–22. Household energy debt has also reached record highs. Although the Labour government has pledged to reduce annual bills by £300 by 2030, it’s unclear if Ofgem’s review will help towards this. But one thing’s for sure, removing the standing charge could make life easier for those on low incomes!
And if standing charges can change based on wealth or usage, does this mean we could see further alterations to the way that all energy costs are shared across society?
Have Your Say About Standing Charges!
Ofgem’s consultation is now open to input from the public, industry stakeholders, and consumer groups. Although these changes are likely to take months or years to put in place, it’s still a positive step towards a fairer energy system.
But until then, there’s a question that still stands. Should a household that uses little energy pay the same fixed charges as one that uses much more? Or should these charges reflect what people can afford?
Are you interested in having your say about the future of standing charges? Then why not submit your views straight to Ofgem?
Households can respond to the Energy System Cost Allocation and Recovery Review from 30th July until 24th September 2025. You can submit feedback using an online survey through the Ofgem website, or you can email feedback to costreview@ofgem.gov.uk.
Struggling to Pay High Energy Bills? Energy Advice Helpline Can Help!
If you’re struggling to meet the costs of gas and electricity or even just the standing charge, Energy Advice Helpline is here to support you! We can help you navigate Government energy efficiency grants such as ECO4 and the Great British Insulation Scheme.
If you live in a property with a low EPC rating of E or below, you could be entitled to free insulation, solar panels and heat pumps. Click the button below to see if you qualify today!
