Ofgem mandates suppliers to offer 'zero standing charge' tariffs, potentially saving Octopus Energy customers £676 annually.
Octopus Energy users could save up to £676 on their annual energy bills if a new tariff proposal removing the daily fee is implemented. Ofgem , the energy regulator, has made it mandatory for suppliers to offer 'zero standing charge' tariffs alongside existing options. Standing charges, fixed daily costs included in energy bills regardless of actual consumption, cost dual fuel households an average of £338 per year.
Critics argue that these fees disproportionately impact less energy-consuming households, as fixed costs represent a larger portion of their total bill. Martin Lewis, founder of MoneySavingExpert, has labelled standing charges as a '£388-a-year poll tax on energy bills', condemning them as a moral issue that discourages efforts to reduce bills among lower energy users. Ofgem's plan, aiming for implementation by next winter, requires suppliers to present zero standing charge options. If eliminated immediately, Octopus Energy customers currently locked into two-year deals could see savings of £676.This initiative is part of broader measures to address soaring domestic energy debts and will be complemented by new standards requiring suppliers to make support access more streamlined for consumers facing financial hardship. As of January 1, standing charges on standard variable tariffs have seen a minor reduction, from 60.99p to 60.7p per day for electricity, and from 31.66p to 31.65p per day for gas. While some suppliers currently offer tariffs with low or even zero standing charges, these plans are at least 10% under the price cap but come with a higher unit rate, benefiting customers who use less energy. Ofgem acknowledges that tens of thousands of consumers have campaigned for the elimination of standing charges. However, there are concerns that such a move could disproportionately affect those, including a number who require high energy due to medical needs, facing soaring bills. This is why Ofgem has decided to keep tariff options open, according to reports from the Express. The new tariffs aim to shift costs onto the unit rates for lower energy users. Higher energy consumers may not benefit from switching, but lower users could potentially offset the increased cost per unit with the absence of standing charge, saving up to £338 annually (£676 over two years) compared to standard tariffs.Tim Jarvis, Ofgem's Director General of Markets, explained: 'We know that many households continue to struggle with bills after the events of the energy crisis, which is why earlier this year, we took steps to consider all the issues around affordability and debt – including the impact of the standing charge.' He added, 'Many people feel very strongly that standing charges are unfair and prevent them from being able to manage their bills effectively. 'We want to give consumers the ability to make the choice that's right for them without putting any one group of consumers at a disadvantage. And by having a zero standing charge tariff, we would create that choice for everyone.'
ENERGY TARIFFS STANDING CHARGES OFGEM OCTOPUS ENERGY MARTIN LEWIS COST OF LIVING CRISIS
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