British Gas, EON, EDF, and OVO Customers to Save £388 After Daily Fee Axed

Energy suppliers across the UK, including British Gas, E.ON, EDF, and OVO, are set to offer new tariffs with no daily standing charges following a landmark decision by the energy regulator Ofgem. The move is expected to save households an average of £388 per year, marking a significant step toward addressing rising energy bills and debt.

Standing Charges Explained

Standing charges are the fixed daily costs energy providers charge customers regardless of their energy usage. Currently, households on a standard variable tariff pay an average of 60.99p per day for electricity and 31.66p per day for gas, amounting to £338 annually under Ofgem’s price cap. These charges have risen by 43% since 2019, adding to the financial strain on many households.

The reforms will require energy suppliers to offer at least one “zero standing charge” tariff alongside their standard offerings by next winter. While some energy providers already offer low or no standing charge tariffs, these typically feature higher per-unit energy costs, making them most beneficial for lower energy users.

Ofgem’s Reasoning and Consumer Impact

Tim Jarvis, Ofgem’s director general of markets, explained the rationale behind the reform:
“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 that tens of thousands of consumers had called for standing charges to be axed, calling them an unfair barrier to managing bills effectively. While the zero standing charge option will benefit those using minimal energy, such as single households or elderly individuals with low consumption, Jarvis emphasized the need to retain flexibility to avoid penalizing high-energy users. This includes those with medical equipment needs.

Martin Lewis Weighs in on the Reforms

Energy advocate Martin Lewis, founder of MoneySavingExpert.com, welcomed the changes but suggested more should be done. He described standing charges as a “£338-a-year poll tax on energy bills” and criticized their disproportionate impact on lower-energy users, particularly those who only use gas for heating in winter. Lewis highlighted how standing charges discourage conservation by making energy savings less impactful on bills.

“The problem with presenting a choice of price caps is many vulnerable people won’t make that choice,” Lewis noted. He has urged Ofgem to require energy firms to automatically default lower-energy users or those on the Priority Services Register onto zero standing charge tariffs.

Implications for Energy Users

From January 2024, standing charges will drop slightly to 60.7p per day for electricity and 31.65p per day for gas, but many households will still face high annual costs if they remain on standard tariffs. Ofgem’s changes provide a chance to cut costs by switching to zero standing charge tariffs, especially for those consuming minimal energy. However, users with higher energy needs must evaluate whether the increased per-unit rates on these tariffs outweigh the benefit of eliminating standing charges.

Critics argue that the reforms, while a step forward, leave gaps in protecting the most vulnerable. Without proactive measures to enroll customers in beneficial tariffs, many may remain unaware of the changes. Advocacy groups have also highlighted the need for government support to reduce energy burdens further for high-usage households, including the elderly and those requiring energy-intensive medical equipment.