Standing charges went up at the start of October, which means that consumers who pay by direct debit could be charged more than £300 a year on a dual fuel tariff before using any energy.
Energy suppliers in Great Britain can now charge 30p a day for direct debit customers to be connected to gas, rather than 29p, which was the cap from July to September 2023. For electricity, it’s 53p a day, which is the same as the previous cap.
As a result, British households connected to both an electricity and gas supply can face an annual bill of more than £300 before they so much as switch on a light.
Energy pricing works differently in Northern Ireland because the market is smaller. It is regulated by the Utility Regulator, which has a tariff review process rather than a price cap. Standing charges are generally lower than those seen in the UK.
What is a standing charge?
A daily standing charge is added to most energy bills in England, Scotland and Wales, regardless of how much energy you use.
Ofgem, Great Britain’s independent energy regulator, explains that these charges cover the cost of supplying energy to your home. But the cost has soared by an average of more than 65% in the four and a half years to October 2023, according to the fuel poverty charity National Energy Action.
Reasons for this include recovering costs related to failed suppliers and government initiatives such as the Warm Home Discount Scheme.
Crucially, the amount you pay depends not only on which supplier you’re with but also on where you live. Ofgem and the energy firms themselves say that the cost of delivering energy to homes varies by region.
While Ofgem also pins some of the blame for the latest increase on inflation, it emphasised in an email to NerdWallet that the allowance for standing charges under the price cap is simply a maximum figure, and suppliers aren’t required to raise prices. So it’s worth checking your energy bill to see how much standing charges are adding to it.
Standing charges by region from 1 October to 31 December 2023
The figures below are for customers who pay by direct debit. Standing charges differ for other payment methods.
Standing charges are the cheapest in London, while people in North Wales and Merseyside face the most expensive fees, paying around £80 more a year than those in the capital.
|North Wales and Merseyside||29.62p||62.23p||91.85p|
Checking how much you pay in standing charges
Now more than ever, it’s important to check your energy bills to make sure that you’re paying the right amount.
You can do this by logging in to your online account with your energy supplier. You should be able to see your current bill and previous bills and download them if you need to. Your energy supplier should also email you a monthly statement which may include a link to your online account.
If you prefer to get paper bills, you can usually ask your supplier to start posting them to you, but you may have to pay a fee. Some suppliers, such as So Energy, don’t offer paper bills at all.
On your energy bill, you’ll find details such as the tariff you’re on, your meter serial and reference numbers, the billing period and the energy used. If any of those details aren’t right, it’s best to speak to your energy supplier.
You can also check your energy bill to find out how much you’re paying in standing charges.
If you’re on a variable dual fuel energy tariff and pay by direct debit, your bill should be broken down by gas and electricity, showing your daily standing charge for each.
Can your energy supplier pause standing charges if you’re not using energy?
Because you pay standing charges to be connected to gas and electricity, it’s unlikely that your supplier will suspend them even if you’re not using any energy.
But in specific circumstances, you may be able to get standing charges refunded.
This could include if you move but don’t use any energy or agree to a contract with the existing supplier, or if your property will be unoccupied for some time.
In situations like this, it might be worth speaking to the supplier.
You might look into suppliers that don’t apply standing charges at all. But Ofgem says that only one supplier in the UK currently offers an energy tariff like this – Utilita, which recoups costs by charging a higher unit rate.
Demand for changes to standing charges
Rising prices have pushed the cost of standing charges into the spotlight.
OVO Energy has recently called for standing charges to be removed for vulnerable customers this winter but has said that implementation would be for the government to decide. The energy supplier won’t be increasing standing charges from October.
Chris O’Shea, CEO of Centrica, the parent company of British Gas, has called for standing charges to be abolished altogether. He believes that they should be rolled into the unit cost of the price cap instead.
On 23 September, the House of Commons Energy Security and Net Zero Committee published a report calling the current standing charge structure ‘unfair’, recommending that the government works with Ofgem to revise the model. It suggests a ‘rising block tariff’ where your unit costs increase the more energy you use.
However, Daniel Portis, deputy director of policy at trade association Energy UK, said in an email to NerdWallet that reforming or abolishing standing charges may not be straightforward: “If you add these costs on to the unit charge then it would disadvantage high energy users, many of whom could be categorised as vulnerable.
“You could, for example, have fuel-poor households paying twice as much for the network charges as a non-fuel-poor household with low energy usage.
“One way round this might be to target financial support towards standing charges for the most vulnerable, but that would need to be looked at in detail.”
In 2022, Ofgem reviewed moving costs from the standing charge to a higher unit rate but decided it would be too damaging for the most vulnerable customers.
Energy UK has called on the government to give targeted support to those in need this winter, as well as a longer-term solution to make sure energy bills are affordable for everyone.
What help is available if you’re struggling to pay for energy?
It’s important to speak to your supplier if you’re struggling to pay your energy bills. Some have financial support and advice available for eligible customers, and you may be able to work out a plan to help clear any debt and pay your bills.
While the government won’t be extending the Energy Bills Support Scheme this winter, there are other schemes you might be eligible for, such as the Winter Fuel Payment.
You can also speak to debt charities such as Citizens Advice and StepChange, which offer free debt advice and information on paying your bills.
Image source: Getty Images
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