Standing charges energy price cap variant: next steps

Policy
Publication date

Topic

Standing charges
Industry sector
Supply and Retail Market

Update on creating a low or zero standing charge option and our proposals for tariffs.

Details

We began a review of standing charges in 2023. Since then, we’ve heard from energy suppliers, consumer groups, household bill payers, industry bodies, and network companies. Across these groups, strong interest was shown in seeing changes to standing charges.

Tens of thousands of consumers responded to express their dissatisfaction with the current system. While we cannot reduce these fixed costs, we want to focus on introducing more opportunities for consumers to have increased control and choice when it comes to how they pay their standing charges.

So far, we have encouraged suppliers to introduce low or no standing charge tariffs voluntarily. However, the pace of change has not been sufficient to meet our policy aims or consumer expectations.

In February 2025, we consulted on a variant of the energy price cap that would not have a standing charge. As part of this proposed variant, the fixed charges currently recovered as part of a daily standing charge would be added to the unit rate instead. Following feedback, we are looking at a wider range of options for how we introduce a greater level of choice and control for consumers in how they pay for their energy.

As an alternative to making changes as part of the energy price cap, we are now also looking at whether to require suppliers to have available at all times, in all regions, at least one lower or zero standing charge offer.

This approach would accelerate consumer access to more flexible pricing options, giving them more choice and control in how they pay for their standing charges. Suppliers have different customers to consider, and by having the ability to set these tariffs more flexibly, they may be able to better meet their customer’s needs.

We will work with suppliers, consumer groups and other interested parties on options over the summer. We are aiming to see new tariffs being offered in January 2026, subject to consultation in autumn 2025.

In the meantime, suppliers are able to offer low or zero standing charge tariffs without action from Ofgem. Some suppliers already offer these tariffs to customers.

Next steps

We are keeping in touch with energy suppliers, consumer groups, industry bodies and network companies about our next steps. This feedback will support the decisions relating to how these tariffs are implemented, such as eligibility criteria and tariff structure.

We remain committed to working collaboratively with suppliers, consumer groups, and other stakeholders to ensure that the rollout is fair, transparent, and provides meaningful benefits to consumers.

Cost allocation and recovery review

In a separate, longer-term project, we are continuing our broad review of how energy system costs are allocated and recovered. Through the Cost allocation and recovery review we are looking at how to take a more holistic and fair approach to structuring energy bills. This includes looking at how costs are split between standing charges and unit rates, how different tariff structures could work, and how costs are shared across different types of consumers. We are exploring how to take a more holistic and fair approach to structuring energy bills. This includes looking at how costs are split between standing charges and unit rates, how different tariff structures could work, and how costs are shared across different types of consumers.

This work is closely linked to the split tariff trial, which is testing new ways of giving consumers more control over how they pay for fixed and variable energy costs. This will start a conversation and seek views about how costs are currently distributed across the energy system and whether alternative models for recovering those costs could provide fairer outcomes for consumers. This is an opportunity for an open and honest dialogue about how the system works today and how it might be improved. We will work closely with government to consider the feedback we receive and use it to help shape future proposals for change.

As part of the review, we are also running real-world trials of different types of tariffs. These trials will help us understand how consumers experience various pricing models in practice, and what benefits or challenges they bring to different groups.

Together, these efforts form part of our short to longer term aim to ensure that energy pricing is fair and responsive to consumer needs.