UK households will pay new, higher 57.21p standing charges on their electricity bills from Wednesday morning, energy regulator Ofgem has confirmed.
On Wednesday, April 1, Ofgem will introduce its latest price cap for gas and electricity. Generally, the cap is reducing household energy bills on average, with government mandated cuts to green levies leading to a £117 overall cut to the typical gas and electricity bill from Wednesday. It means the average annual household bill for a dual fuel house will see bills drop from £1,758 a year to £1,641 a year from April 1.
But although bills are going down on average, one charge is actually being increased: standing charges for electricity.
The standing charge, often referred to as a ‘moral hazard’ by money campaigner Martin Lewis, is the daily charge customers pay simply for having a gas or electricity connection. It is particularly regressive for lower income households because it cannot be reduced by cutting usage.
As explained by Martin Lewis’ Money Saving Expert: “Standing charges – which you pay just for the facility of having gas and electricity, even if you don’t use any – currently make up around £330 of the average annual energy bill. We’ve long called for these charges to be lowered, as they penalise lower-use households and those looking to cut their usage.”
Martin Lewis added: “The current standing charge is a moral hazard that disincentivises lower usage and keeps bills high for people who use very little energy. It’s the biggest single cause of complaint I get about energy bills, by a mile.”
Last year, Ofgem, in response to calls to cut standing charges, promised that suppliers would have to introduce low or no-standing charge tariffs to customers, but these are yet to materialise.
From Wednesday, the daily standing charge for electricity will increase from 54.75p per day to 57.21p per day. It means households not currently on a fixed tariff – which is the vast majority of UK households – will pay the new higher standing charges on electricity from Wednesday.
At the same time, gas standing charges will hold almost flat, down from 5.93p to 5.74p.
It means that for a dual fuel household, it will cost roughly £19 a month in standing charges before you use any energy.
The next Ofgem price cap is expected to go up significantly following the conflict in Iran.
The new, lower price cap is in place from April 1 to June 31, and then it will be replaced by the next cap on July 1. Current forecasts from analysts Cornwall Insight suggest the next cap could be up by as much as 20% or £332, but the final figures won’t be announced until May.