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Energy UK responds to Ofgem’s announcement on standing charges

Responding to Ofgem’s announcement on standing charges, Energy UK’s Deputy Director, Daniel Portis said:

“It is unsurprising at a time when bills remain high and customers are trying to do all they can to make savings that standing charges are attracting increased debate.  

“It’s important to recognise that there is a difficult balance to be struck here, as Ofgem says. Standing charges are capped by the regulator and largely cover fixed costs – those which are unrelated to the amount of energy a customer uses. For example, the standing charge is how we all pay for the infrastructure needed to deliver energy safely to our homes because network charges are included, set by the regulator, collected by the supplier and then passed onto the network companies.

“These costs are incurred by all customers irrespective of the amount of energy they use. If you were to switch these costs to the per unit charges then those customers disadvantaged by the current system, such as low usage households, would benefit but equally other customers who might be more reliant on energy or have a less well-insulated home could end up paying significantly more – including many on low-incomes as Ofgem’s new analysis indicates.

“Although some suppliers have reduced standing charges to help customers where they can, the price cap on the unit rate leaves suppliers very little scope to offer tariffs with low standing charges.

“Ofgem therefore needs to examine this in detail and introduce any eventual changes with care to ensure that customers in the most difficult situations are still protected. As we’ve said, this issue has been brought to a head because energy bills remain high and it underlines the need to put targeted support in place for those customers in most need this winter and beyond.”