Responding to Ofgem’s proposals on standing charges and debt, Energy UK’s chief executive, Dhara Vyas said:
“We need to study Ofgem’s proposals in detail but the addition of a zero standing charge option could significantly change the nature of the price cap – from a single regulated price that gives customers price protection whether they shop around or not, to a situation where customers are expected to make an active choice about which cap they are on.
“It would be a major undertaking to make all customers aware of this change and to ensure they then choose the best option for their circumstances. As Ofgem highlights, there is a risk that it would be very expensive for some households, especially those in vulnerable circumstances, if they end up on the wrong tariff.
“The current price cap leaves suppliers very little scope to offer lower standing charges. The process of setting and then complying with a single price cap is far more complex than widely appreciated. Having two price caps in place increases the challenges for suppliers as they buy energy in advance, forecast demand, costs – and how to recoup these – and the likely take-up of each tariff.
“Standing charges have of course been an area of much debate in the past couple of years and it’s important to appreciate that they cover costs that are incurred by all customers irrespective of the amount of energy they use – such as paying for the infrastructure needed to deliver energy safely to our homes through network charges. Ensuring suppliers can recoup these costs in way that is fair to all customers is a difficult balance.
“Rising customer debt has been an increasing concern for the industry over recent years and with it now approaching a record £4 billion, we welcome Ofgem’s commitment to tackling a problem that has become unsustainable. Energy suppliers have pledged over £500 million of support this winter to provide a range of financial support to their customers, including enhanced debt write-off schemes and hardship funds alongside working with charities and debt support agencies to provide additional expert help to customers in need. We look forward to discussing how such best practice can be further established across the industry.”