Energy UK Explains: Standing charges 

What are standing charges?

• Standing charges are fixed daily charges added to energy bills. They are separate from the unit rate on a bill, which is not fixed. The more units of energy a customer uses, the higher their total bill will be.
• Unlike the unit rate, standing charges remain the same regardless of consumption and cover the fixed costs of suppling energy.
• These fixed costs include the maintenance, operation, and expansion of the electricity and gas networks. The costs need to be recovered through network charges and may appear on bills through standing charges or unit rates.
• Because standing charges recover costs that do not vary with energy use, moving these costs into the unit rate would increase suppliers’ risk of not being able to recoup the true cost of supplying energy. This can result in suppliers needing to find alternative ways to cover their fixed costs, such as increasing the unit rate of energy.
• Standing charges are covered by the price cap, which limits how much suppliers can charge. Suppliers are not required to include a standing charge at all and can choose to set them lower than the price cap limit if they wish. Some suppliers already offer tariffs with lower or zero standing charges.
• The amount that customers pay for standing charges can vary according to their supplier, as well as location, type of meter, and payment method.

Figure 1: Annual standing charge within the overall price cap

Figure 2: Annual standing charge components

Why have standing charges risen in recent years?

• Standing charges increased significantly during 2022 and 2023 as result of the implementation of Ofgem’s Targeted Charging Review (TCR). This aimed to achieve a fairer distribution of electricity network charges among energy customers.
• However, one of its consequences was a significant reallocation of network costs from the unit rate to standing charges. Inflation has also led to increases in standing charges, as it affects how they are calculated.
• Standing charge rates for electricity distribution are set 15 months in advance, based on the inflation rate at that time. In December 2022, the Consumer Price Index inflation rate reached 9.2%, which informed the standing charge rate for 2024/25, leading to significant increases.
• The combination of TCR and high inflation has led to price cap tariff electricity standing charges, rising from 22p/day in October 2019 to 51p/day from July 2025, while gas standing charges have increased more modestly from 25p/day to 30p/day over the same period.

Why are standing charges controversial?

• The issue of standing charges remains highly debated in energy policy, especially in relation to fairness for low-income and vulnerable households. Even if a customer disconnects from their energy for weeks at a time, they will still be required to pay their daily charge.
• It is also controversial because the significant increase in standing charges for high-capacity users following the TCR has contributed to Britain’s relatively high energy prices compared to other countries. This in turn damages the investment case for electricity-intensive businesses such as data centres.
• High standing charges are also criticised for potentially discouraging the uptake of low-carbon technologies, such as EVs. This is because of a wider issue of investment in our networks has not kept up with growing demand for electricity. Therefore, reinforcement to the grid is needed, which is paid through standing charges.
• While this is happening, consumers will face these higher charges no matter how much electricity they use, or whether they use flexible consumption at cheaper times. This dampens the market incentive for installing low-carbon technology or using smart flexibility measures.
• Higher standing charges are already especially discouraging the decarbonisation of businesses and transport. This is because electrified bus depots, public charging stations, carbon capture and storage (CCUS) equipment, and electrified industrial processes all require large connection reinforcement, meaning higher standing charges.
• Some campaigners say the charges are unfair because they are a flat rate, meaning they make up a disproportionately high share of energy bills for low energy use households. However, for low-income households with high energy consumption due to inefficient homes or medical needs, it is the overall unit cost of energy that will have a greater impact on their total bill, not standing charges

What is Ofgem’s zero standing charge price cap proposal?

• As part of its considerations on how to distribute costs more fairly and effectively, in early 2025 Ofgem consulted on the introduction of a zero standing charge price cap tariff.
• This would require suppliers to offer a default tariff, regulated by a price cap, without standing charges, but with a higher unit rate.
• It means that while households on this tariff would not pay a fixed daily charge, they would pay higher costs per unit of energy used.

What does this mean for customers?

• Ofgem’s proposal is not aimed at reducing costs for customers, but to expand consumer choice. It does not remove the costs that make up standing charges, as the costs for the maintenance of the energy system must be recouped.
• Removing standing charges means costs will have to be moved to another part of the bill – in this case, the energy unit price.

Who might benefit from this type of price cap?

• For customers who do not use energy for extended periods of time, this tariff may be preferable, as they will incur no charges on days with zero usage.
• It could also be a good choice for customers who prefer to have more direct control of costs.
• However, due to higher unit rates, customers would still cover the costs currently in standing charges once they start using energy. As a result, only those with regularly low overall energy consumption are likely to benefit from this tariff.

Who risks losing out from this type of price cap? 

• It is likely that the majority of customers would not be financially better off under this tariff. Vulnerable high users of energy, such as those with disabilities or medical conditions requiring specialised electronic equipment or stable temperatures, would be at significant risk of very high bills if they switched to it.
• It is, therefore, important that customers understand that switching to this tariff is not likely to generate cost savings and could lead to higher costs depending on their usage. If not clearly communicated, this could result in an erosion of consumer trust in the energy market, particularly if the tariff is seen as a cost-saving option.
• In addition, if suppliers are required to offer a zero standing charge tariff, they would need to recover more of their fixed costs through unit rates, which would increase their cost recovery risk. All energy needs to be paid for, and this could lead to increased prices under the existing price cap, potentially affecting a wide range of consumers who are not on the zero standing charge tariff.
• Further, the introduction of an additional variant of the price cap undermines its core purpose as a safety net for disengaged customers. By design, the price cap is there to ensure that those who do not or cannot switch are still protected by a fair default tariff. Replacing this with a choice between two options adds complexity and increases the likelihood of households ending up on the wrong tariff.

Looking forward

• Ofgem is running collaborative trials with suppliers to better understand customer appetite for, and behaviour surrounding, low or zero standing charge tariffs.
• In June 2025, Ofgem announced that a split standing charge tariff trial will go live from October 2025 to March 2026. The tariff will have a standing charge that is split in two, with one part varying with the customer’s electricity usage during peak periods.
• Ofgem is also conducting a review on Energy Cost Allocation and Recovery, which will look at fairer, simpler, and more efficient ways to recover costs. This will include exploring different approaches to passing costs to various types of customers, thinking beyond the current route of standing charges and unit rates. More detail on this review is expected in the coming months.

For more information on this paper, please email rosie.nurse@energy-uk.org.uk or press@energy-uk.org.uk.