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December 6, 2023

Is your standing charge a ‘moral hazard’?

Is your standing charge a moral hazard and why might they be removed in the near future?

What are Standing Charges?

A standing charge is a fixed daily amount which you have to pay to your energy supplier, no matter the amount of energy you use. Even if you haven’t been in your house, and no energy has been used, you will still have to pay this standing charge.

The standing charge cost can vary from household to household or business to business; different energy suppliers often charge varying rates.

  • Using and maintaining the energy network, wires, and pipes.
  • Keeping connected to the network.
  • Meter reading(s).
  • Payments to government initiatives.
An older woman looking at her smart meter.

Are there suppliers who offer zero standing charges?

There are a few suppliers who do not make you pay a standing charge, which means you only pay for the energy you use; however, the standard rates are usually higher than other suppliers, and medium to high-energy users will most likely end up paying much more for their energy.

Empty properties

The standing charges are however perfect for people who own homes which will not be in use for most of the year, as they will only be paying for the energy they use while their property is in use.

Could you pause your standing charge?

If you are moving into a property, but leaving it empty for a while, get in touch with your supplier to discuss the option of pausing your standing charge, as this may be a possibility and could help you stop any energy bills coming through while you are not in the property.

What are the cheapest standing charges?

Until March 2024, the average standing charges for domestic customers on default tariffs will be capped in line with the prices set by Ofgem (the energy price cap), at 53.34p per day for electricity and 29.60p per day for gas, excluding VAT, for a typical dual fuel customer paying by Direct Debit.

Standing charges can range from 5p to the capped amount mentioned above, with the zero standing charge also being available. Some of the cheapest energy supplier standing charges on electricity tariffs can be found with British Gas, Utility Warehouse, E. ON Next and Fuse Energy.

A couple looking at their high energy bills.

Could standing charges get the axe?

Martin Lewis, founder of MoneySavingExpert.com, has previously said: 

"Outrageously, most people will pay £300 per year just for the facility of having gas and electricity, even if you don't use any. This is due to the high energy standing (daily) charges. These are a moral hazard and should, at the minimum, be substantially reduced.

There has been a lot of recent speculation regarding the need for standing charges, or at least the high prices of them. An example of this is an MP calling the standing charge “unfair” and that it should be replaced.

The 'Rising Block' Tariff

One alternative is a ‘rising block’ tariff, this is where the price you pay per unit increases the more you use it, which makes sure low users are not charged for something they cannot control.

Another alternative is reducing standing charges by removing firms’ day-to-day costs from them, which could reduce some standing charges by 45%.

At the moment, there are no solid plans for standing charges to be removed, reduced, or changed, however, the ball is rolling and within the next couple of years we could see a change in the way we pay our standing charges, or we may not pay them at all.

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