Standing charges under the Ofgem price cap rose to their highest level since the cap was introduced in 2019 when the new cap level took effect on 1 April 2023, according to a report published by the fuel poverty charity National Energy Action (NEA) on 30 March 20231. The report, produced by Ideal Economics and commissioned by NEA, puts the increase at 64%1.
For a dual fuel household paying by prepayment meter, standing charges reach £350 a year1. Across Great Britain the dual fuel prepayment standing charge averages £350 a year including VAT, ranging from £296 a year in London to £382 a year in Southern Scotland and in North Wales and Mersey1. Prepayment standing charges have risen by 48% since October 2020, when a separate price cap initiated by the Competition and Markets Authority came to an end1.
NEA says the increase results from decisions by Ofgem under its Targeted Charging Review to move costs from the unit rate to the standing charge1. The Energy Price Guarantee reduces unit rates for all households but provides no discount to the standing charge1. NEA states that 13% of the typical dual fuel energy bill is unavoidable, and that a standing charge of £350 a year accounts for 41% of what the poorest 10% of households have available to spend on energy, leaving them £508 worth of gas and electricity a year1.
"For years, the standing charge has been growing. It makes life worse for low-income households who cannot afford the cost of a warm, safe home and have no choice but to cut back on their energy consumption."
The change coincided with the end of the UK Government's Energy Bills Support Scheme rebate on 1 April, which had provided £67 a month to all households1. The Energy Price Guarantee keeps the annual bill for typical households at £2,500, but NEA says that with the standing charge increase and the end of the rebate, energy bills will increase by 40% a year1. NEA estimates the number of UK households in fuel poverty will rise from 6.7 million to a new high of 7.5 million from 1 April1.
| Measure | Figure |
|---|---|
| Rise in standing charges since 2019 cap | 64% |
| Dual fuel prepayment standing charge, average | £350 a year |
| Range across Great Britain | £296 (London) to £382 (Southern Scotland, North Wales and Mersey) |
| Rise in prepayment standing charges since October 2020 | 48% |
| Share of typical dual fuel bill that is unavoidable | 13% |
| Households in fuel poverty from 1 April | 7.5 million (from 6.7 million) |
Why it matters for households
A standing charge is paid before any gas or electricity is used, so it is a fixed daily cost that cannot be reduced by using less energy. For a prepayment household on £350 a year, that cost is incurred whether or not any units are bought. Because the Energy Price Guarantee discounts unit rates but not standing charges, the freeze at £2,500 for a typical household does not limit this part of the bill. The standing charge therefore sets a floor under what a home pays, and the Targeted Charging Review shifted more network costs into it. Households that use very little energy, including those cutting back to save money, see the standing charge take a larger share of what they spend. The price cap limits unit rates and standing charges for default tariffs, but it does not remove the standing charge, and the Energy Price Guarantee applied only to unit rates. For homes weighing a fixed tariff against the price cap, or considering a no standing charge tariff, the level of the standing charge is the part of the comparison that usage cannot change.
What happens next
In the Budget on 15 March 2023, the UK Government announced that from July 2023 to March 2024 it will compensate prepayment customers for the additional cost, meaning the higher standing charges, they face relative to those who pay by direct debit1. NEA puts the cost of this at £200 million to the taxpayer1. Prepayment customers still pay the extra for the three months until July, standing charges remain high for all consumers, and NEA says it is unclear what will happen from April next year1.