Consumer Scotland published its response to Ofgem's Standing Charges Call for Input on 25 January 2024, arguing against transferring standing charges to unit rates as a standalone measure. The statutory body for consumers in Scotland said any such reform should form part of wider energy market reform rather than being pursued on its own1.
Ofgem's call for input modelled an indicative transfer of 50 per cent of standing charges to unit rates across 24 consumer archetypes. On electricity, 5.5 million low-income households saw a small annual reduction of £21.90, while 1.2 million low-income households saw a larger bill increase of £44.52, double the gain of those who benefited. On gas, 3.7 million low-income households saw a smaller reduction and 1.8 million saw a nominal increase1.
"Consumer Scotland does not consider that this distributional analysis supports the case for intervention on standing charges"
The body said households with above median consumption would lose out from any rebalancing of costs from standing charge to volume, and that this group is likely to include consumers in Scotland disproportionately. It cited National Energy Efficiency Data showing median gas consumption for dwellings in Scotland has been consistently higher than in England and Wales over the last decade, and 7.8 per cent higher in 2021. Scotland also has a higher proportion of consumers on traditional forms of electric heating, who would lose out if charges were rebalanced in favour of volume1.
Consumer Scotland's energy tracker found 37 per cent of electric heating users reported struggling to keep up with their energy bills, compared with 30 per cent on average in the autumn wave. Its analysis using the Scottish Household Condition Survey found households with a health condition that limits them a lot spent a median 8.5 per cent of total household income on energy, against 6 per cent in households without such a condition1.
The response said increased volumetric charging would have negative impacts and high cost implications for disabled people and those with health conditions, and that Ofgem does not have the tools to offset unintended consequences of intervention. Consumer Scotland instead pointed to reform of tariff structures, targeted energy bill support and a renewed impetus on energy efficiency as the best options for improving affordability1.
Why it matters for households
Standing charges are the fixed daily amounts paid whatever energy is used, and they cover costs such as network connection and meter provision. Moving those costs into the unit rate would mean paying more per kilowatt hour and less per day, which changes who pays what without changing the total cost of running the system. For a household using more energy than average, the shift raises the bill; for a low user, it lowers it. Consumer Scotland's argument is that in Scotland the higher-use group is large, and overlaps with households already struggling, including those on electric heating and prepayment meters1.
For a home's energy independence, the practical point is that the fixed part of a bill is not avoidable through lower consumption, while the unit rate is. Shifting costs from one to the other changes the return on measures such as insulation, heating controls or solar, because savings are calculated against the unit rate. Consumer Scotland said volumetric recovery would sharpen price signals for energy efficiency, but also that all models of volumetric cost recovery go against the principles of Ofgem's Targeted Charging Review by allowing some consumers not to pay their fair share of system costs1.
What happens next
Consumer Scotland's response was submitted by email to Ofgem's standing charges mailbox in January 20241. No decision by Ofgem following the call for input is set out in the response, and no timetable for further action has been reported. Consumer Scotland said it would encourage Ofgem to outline a stronger, more defined vision of the consumer outcomes that standing charge reform would seek to achieve, so that stakeholders can scrutinise proposed changes against those outcomes1.