The Welsh Government published its written response to Ofgem's call for input on standing charges on 15 February 2024, setting out its opposition to the current regime and its preferred alternative1.
The response states that customers in North Wales pay the highest standing charges in Great Britain, while those in South Wales also pay above average charges1. It describes the regional variation as a postcode lottery and notes that households in North Wales live close to large sources of renewable electricity exported through the national grid, yet face the highest charges1. The Welsh Government also points to the more than doubling of the charge since 2021, which it says has a disproportionate impact on lower income households and those who consume less energy1.
"Our preferred solution is a holistic review of retail charges to include the abolition of standing charges, the introduction of a social tariff and/or medical tariff and the rebalancing of gas and electricity costs"
On the question of moving costs from standing charges into unit rates, the Welsh Government says Ofgem's own modelling suggests such a transfer would have a detrimental impact on domestic customers in Wales1. It adds that while lower income households overall would benefit, some high usage households in that group would lose out, and those who lose out would be impacted negatively at more than twice the scale of those who benefit1. It supports equalising standing charges across the regions of Great Britain as a first step, and backs Ofgem's preference for levelling prepayment meter and direct debit standing charges if a standing charge is retained1.
| Position | Welsh Government response |
|---|---|
| Standing charges | Abolition preferred, via holistic review of retail charges1 |
| Regional variation | Flat rate across Great Britain described as a step in the right direction1 |
| Prepayment meters | Support for levelling PPM and direct debit charges; standing charges absorbed entirely after a period of self-disconnection1 |
| Net zero costs | Should be met through general taxation, not a charge on energy users1 |
| Social tariff | Called for repeatedly; commitment made in Autumn Statement 2022 for possible introduction from April 20241 |
The response also raises the Targeted Charging Review, welcoming Ofgem's decision to conduct post-implementation analysis, and notes Ofgem's indication of likely increases in charges under the electricity nil consumption cap level in 2024/251. It criticises a proposed levy on other consumers' bills to support Energy Intensive Industries, saying the UK Government must consider impacts on lower income and vulnerable households1.
Why it matters for households
Standing charges are the fixed daily amount paid regardless of how much gas or electricity a home uses, and the Welsh Government's central argument is that households have no direct influence over them and no meaningful way to reduce them, given the lack of variation in tariffs on the market1. For a home trying to cut its bills through lower consumption, a high fixed charge limits how far that effort translates into savings. The response also argues that high standing charges reduce the incentive for households to save energy1.
The regional dimension matters for energy independence in a practical sense: a household in North Wales pays more to be connected than one elsewhere in Great Britain, even where the electricity is generated locally1. The Welsh Government's position that net zero transition costs should come from general taxation rather than energy bills is a statement about who carries that cost1.
What happens next
The response is the Welsh Government's input to Ofgem's call for input; no decision by Ofgem is set out in the document1. The Welsh Government notes that the Chancellor committed in the Autumn Statement 2022 to developing a new approach to consumer protection, including the option of a social tariff to apply from April 2024, and says it is very concerning that nothing further on that commitment has been seen1. It urges Ofgem to consider how a social tariff could work as a mitigating measure alongside standing charges reform, while recognising that introducing one is a matter for the UK Government rather than Ofgem1.