Consumer Scotland has responded to Ofgem's call for input on standing charges within the default tariff cap, cautioning against moving suppliers' fixed costs from standing charges to unit rates. The statutory consumer body for Scotland published its response on 20 September 2024, in the context of Ofgem's review of how the cap recovers fixed costs.
The response states that electricity standing charge allowances under the default tariff cap for direct debit single rate and multi-rate consumers have risen by a real terms average of 116.4% between January 2019 and September 2024, while the equivalent gas allowance has fallen by 4.7% in real terms over the same period1. Regional variation is wide: single rate electricity standing charge allowances range from a 49.34% real terms increase in London to 151.99% in North Wales and Mersey, against a GB average of 116.40%1.
| DNO region | Jan 2019-Mar 2019 | Jul 2024-Sep 2024 | Real terms increase |
|---|---|---|---|
| N Wales and Mersey | £75.82 | £191.06 | 151.99% |
| Northern | £82.14 | £202.93 | 147.06% |
| Southern Scotland | £81.09 | £180.44 | 122.52% |
| Northern Scotland | £92.01 | £174.15 | 89.27% |
| London | £77.83 | £116.23 | 49.34% |
| GB Average | £79.16 | £171.29 | 116.40% |
Consumer Scotland attributes much of the divergence to changes in how electricity network costs are recovered, including the Targeted Charging Review, under-recovery of Distribution Use of System charges in the first year of the RIIO-ED2 price control, and the costs of the Supplier of Last Resort process following the market exit of 25 domestic electricity suppliers in 2021-20221. It says these changes are anticipated to exert negative pressure on electricity standing charges in 2025 in 12 of the 14 DNO licence areas in Great Britain1.
The body argues that redistributing fixed costs to unit rates would hit consumers with high essential energy expenditure, including households with enhanced heating needs and those reliant on electrically powered medical equipment, and would worsen winter affordability for prepayment meter consumers. It notes that median gas consumption in Scotland is around 6% above the national average and that a greater proportion of Scottish households use traditional forms of electric heating than elsewhere in Great Britain1.
"we would caution against any redistribution of suppliers' fixed costs from standing charges to unit rates"
Consumer Scotland instead suggests suppliers could innovate beyond the default tariff cap to make low or zero standing charge products more widely available, with uptake arising from active consumer choice1. Ofgem's options paper examines shifting between £20 and £100 of operating costs from standing charges to unit rates; the response notes that any such redistribution results in higher overall costs for consumers with above-average consumption1.
Why it matters for households
Standing charges are the fixed daily amount paid regardless of how much energy a home uses, and they pay for network and supplier costs rather than units consumed. For a household that already uses little electricity, a higher standing charge is a larger share of the bill, while a household with high essential use, such as one relying on electric heating or medical equipment, cannot easily cut consumption in response to a higher unit rate. Consumer Scotland's position is that moving fixed costs into unit rates would transfer cost onto the households least able to reduce usage, and that the regional gap in electricity standing charges is largely a product of network charging decisions rather than supplier behaviour. The standing charges guide sets out what the charge covers, and energy tariffs in Scotland explains how Scottish households are affected by network areas and heating type.
What happens next
Ofgem's call for input on standing charges closed before this response was published; the response does not set out a date for Ofgem's decision. Consumer Scotland says it supports Ofgem's longer term commitment to keep the distributional impact of electricity network cost recovery under review, and Ofgem's work with government on energy affordability alongside the Review of Electricity Market Arrangements1. No timetable for those workstreams is given in the response.