Ofgem launched a consultation on a zero standing charge option within the energy price cap

Ofgem launched a consultation in February 2025 asking for views on a zero standing charge option within the energy price cap¹. The proposal followed a call for input on standing charges in November 2023 and an options paper published in August 2024¹. Standing charges are a daily charge that energy customers have to pay even if they use no energy¹.

The consultation set out three possible structures for moving standing charge costs to unit prices: a single higher unit price, falling block tariffs, or rising block tariffs. Ofgem said the way it sets the energy price cap "strongly influences how retail suppliers recover fixed costs", and that reducing the standing charge would mean fixed costs would have to be recovered through higher unit prices, with the maximum level for unit costs also set by the cap¹. Alternative tariffs outside the cap already exist on the market with no standing charge but a higher unit price for energy¹.

Standing charges have risen sharply in recent years. Electricity standing charges jumped by more than 80% in April 2022, largely due to supplier of last resort costs after many smaller suppliers went out of business, and rose again by more than 10% in April 2023 and April 2024¹. The implementation of Ofgem's Targeted Charging Review in 2022-23 resulted in a significant redistribution of network costs from the unit rate to the standing charge². In July 2025, reforms to the way costs are calculated under the cap meant the typical electricity standing charge paid by an average consumer fell by five percent compared with the previous cap period, while the typical gas standing charge fell nine percent².

Ofgem's own consumer research found no consensus on how tariffs should change, but most respondents favoured a reduction rather than removal of standing charges, even when told this could raise their bills³. In an omnibus survey where respondents were asked about preferred cost structure, 28% preferred to remove standing charges entirely³.

"These proposals won't result in cheaper bills for all consumers, the essential costs of running the energy system need to be paid for, but they can provide consumers with better choice and control in how they pay."

Why it matters for households

A standing charge is paid regardless of how much gas or electricity a home uses, so it takes up a greater share of the bill for low-consuming households and a smaller share for high-consuming ones¹. Under the October to December 2026 direct debit cap, standing charges make up 18% of a total dual fuel bill at typical consumption, down from a peak of 24% in Q3 2024¹. At the low consumption level for electricity, standing charges make up 32% of a final bill, meaning one quarter of consumers face standing charges worth at least 32% of their annual electricity bills¹.

For a household trying to cut its reliance on bought-in energy, through appliance running costs or reduced usage, a fixed daily charge is a cost that cannot be avoided by using less. Moving costs into unit prices changes that relationship: a home that uses very little would pay less in total, while a home that uses more would pay more. Ofgem has said the essential costs of running the system still have to be paid for³.

What happens next

In July 2025, Ofgem published a summary of responses and its planned next steps¹. In September 2025, Ofgem announced it planned to go ahead with a new requirement for suppliers to offer at least one lower standing charge tariff for all payment methods in all regions, and to smart and traditional meter customers¹. Ofgem's statutory consultation on that requirement proposed a tariff priced £150 below the price cap nil consumption level, and said it was considering going further, for example a £200 discount³. It proposed minimum consumption thresholds of 666kWh and 2,836kWh per annum for electricity and gas respectively, and a sunset clause so the requirement initially applies for a limited period, such as two years³.

Ofgem then decided to launch a one-year pilot of lower standing charges starting in April 2026, later put back to June 2026, first offered by four of the big suppliers with a limited number of customers able to sign up¹. In July 2026 Ofgem will bring in new lower Typical Domestic Consumption Values for its presentation of bills under the price cap¹.

Sources3 cited

1. Energy standing charges - House of Commons Library, commonslibrary.parliament.uk
2. Tackling the energy cost crisis, publications.parliament.uk
3. Requirement to offer lower standing charge tariffs, consult.ofgem.gov.uk