Ofgem takes action to reform energy bills by introducing zero standing charge tariffs.

Ofgem has announced plans to require energy suppliers to provide tariffs with low or no standing charges, allowing customers increased flexibility in their energy payments. A consultation that started today will investigate how these tariffs, expected to be available by the winter of 2025/26, could function in reality.

Standing charges account for fixed expenses such as network maintenance and infrastructure improvements. Many consumers have advocated for their elimination, claiming it would assist in managing bills and debts. However, Ofgem cautions that while costs can be adjusted, they cannot be entirely eliminated—tariffs without standing charges will likely feature higher unit rates.

"We understand from the significant feedback we've received that numerous people consider standing charges to be unjust," stated Charlotte Friel, Ofgem's director for retail pricing and systems. "Nonetheless, we are also aware that vulnerable, high-energy users would face disproportionate challenges if these costs were transferred to the unit rate for all customers."

To tackle this issue, Ofgem is contemplating three models: a single unit rate, a falling block tariff where prices decrease after a certain usage level, and a rising block tariff where costs escalate after reaching a specific threshold. There may also be minimum usage requirements introduced to avoid unfair cost distribution.

This initiative arises as Ofgem is engaged in broader reforms, including a suggested Debt Relief Support Scheme aimed at assisting struggling households. The consultation period will last until March 20, 2025, and is seeking opinions from consumer organizations, charities, and suppliers.

This development could significantly impact energy bills, but the specifics will be crucial.