Households across the UK could face increased energy costs under potential changes to standing charges, according to consumer champion Martin Lewis. The founder of Money Saving Expert has issued a warning that a review by energy regulator Ofgem into the structure of the energy price cap could inadvertently penalise those who use less energy.
Ofgem is currently consulting on various aspects of the energy market, including the fixed daily standing charge, which all households pay regardless of how much gas or electricity they consume. Lewis highlighted concerns that if the standing charge were to increase while the unit rate for energy decreased, households with low energy usage could end up paying more overall. This could particularly affect vulnerable groups, such as the elderly or those in smaller homes, who typically consume less energy.
The standing charge covers fixed costs for energy suppliers, including maintaining the energy network, meter reading, and administrative expenses. Historically, there have been calls for its reduction or even abolition, with arguments that it disproportionately impacts those striving to conserve energy. Lewis has consistently advocated for a lower standing charge, or its complete removal, to better reward energy-efficient behaviour.
The energy price cap, set quarterly by Ofgem, limits the maximum amount suppliers can charge per unit of gas and electricity, as well as the daily standing charge. The regulator's ongoing consultation seeks to explore how the cap can be made more effective and fairer for consumers, while also ensuring the financial stability of energy suppliers and investment in the network.
Any changes resulting from Ofgem's consultation would have direct implications for millions of households' energy bills. While a reduction in the unit rate might seem beneficial, the interplay with a potentially higher standing charge means that the overall impact on individual bills could vary significantly depending on energy consumption patterns. Consumer groups and charities will be closely scrutinising the proposals to ensure they protect the most vulnerable.