Plans for new tariffs with no standing charge tophyper

Energy companies will be forced to offer tariffs to customers without any fixed charges, under a proposed billing shake-up by regulator Ofgem.

All households pay a fixed daily charge that covers the costs of connecting to the power supply, but there have been widespread calls for these charges to be scrapped.

Ofgem is proposing suppliers offer one fixed-price tariff that includes standing charges, and one that charges these costs onto energy usage charges instead. Customers can choose what suits them best.

The overhaul scheduled for next winter also raises the possibility of writing off some of the unpaid bills that have accumulated during the recent price hike crisis.

When Ofgem asked for the public’s views on the standing charges, it received an unprecedented response of 30,000 requests.

The majority were against standing charges – fixed charges, usually totaling more than £300 a year, which are paid regardless of how much energy households use.

Under Ofgem’s rate cap, standing fees have risen by 43% since 2019.

Those who are low energy users, such as people who live alone, said that even if they reduced the amount of gas and electricity they use, they would see little difference in their bills. They wanted more control over their bills.

However, those with high energy needs could see bills spike if these charges were instead included in the price of each unit of energy used. This means higher bills for people with disabilities who have to charge specialized equipment.

Alex Belsham-Harris, from Citizens, said: “We hear from people who have turned off their heating, rationed hot water, and avoided charging essential mobility devices, yet still feel like they are fighting a losing battle with their energy bills.” advice.

Ofgem’s proposed solution is to require energy companies to submit a double bid – one with a fixed charge and one without a charge. Both will fall under the list Price limit system.

Such tariffs do exist, but only from a few suppliers and are not available to everyone.

Customers will need to choose, but some campaigners want those on low energy to automatically move to a permanent, fee-free deal.

Martin Lewis, founder of Money Saving Expert, said: “The problem with offering the option to set rate caps is that many vulnerable people will not make that choice.”

One of those who could benefit would be Joan Wilkinson.

“I try not to look [at the standing charges] “Because he’s frustrated,” she said.

She said she had enough worries about dealing with her young daughter, Adeline, but she noticed how quickly the meter went through the money that was loaded onto it.

She said low wages in the north of England made it difficult for parents like her to afford energy bills, especially as she was still on maternity leave.

But Energy UK, which represents suppliers, said such a proposed fundamental change needed careful consideration.

Dara Vyas, chief executive of the trade body, said: “It will be important to make all customers aware of this change and ensure they choose the best option for their circumstances.”

She told the BBC’s Today program that adding the option of a standing fee cap price “will significantly change the nature of the cap price”.

“It will go from being a single regulated rate that gives customers protection whether they switch or not, to a situation where I think customers will be expected to make an active decision about what cap they will apply.

“This changes what a price cap should do – it is there to protect people who have chosen not to participate in the market.”

The proposals also fail to deal with the variation in standing charges in different parts of the UK, with bill payers in some areas paying a much higher amount. Ofgem intends to make this part of a wider and separate investigation.

The amount of money owed to suppliers by customers has almost doubled in two years, and now totals around £3.8bn.

The regulator is also developing a plan for next winter that will address some of this debt, which has accumulated during the period of rising prices, and which has little chance of being repaid.

Debt Guarantee plans to improve the level of service provided by suppliers supporting indebted customers, which it said will give families “consistent, compassionate and tailored support”.

Suppliers may also be required to accept debt repayment offers from reputable third parties, such as debt advice agencies or consumer organisations.

One option for energy crisis arrears may be debt matching, which means customers repay some debt, with energy companies writing off a similar amount.

Some of these costs are already covered in provisions, but all customers may be responsible for financing through higher bills.