Why I am sceptical about Ofgem’s review of standing charges - Jayne Dowle

In an unprecedented pro-active move, energy regulator Ofgem has announced it will carry out a review into the ‘standing charges’ homeowners have to pay for gas and electricity even if they never switch on a light.

The standing charge varies around the UK depending on local demands on the grid and other operational and environmental factors, including the way you pay your bill. Currently, it sits at, on average, 53.7p per day for electricity and 29.62p for gas for direct debit customers - so around 83p for both, typically costing households £300 a year. As it stands, it’s an unavoidable part of everyone’s energy bill.

Campaigners, including television money expert Martin Lewis, want this arrangement re-assessed. Speaking out on X (formerly Twitter), Lewis said: “It has been a long fought campaign to get this morally hazardous energy poll tax looked at, a flat £300 a year just to have energy meters is too much.”

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The energy regulator says it wants to open a national debate over standing charges, including opinions on how the system might be changed to make it fairer for all customers. Announcing that now is the “right time” to look at standing charges due to wider cost of living pressures, Ofcom is asking bill payers, suppliers, charities and consumers to share their views.

A file photo of a handheld smart meter on a kitchen hob showing the cost of a year-to-date's worth of home energy usage in a home. PIC: Yui Mok/PA WireA file photo of a handheld smart meter on a kitchen hob showing the cost of a year-to-date's worth of home energy usage in a home. PIC: Yui Mok/PA Wire
A file photo of a handheld smart meter on a kitchen hob showing the cost of a year-to-date's worth of home energy usage in a home. PIC: Yui Mok/PA Wire

Am I right to feel ever so slightly cynical? I know some of the factors which led to huge and unprecedented rises in energy bills last autumn, including the escalating outcome of the war in Ukraine, could not have been predicted, but Ofgem did not exactly fall over itself to help bill-payers 12 months ago. So why now?

Instead, the government stepped in with a series of spurious ‘cost of living’ payments; there has been no mention of a repeat hand-out for most people in 2023. I know the so-called energy price cap has dropped slightly this autumn, but there are absolutely no guarantees it won’t rise again over winter. And there is nothing at all any consumer can do about this.

Surely, however, there was much Ofgem could have done back in the autumn of 2022 to put pressure on profiteering energy providers in order to keep price rises proportionate, and also, to ensure that customers were treated with consideration.

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It has been well-reported, for example, that a debt collection agency working for British Gas entered private premises and force-fitted energy prepayment meters in elderly and vulnerable people’s houses. Following a public backlash, British Gas has said it will no longer work with outside contractors to fit the devices and instead is bringing the job in-house.

However, millions of other people have found themselves under the cosh from greedy energy companies, including me.

It took about four months for my own supplier to stop messing about with my bill, one month taking more than a thousand pounds out of my bank account in a one-off direct debit and sending me into overdraft, without prior warning.

But the trust has gone, and that’s one of the reasons why I feel wary about Ofgem’s apparent olive branch. We have until January 19 to submit our views on standing charges but then what?

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Only a naïve fool with no experience of the tricks energy companies are seemingly allowed to pull without redress would believe that the regulator is about to scrap the compunction to levy standing charges altogether and encourage providers to drop their bills by up to £300 a year.

Bearing in mind the need for some consumers, particularly those who rely on electrical equipment for medical conditions, should not be penalised for heavy energy use, some of the suggestions put forward already sound alarm bells.

Costs have to be recouped somehow. If standing charges are scrapped, it could be that we would face higher costs for units of gas and electricity per se.

As Tim Jarvis, director for markets at Ofgem, says “there is a difficult balance to be struck, which is why it is important as many people as possible respond to our call for input with their experiences of it, how it affects them and what the alternatives could be.”

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Call me even more cynical, but if you play chess, you’ll understand. Is this first move towards consumers simply a PR initiative dressed up as a cost-of-living crisis solution?

By firing the initial salvo, Ofgem can, in future, claim the moral high ground. Imagine the script: “We gave you the chance to come up with an alternative to standing charges, and listened. What more do you want?”.

And then Ofgem would consider itself justified to step back whilst the energy providers ramp up their prices again and again in future.