By Samantha Leathers

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New plans have been announced to force energy suppliers to offer a lower standing charge tariff. These new options for consumers could arrive as soon as January.

The Office of Gas and Electricity Markets, Ofgem, which regulates the energy industry in Great Britain, has announced the changes. Initially, the plan proposed removing these fixed costs entirely on some tariffs.

The revised plan will instead mean all energy suppliers have to offer at least one tariff with lower standing charges that households can pay as part of their unit rate. A standing charge is a daily cost on your bill, even if you don’t use energy.

It covers costs like moving gas/electricity and supplier business costs according to the regulator. On the other hand, unit rates are usually decided by the energy price cap, which is set by Ofgem, and charges consumers based on their actual or estimated usage.

Standing charges are applied daily and usually cost the same for everyone. So if a household uses less energy, standing charges will make up a higher proportion of their energy bill than what they actually used.

Ofgem’s initial plan would have seen some tariffs with zero standing charges and much higher unit rates, so these households are only paying for what they use. However, this plan was scrapped as it could unfairly impact consumers with high energy needs such as households that have electronic medical equipment.

It is also reportedly looking to create a minimum usage on these new tariffs so that those with second homes or properties left vacant for long periods do not disproportionately benefit from the lower charges. The plans are yet to be confirmed, with one final consultation now under way before it can be put in place. Ofgem aims to make a decision by the end of the year and if it all goes accordingly the new tariffs could be available to people across Britain by the end of January.

The new tariff mandate would likely only be a short-term measure while Ofgem arranges permanent changes to allocate costs within the energy system as the UK shifts towards renewable energy. Simon Francis, co-ordinator of the End Fuel Poverty Coalition, called it a “small step forward” but warned it doesn’t “negate the need for long-term reform to make the system fairer”.

Tim Jarvis, director general of markets at Ofgem, said: “We’ve listened to thousands of consumers that wanted to see changes to the standing charge and taken action. We have carefully considered how we can offer more choice on how they pay these fixed costs – however, we have taken care to ensure we don’t make some customers worse off.

“After examining all the options available to us, we believe that the right way forward is to require all major suppliers to offer at least one tariff with a lower standing charge. This will deliver the choice we know customers want, without having a detrimental impact on customers that have high energy needs.”

But he added: “We cannot remove these charges, we can only move costs around. These changes would give households the choice they have asked for, but it’s important that everyone carefully considers what’s right for them as these tariffs are unlikely to reduce bills on their own.”

The announcement comes just before the next energy price cap rise which will increase energy costs by 2% from October 1. This will see the typical household bill rising from £1,720 per year to £1,755.

Martin McCluskey, minister for energy consumers, said: “Consumers should have freedom and choice when choosing an energy tariff that works for them. This proposal will make more tariffs available on the market, giving people more options to pay lower standing charges if that suits their needs.”