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What’s going on with standing charges?

Oct 9, 2024

3 min read


A woman check her electricity bills using a laptop

Note: This article was updated 7/01/2025 to reflect Ofgem's proposed standing charge reforms


Standing charges are a fixed daily fee that all consumers pay for the supply of electricity and gas, regardless of how much they use. For a long time, they have been one of two key components of energy bills alongside unit pricing, where consumers are charged for every unit of electricity they consume. In principle, standing charges are intended to cover the fixed costs of electricity supply - these include maintaining transmission and distribution networks, upgrading the grid and payments to government social and environmental schemes.


This way of charging customers has been in place practically as long as electricity supply itself. However, the cost of the standing charge component has been on the rise over the past three years for a number of reasons, including covering the cost of multiple large suppliers going out of business, and inflation. As a result, Britain’s electricity regulator Ofgem has announced a radical shake-up of how we bill electricity, with plans to require all electricity suppliers to offer tariffs with no standing charges alongside regular tariffs. These new tariffs would load fixed costs onto the price customers pay per unit of electricity, potentially alleviating pressure on lower-income, low-usage households. 


While these zero standing charge tariffs will make sense for lower usage households, many households which use more electricity will likely stay on traditional tariffs. And with the energy transition requiring greater spending on fixed costs such as grid upgrades, the costs associated with the standing charge are going to find their way on to customers’ bills in one way or another. This all begs the question: what’s going on with standing charges, and how did we get here?


What are the current problems with standing charges?


  • Standing charges disproportionately impact lower income households. Even if these households reduce their consumption significantly, they still incur significant daily costs through the standing charge. Therefore, the 9% of the UK who are behind on their bills are forced to take ever more drastic cuts to their consumption to try and reduce their electricity bills to a level they can cope with.  


  • The present standing charge structure doesn’t incentivise households to use electricity more efficiently. Despite the fact that households who use electricity at off-peak hours actually alleviate pressure on the grid, they’re billed the same as those who use electricity during the congested peak period. For the same reason that lower-income households find it hard to save money, households across the UK therefore have less of an incentive to cut their electricity usage. 



Standing charge variation in Great Britain, with prices for South Wales 64.12p , North Eastern England 72.10p, and London 41.59p

Figure 1. Standing charge variation in Great Britain, with prices for South Wales, North Eastern England and London


  • Standing charges vary significantly by region. While the average GB standing charge is currently 60.99p, customers in London spend as little as 40p daily, whilst Scotland, Northern England and Wales pay more like 65-70p. Although this reflects the increased costs of servicing electricity supply in sparsely inhabited regions, the necessity of having electricity supply means many consider these regional differences to be punitive and unfair. 



What does the future hold for standing charges?


Standing charges are generally considered to be unpopular - two-thirds of respondents to a recent Ofgem call for input called for abolishing standing charges entirely. There is a widespread belief that standing charges are fundamentally unfair and a way for energy suppliers to make more money out of consumers. Ultimately, there’s currently no link between the standing charge you pay and the service you receive – to the consumer, electricity supply is electricity supply. It’s easy to understand why so many people are unhappy with how we price electricity.


Moreover, Ofgem’s proposed reform is unlikely to alleviate regional disparities in cost. Neither will shuffling costs between the two parts of the bill make any impact on reducing the cost of the future electricity system we need to fight climate change - the fixed costs associated with electricity supply can’t be eliminated. And none of this takes away from the fact customers don’t feel that the money they’re paying is reflected in the service they get. In light of the challenges facing the electricity market and increasing pressures on the grid, it might be time to find entirely new funding models for billing residential electricity consumption altogether, and replace opaque standing charges with new charges directly linked to the quality of the service customers receive.

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