Question to the Department for Energy Security & Net Zero:

To ask the Secretary of State for Energy Security and Net Zero, what recent assessment his Department has made of the potential merits of abolishing standing charges for energy.

Standing charges recover ‘fixed’ costs that do not vary by energy use. This includes suppliers’ fixed operational costs of serving each customer, the cost of network upgrades and maintenance necessary to keep all consumers connected and fund investment in clean energy infrastructure. It also includes the cost of providing Warm Home Discount payments to eligible customers. However, we are committed to lowering the cost of standing charges and have worked constructively with the regulator, Ofgem, on this issue.

As part of their update on standing charges, Ofgem announced it will be undertaking a broad review of system costs considering how costs are allocated and recovered across domestic and non-domestic consumers. On 20 February, Ofgem launched a consultation ‘Introducing a zero standing charge energy price cap variant’ - https://www.ofgem.gov.uk/consultation/introducing-zero-standing-charge-energy-price-cap-variant.

The consultation seeks views on the introduction of an option - within the price cap – for a tariff that does not have a standing charge, providing households with more choice over how they pay for their energy. It also explores different ways a zero standing charge tariff could work, with options on a single unit rate, as well as block tariff options where the unit rates go up or down once a certain amount of energy is consumed.

Ofgem has not proposed moving people automatically onto a zero standing charge tariff because of the risks to vulnerable groups, such as people with disabilities, who have high energy use. We were clear that we would not support changes to standing charges that would disproportionately affect people with higher energy costs.

The consultation closed on 20 March and we stand ready to continue to work with Ofgem on this matter.