Source · Select Committees · Energy Security and Net Zero Committee
Recommendation 18
18
Accepted in Part
Ofgem's standing charge proposals risk unfairness and consumer detriment without safeguards.
Conclusion
We welcome Ofgem’s ambition to reassess how costs are allocated across consumer energy bills, but we are unconvinced that its proposals for a mandatory zero or low standing charge tariff option will go far enough to address the inherent unfairness of the existing arrangement of standing charges. Moreover, while consumers should be given greater choice in how to pay for their energy bills, Ofgem must proceed with caution and recognise that its current proposals carry inherent risk for consumers, if 46 not accompanied by a robust information campaign and obligations on suppliers to ensure that consumers are adequately informed. (Conclusion, Paragraph 69)
Government Response Summary
The government agrees with offering choice and lower standing charges, citing a published consultation to move Warm Home Discount costs to the unit rate, which would reduce standing charges by £39 for typical households from April. It also mentions Ofgem's review of disconnections and a future Call for Evidence in 2026 on gas network transition, but doesn't directly address the committee's specific concerns about the sufficiency or risks of Ofgem's mandatory zero/low standing charge tariff proposals.
Government Response
Accepted in Part
HM Government
Accepted in Part
The Government agrees that consumers should be given choice in how to pay for their energy bills, and believes that options such as tariffs with lower or zero standing charges could deliver benefits for a significant proportion of consumers. That’s why, in its manifesto, the Government pledged to work with the regulator to bring down these charges. The Government is delivering on this promise and recently published a consultation on whether to move Warm Home Discount (WHD) costs from the standing charge to the unit rate. This proposal would reduce standing charges by £39 for typical dual fuel households from April. If the proposals in the consultation proceed, the majority of households, and around 60% of low-income families, would save on their bills. The proposed changes would ensure the Warm Home Discount is paid for in a fairer and more progressive way, with those who use more energy contributing more to policy costs. This comes alongside the measures announced at the Budget which will take £150 of costs off households’ energy bills on average from April. The more energy people use, the more they will benefit from the package of measures announced at the Budget. The less energy people use, the more they would benefit from this reform to standing charges. As the Committee notes, Ofgem are conducting a Cost Allocation and Recovery Review (CARR) to look at how fixed energy system costs are allocated and recovered and consider whether this can be done in a fairer and more efficient way. The scope of this work includes electricity network charges and other costs related to investment in infrastructure. Ofgem published a Call for Input over Summer 2025 and will conduct a full consultation on a refined list of options in due course. On Ofgem’s proposals to require suppliers to offer tariffs with lower standing charges, the Government agrees that consumers must be adequately informed as they consider which tariff best suits their needs. Ofgem have consulted on these proposals and will take into account all stakeholder views, including those of the committee, before finalising their approach. Suppliers are currently obliged to provide information and tools which allow consumers to easily compare tariffs and to provide an estimated annual cost to a consumer when they take up a new tariff. Ofgem will monitor suppliers’ compliance with these licence conditions in a way which is proportionate to the risk for consumers. When Ofgem has finalised its approach and these tariffs are available, they would provide increased choice for consumers, including those customers with prepayment meters who may not use energy over the summer months. If customers are unable to repay any debt they have built up, they should contact their energy supplier in the first instance to discuss their options. Ofgem’s rules require energy suppliers to work with customers to understand their circumstances and set up any repayment plans based on a customer’s ability to pay. Customers can also contact the Citizens Advice Consumer Service (CACS), the statutory consumer body for energy consumers, which can provide help and guidance on a range of energy consumer issues. Where a consumer has converted their home to electrical heating but continues to have a live gas supply, a supplier will continue to incur costs associated with serving that property. Therefore, where consumers no longer require a gas supply, they should request that their supplier removes the gas meter and caps the supply. Whether or not to charge customers to do so is a commercial decision for suppliers and several do not charge customers for this service. We would expect that where a consumer wishes to have their meter removed and supply capped, their supplier will do so promptly and at the lowest cost possible. Once an energy supplier has removed the meter and capped the supply, the gas network is able to disconnect the property from the gas main. As the energy regulator, Ofgem is currently undertaking a review of the disconnections regulatory framework, due to conclude early next year. In June 2025, DESNZ published a “Midstream Gas System: Update to Market” which identified the key challenges facing the gas system. As outlined in the Update to Market, we recognise that the disconnection regime plays an important role in the transition of the energy system and, working with HSE and Ofgem, plan to publish a Call for Evidence in 2026 that seeks stakeholder views on how to operationalise the gas network transition in a way that is safe, planned and orderly. Further details will be shared in due course.