An energy campaign group has made fresh calls for standing charges on electricity and gas bills to be scrapped, as many customers struggle with soaring prices. A new survey by Fuel Poverty Action (FPA) shows that nearly 81% of customers support the idea of scrapping the charge on every customer’s energy bill, which must be paid regardless of how much they use.
The group has written to Ofgem about the way the costs of failing suppliers have been loaded on the standing charge, which it calls a “grotesque injustice” and has called for a free band of energy for every household to cover their more urgent needs.
The energy price cap rose more than 50 per cent in April, meaning a typical household is paying as much as £1,900 for their domestic fuel. The cap is expected to rise again in October to a staggering £3,200, which Fuel Poverty Action says will mean that more than a third of all households will be facing 'fuel poverty' by Christmas.
Read more: What is the energy price cap and why is it in the news now?
Standing charges are the additional daily spend that is added to an energy bill, and is charged no matter how much energy a household has used on that day. Ruth London, Founding Member of Fuel Poverty Action, said that the charge mounts up frighteningly quickly. "People on prepayment meters are often forced to find money to pay this charge before they can even turn the lights on," she said. “People who cut their use down to the bone in a bedsit end up paying more per unit of energy than those who are heating a mansion.”
Standing charges are currently capped at an additional 45p for electricity, based on a customer with typical usage, and 27p for gas, which equates to an additional £163 for electricity and £98 for gas on household energy bills. They are used to pay for things like suppliers' administration costs, which and at the moment include recovering the debt from the 30 energy suppliers who went bust in 2021, when the cap on standing charges increased by around 20p per day.
Recently, Jonathan Brearley, chief executive of energy regulator Ofgem said the regulator will look at whether the cost of the standing charge could be cut.
An Ofgem spokesperson said: “Our top priority is to protect consumers including making sure bill payers pay a fair price. We regularly engage with suppliers to ensure they are treating and billing consumers fairly. Suppliers are free to set the standing charge and unit rate, as long as these do not breach any licence requirements and it is for the supplier to explain and justify any price changes to the affected customers. Our CEO confirmed to parliament recently that the issue of standing charges is something we are currently looking at closely.
The regulator said that its considering recovering the debt through other means, but warned that could mean higher bills for those who use a lot of energy. It said: 'We will be considering whether another option, such as recovering this through unit rates, might be seen as fairer by consumers.
Ms London said: "It's unjust to put more and more load on the part of the bill that no one can avoid no matter how little energy they use. The standing charge is a killer for people who have cut their energy use to the bone but still face heavy daily charges. People on prepayment meters can end up having to find substantial sums before they can draw any heat or power at all. Standing charges are being played off against the tariff paid per unit of energy.
"Ofgem says it is trying to keep the per-unit tariff down for the sake of people who need a lot of energy, for example for health conditions. But this does nothing for the many vulnerable customers who can't manage to use much energy even if they do desperately need it. Clobbering millions of people can't be the solution to ensuring that people who need more energy can afford to keep warm - or cool."
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