Ofgem Targets Standing Charges: What It Means for Your Energy Bills
The UK’s energy regulator, Ofgem, has confirmed plans that could shake up how we all pay for our electricity and gas. By January 2026, every major energy supplier will be required to offer at least one tariff with a lower daily standing charge - the fixed fee you pay simply to be connected to the grid.
At first glance, this might sound like a token gesture. After all, suppliers could simply shift more of your bill into the per-unit cost (the price per kilowatt-hour) instead. But this move is about more than just rearranging the numbers - it’s about choice, fairness, and the future of how we pay for energy.
What’s a Standing Charge - and Why is it Controversial?
Standing charges cover the basic costs of supplying energy: maintaining the network, reading meters, running billing systems, and paying for certain government schemes. They’re charged daily, no matter how much or how little energy you use.
In recent years, these fixed fees have risen sharply, sometimes adding £250 or more a year to bills even for very low-consumption customers. That’s sparked growing criticism that the system is unfair - especially for smaller businesses, energy-efficient homes, or properties like holiday lets that use very little energy.
Ofgem’s Plan: More Control for Customers
Rather than scrapping standing charges outright, Ofgem is taking a more nuanced approach. The new rule means every major supplier must offer at least one tariff with a lower fixed charge, even if that comes with a higher unit rate.
That matters because it gives customers more control over how they pay for their energy. Low-usage households and businesses, who are disproportionately penalised by high standing charges, will finally be able to pick a plan that better suits their needs. And because more of the bill will be linked to actual consumption, it also rewards energy efficiency.
Why Not Just Cut Standing Charges for Everyone?
The reality is that standing charges fund essential parts of the energy system. Removing them overnight would leave a big hole in how the networks and support schemes are paid for - one that would likely have to be filled by significantly higher unit rates across the board. That would shift the burden onto high-usage customers, like larger families or many small businesses.
By mandating a choice of tariff structures instead, Ofgem is trying to strike a balance. It’s testing how consumers respond to lower-standing-charge options without destabilising the funding of the wider energy system.
A Step Toward Bigger Reform
This change is widely seen as the first step in a broader rethink of how we pay for energy. Future reforms could include splitting policy levies out of standing charges, linking more costs directly to usage, or even moving toward dynamic, time-based pricing models that reward customers for using energy at off-peak times.
For now, the key takeaway is that the era of “one-size-fits-all” fixed charges may be coming to an end. And for businesses and consumers alike, that could mean more flexibility - and more opportunity - in how we manage our energy costs.
In short: Ofgem’s move won’t instantly shrink energy bills, but it will give customers more choice and signal a shift toward a fairer, more usage-based energy market. Watch this space - tariff design could look very different by the end of the decade.