Martin Lewis’ consumer champion group Money Saving Expert are celebrating after it was revealed energy suppliers will be required to offer tariffs featuring minimal or zero standing charges. This follows new proposals tackling the issue of steep standing charges, contributing over £330 to most annual energy bills.
The stalwart BBC and ITV personality, Martin Lewis, announced: “NEWS: @Ofgem announces firms to offer a ‘no standing’ charge Price Cap as well as the normal one. Here’s my official MSE comment on it…” He elaborated by stating: “While today’s Ofgem announcement on standing charges isn’t the best possible outcome, it’s the best outcome that Ofgem can deliver unilaterally, to do more would require government intervention – and that hasn’t happened.”
“Standing charges are a £338 a year poll tax on energy bills, a moral hazard disincentivising lower users from cutting their bills. They also punish customers that only use gas for central heating in winter, many of whom are elderly, by making them pay for every day in summer. It’s by far the biggest single subject of complaint I get from the public about energy bills.”
“The best outcome would be to slash standing charges within the Price Cap, yet as that’d mean the cost of each unit of energy needed to increase, it’d require the Government to put in special support for vulnerable high energy users – such as those charging electric wheelchairs, or those with illnesses that require a very warm home. That hasn’t happened (yet? ).”
“Instead, I’m pleased its alternative path follows our submission suggestion of a dual Price Cap, one as now, a ‘higher standing charge, lower unit rate’, and a new ‘no standing charge, higher unit rate’ version that’ll benefit lower users. Yet the Price Cap was designed to be a safety-net tariff for customers who don’t or can’t engage in switching.”, reports Birmingham Live.
“The problem with presenting a choice of Price Caps is many vulnerable people won’t make that choice. So I will be making representation to Ofgem to ensure firms are mandated to default lower-use Price Cap customers on to the no standing charge tariff – or at least do that for those on the Priority Services Register.”
On its website, MSE explained: “We’ve long campaigned for standing charges to be lowered. However, in our response to Ofgem’s recent “call for input”, we had also suggested that one alternative would be to introduce a new ‘no standing charge, higher unit rate’ version of the Price Cap instead.”
“Many people feel very strongly that standing charges are unfair,” said Tim Jarvis, the director general of markets at Ofgem. “We want to give consumers the ability to make the choice that’s right for them without putting any one group of consumers at a disadvantage.”
On Good Morning Britain, financial expert Mr Lewis shared his thoughts, stating that while not ideal, it was the best solution Ofgem could implement without government intervention. He explained: “This isn’t the perfect solution that I would have liked to happen, but I think it’s the best solution that Ofgem can do unilaterally without government intervention. I tend to call standing charges a poll tax on energy £338 a year, is the average standing charge on direct debit.”
He highlighted the drawbacks, saying: “You pay that whether you use anything or nothing. It’s a disincentive for those who have lower bills to cut their use any more. It’s terrible for people who only use their gas central heating in the winter, which is many elderly people because it means they’re paying all the way through the summer for gas central heating they’re paying every day, even though they don’t use it.”
He also pointed out the unfairness for those on prepayment tariffs, saying: “It’s awful for people on prepayment tariffs. It means when they’ve got no money and they’re not using any energy, the metres still ticking. So when they want to use energy again, they have to put in money to cover the standing charges, even though they don’t have the money.”
