Status of No Standing Charge Tariff for December 2025

matelodave

I think a lot of people will be very disappointed when they discover that a zero standing charge tariff ends up costing them more and the main beneficiaries will be those with solar and batteries and those with second homes who could end up paying almost nothing.

Be careful what you wish for. The costs that standing charges currently cover will have to be recovered by increasing the kwh tariff rate to compensate.

10p extra per day on my standing charge adds £36.50 a year to my bill whereas just 1p/kwh would increase it by £75 a year so there's a better than even chance that those who hope or expect to benefit could end up being worse off

tfhnota

It is not a compulsory tariffs, and yes unit rates will go up, and we are all waiting to see by how much.

Qyburn

https://forums.moneysavingexpert.com/discussion/comment/81861570#Comment_81861570

The point is that this tariff will be chosen by people who'll save money as a result. Suppliers therefore get paid less by those customers. That shortfall will have to be made up elsewhere, ultimately by increased prices for everyone else.

You simply can't reduce costs for a subset of customers without side effects elsewhere.

matelodave

Unfortunately I'm not sure that many of those who want a zero standing charge will understand the consequences of a higher tariff to compensate. They'll just see the fact that as its zero s/c it must work out cheaper., especially those who don't understand the difference between £££'s and kwh's.

You only have to look at many of the questions and problems that get flagged on this forum to realise that there are a lot of people unable or unwilling to do some sums to work out what is going on with their bills and tariffs.

I fear that zero s/c will catch out more people than it helps because they wont see past the offer of a zero s/c.

gpman

"You can agitate here as much as you want, but …"

Please don't encourage them

tfhnota

Those who don't pay attention to their energy bills will most likely not be aware of low s/c tariffs unless the energy providers inform them - which they have to do only when it is a cheaper tariff for them.

One option for suppliers will be to apply the £150 coming off bills in April to the s/c rather than unit rate, which gets them halfway to zero s/c bills.

gpman

https://forums.moneysavingexpert.com/discussion/comment/81861369#Comment_81861369

As a low user, I would certainly be very disappointed to discover that a zero standing charge tariff would end up costing me more.

I've had zero standing charge tariffs in the past (some of which were discussed on this very forum) and they ended up saving me money!

The issue is that standing charges for a dual fuel user can make up over 30% of a typical low user's annual bill, and there is nothing they can do about it. To an extent it can even encourage such customers not to reduce their consumption further.

The proposal as I understand it is that zero or low standing charge tariff will be an option, and only those who would benefit from it should therefore apply.

I know MSE Martin is hoping to get suppliers to make the calculation for each individual customer and then automatically put the customer on the cheaper option, but I'm not sure he'll succeed. Indeed, to an extent, I hope he doesn't. If suppliers can't keep my EAC & AQ stable, what hope have they on correctly calculating the best tariff for me?

In regards the cost effect, I guess you are referring to electricity. As a low user, 10p extra per day on my standing charge adds £36.50 a year to my bill whereas just 1p/kwh would increase it by about 3-4p a day i.e. £11-£15 a year

Different for gas, of course. Even for an average user of 11,500 kWh/yr, a 10p cut in daily standing charge (£36.50 pa) could be fully offset by about 0.3p/kWh increase in unit price. Or you could remove it entirely for about 1p/kWh increase in unit price.

Of course there will be winners and losers in any change. But how far do you want to go? Some people get a £150pa warm home discount. How is that funded? Yes we all pay for it. (It's currently part of the SC). Based on your argument, why should I be expected to part fund these people heating their home.

You could go even further, and consider the application of taxes as a whole. But I'll stop there, as that would verge on political debate.

But it does ultimately depend on your own personal political opinion. I know this won't go down with many posters on this forum, but I agree with MSE Martin in that it does seem rather perverse that those who are financially struggling the most can do nothing to reduce the high cost of standing charges. SC unfairly penalise households on lower incomes and those looking to cut their usage. And that can have an adverse effect on environmental concerns.

Of course, suppliers secretly do not want you to reduce your consumption, despite what they may say. All else being equal, lower consumption = lower revenue = lower profit.

tfhnota

And because they are limited to three percent "profit" on turnover they also want high energy prices as well as high usage…

booneruk

Oh no, we've started talking about 'they'

gpman

https://forums.moneysavingexpert.com/discussion/comment/81861979#Comment_81861979

Whilst you are correct in the underlying principle, sadly, that is another often misunderstood misnomer stated on the internet.

There is no limit placed upon the amount an energy supplier can make in profit.

Ofgem only regulates the price a supplier may charge on their 'default' tariff. i.e. a tariff a customer is placed on when they have not agreed any other tariff with their supplier (including at the end of any agreed tariff, if no further agreement is made). Suppliers are otherwise free to set their own prices, only controlled by competition forces.

The cost set by Ofgem for a default tariff is calculated based upon a number of assumptions

e.g.
wholesale price - actually this is based on historical wholesale price data, not what the supplier can buy for today or in the future. Hopefully the supplier has suitable arrangements in place, but there is no control as I understand it, of what price the supplier actually buys at. If they have secured an option to buy at a significantly reduced cost, then they may be in the money (as long as they actually sell it). If they have not purchased sufficient options, they will have to purchase at todays spot price which may be significantly higher than the Ofgem assumed historical price. (I believe Octopus secured a special arrangement to fund this when they suddenly took on ex-Bulb customers, after Bulb went bust). Or maybe todays spot price is less than the cost assumed by Ofgem, and again the supplier would then be in the black.

Network costs - these are costs outside the control of the energy supplier for the infrastructure to get the energy to you (e.g. the pipes and wires, etc). I think Ofgem have a good handle on these costs. The supplier cannot influence these costs.

Supplier business costs - these are generally the costs the supplier incurs in providing you their service (billing, collecting payments, customer service, etc). It will, by nature, be an average industry cost but it is largely down to the supplier. Reduce these costs and the supplier can make a bigger profit. Waste money and it will adversely affect their bottom line.

Government social & environmental costs - these are set by the government, and Ofgem will again know what they are.

Profit - this is the bit people misunderstand. Ofgem builds into their calculation a profit margin, because businesses need to make profit to survive. But this is not a limit, or conversely a given, that a supplier may earn. The supplier is only limited as to what maximum price they can charge on a default tariff.

Headroom - this is essentially good business practice. All good business build into their accounts a provision for unknown/uncertain things that may cost them in the future. Ofgem builds that into the price cap. Of course, if that money is not eventually needed it goes back into the supplier's pocket, not the customers who have paid it. In simple terms, potentially more profit for the supplier.

Levelisation allowance - this effectively funds the premium cost of those who pay by the more administratively expensive prepayment meters to have the same or slightly lower default tariff as direct debit paying customers. Another example of how one set of customers already funds another customer's costs, typically funding those on lower incomes and/or are financially struggling.

There's also VAT that is added but that is set by the government.