Standing charges reform 2026: the Ofgem consultation that changes your bill

Standing charges are the fixed daily fee on every domestic energy bill, levied whether the household uses any energy or not, and Ofgem's Future of Domestic Standing Charges consultation has been working through what to do with them since November 2023. The consultation closed on 19 January 2024. Ofgem published its initial decision direction in late 2024 and a substantive policy decision document is expected through 2026. The proposal that has drawn the most attention is an optional zero-standing-charge tariff offered alongside the current price-cap structure.

What a standing charge actually pays for

Strip the marketing language away and the standing charge is a recovery mechanism for fixed costs that the supplier and the network face whether the household uses any kilowatt-hours or not. Those costs include:

• Network use-of-system charges (the regional Distribution Use of System charge set under price control RIIO-ED2)
• Transmission charges (TNUoS, set by National Grid ESO)
• Balancing Services Use of System (BSUoS, recovered via supplier obligations)
• Smart meter rollout costs (the Smart Metering Implementation Programme levy)
• The Warm Home Discount obligation
• The Renewables Obligation, the small-scale Feed-in Tariff legacy cost, and Contracts for Difference levy
• Supplier of Last Resort levies (added after the 2021-22 supplier failures)
• Supplier overheads, bad-debt provision, and the EBIT margin allowance set by Ofgem

Ofgem's price cap default tariff cap methodology (version 14, in force for Q2 2026) sets out exactly how each of these components feeds into the standing charge calculation, broken down by fuel and by the 14 GB cap regions.

Why the daily figure varies so much by region

The standing charge is the line item where regional variation hits hardest. The unit rate (p/kWh) is also regional, but the standing charge sees the bigger spread in pence terms.

For electricity on direct debit under the Q2 2026 price cap, the daily standing charge sits roughly in the following ballpark by region:

Verify the current quarter cap on ofgem.gov.uk before quoting any figure.

The reason a household in Birkenhead pays substantially more in fixed daily charges than a household in central London comes down to network costs. Merseyside and North Wales sits in SP Energy Networks' SP Manweb licence area, which has a high cost-to-customer-base ratio. Northern Scotland is even more pronounced because of low population density and long distribution distances.

What Ofgem actually consulted on

The Future of Domestic Standing Charges consultation (Ofgem reference 200/23, opened November 2023) put three structural options on the table:

1. Keep the current structure (status quo) but improve consumer information about what the charge recovers
2. Offer an optional zero-standing-charge tariff alongside the standard structure, with all costs recovered through the unit rate
3. Move some fixed costs (notably a portion of network charges) out of the standing charge and into the unit rate by default

Option 2 dominated the consultation response. Ofgem received more than 30,000 responses, the largest response volume the regulator has handled for a domestic energy consultation. The published response analysis (Ofgem, August 2024) showed strong public preference for an optional zero-standing-charge tariff and for greater transparency on the cost stack.

The catch is that any move of costs onto the unit rate has distributional consequences. Households with high electricity consumption (heat pump on a single-rate tariff, electric vehicle, all-electric off-gas-grid homes) end up paying more under a zero-standing-charge structure. Low-consumption households (small flats, second homes, households that have shut off rooms to save money) end up paying substantially less.

The DESNZ side and the political pressure

The consultation did not run in a vacuum. The Department for Energy Security and Net Zero published its Better Energy Bills consultation in 2024 raising parallel questions about bill transparency and the policy-cost stack, and the House of Commons Energy Security and Net Zero Committee took oral evidence on standing charges through 2024-25.

Cross-party pressure to act on standing charges accelerated after fuel-poverty data from National Energy Action for winter 2024-25 showed households on prepayment meters disproportionately affected by the fixed daily charge.

What an optional zero-standing-charge tariff would look like

Under Ofgem's option 2, suppliers would be required to offer a zero-standing-charge tariff alongside their normal cap-bound default tariff. The structure would carry:

• 0p/day standing charge for electricity and gas
• A higher unit rate (p/kWh) to recover the fixed costs
• Cap-aligned pricing, so the typical-consumption household pays broadly the same total as on the standard cap
• A clear annual savings or cost comparison shown at the point of sale

Modelling in the consultation impact assessment indicated that a household consuming below roughly 1,800 kWh of electricity per year (well below the Ofgem typical consumption value of 2,700 kWh for medium electricity-only) would generally save on a zero-standing-charge tariff. Above that threshold, the standard cap would remain cheaper.

Implementation timetable, where things actually sit

Ofgem's published timeline placed the substantive decision document in late 2025 and early 2026. As of the sprint date in May 2026, Ofgem has issued an interim direction and signalled that a final policy decision will be released alongside the Q3 2026 cap announcement window. Suppliers are expected to be required to offer the zero-standing-charge option by the second half of 2026 at the earliest, with full integration into the price cap framework into 2027.

On the ground, the practical question for households is when to switch. Switching onto a fixed deal now means missing any future zero-standing-charge structural option for the duration of the fix. Sticking on the cap keeps the household exposed to quarterly repricing but preserves access to whatever new structure Ofgem introduces.

The supplier response, where the friction sits

Suppliers responded to the consultation across a wide spread of positions. Octopus Energy backed an optional zero-standing-charge tariff publicly in its November 2023 consultation response, framing it as a simpler product for low-consumption households. British Gas, EDF Energy, and E.ON Next raised concerns about cost-shifting onto high-consumption households and about the operational complexity of running parallel cap structures. Smaller suppliers were generally more cautious, citing the risk that a zero-standing-charge tariff at a higher unit rate creates adverse selection (low-consumption households self-select onto it, leaving high-consumption households disproportionately funding the cap-bound default). The catch in the supplier responses is that any structural change to cost recovery has to be neutral on the total revenue collected from the cost stack. Ofgem's role is not to reduce the stack; it is to decide how the same stack is distributed. The cost-of-supplying-energy reform working group, set up in 2024 to feed into the consultation, has been pushing for clearer separation between policy costs (which arguably belong in the unit rate or in general taxation) and network costs (which arguably belong in the standing charge because they reflect a fixed connection cost).

Citizens Advice complaint data on standing charges

Citizens Advice's energy policy unit publishes quarterly data on the substance of energy complaints. Through 2024 and 2025 the share of complaints touching on standing charges (their level, their fairness for low-consumption households, their visibility on bills) ran higher than in any year since the Energy Price Guarantee period of 2022-23. The complaint volume reinforced the political pressure on Ofgem to act and shaped the priority that DESNZ placed on the Better Energy Bills consultation alongside Ofgem's own process.

On the ground, the most consistent theme in the complaints was prepayment meter households unable to switch off the standing charge during periods when they were not using energy. Households temporarily living elsewhere (in hospital, with relatives, in supported housing) continued to accumulate standing charge debt even when consumption was zero. The current cap structure does not address this directly; an optional zero-standing-charge tariff would, but only for households able to actively switch to it.

What it changes on a typical bill

Take a Midlands cap region household using the Ofgem typical-consumption profile (2,700 kWh electricity, 11,500 kWh gas a year) on direct debit. Under the Q2 2026 cap, electricity standing charges contribute roughly £190 a year and gas standing charges roughly £120 a year, totalling £310 a year in fixed daily charges before any kilowatt-hour is consumed.

Under a zero-standing-charge tariff with full cost recovery on the unit rate, that £310 disappears from the daily line. The unit rate rises to compensate: roughly 3-4p/kWh extra on electricity and 1-2p/kWh extra on gas at typical consumption. A low-consumption household (1,500 kWh electricity, 6,000 kWh gas) under that structure ends up several tens of pounds a year better off. A heat-pump household running 6,000 kWh of electricity on a single-rate tariff ends up around £80-£100 a year worse off. The break-even consumption point in the impact assessment sat broadly at the cap's typical-consumption value, with regional variation.

Devolved-nation differences worth flagging

The price cap and the Future of Domestic Standing Charges consultation apply to Great Britain (England, Scotland, Wales). Northern Ireland's domestic energy market is regulated separately by the Utility Regulator, which does not operate a price cap in the same form. Tariffs from Power NI, Firmus Energy, SSE Airtricity, and Click Energy are approved under the Utility Regulator's price control framework. The Ofgem consultation will not directly change Northern Ireland's standing charges, although policy and regulatory comparisons are influencing the Utility Regulator's own retail market review.

Scotland sits inside the GB cap framework but the Northern Scotland cap region carries some of the highest standing charges in Great Britain on a sustained basis because of low population density, long distribution distances, and TNUoS zonal charges that fall hardest on the north of the network. Any zero-standing-charge tariff option would have its biggest visible effect in Northern Scotland and Merseyside and North Wales: precisely the regions where the fixed daily charge is at its most painful for low-consumption households.

Frequently asked questions

Why are standing charges higher in some regions than others?

Because network distribution costs vary by region. The 14 GB cap regions have different Distribution Network Operators, different population densities, and different geographic distribution costs. Merseyside, North Wales, and Northern Scotland sit at the top end; London sits at the bottom. The cost-recovery formula sits inside Ofgem's price cap methodology.

Will Ofgem actually scrap standing charges?

Not entirely. The consultation never proposed full abolition. It proposed an optional zero-standing-charge tariff alongside the standard cap, with the fixed costs recovered through a higher unit rate instead. Total revenue collection from the cost stack does not change.

Who benefits from a zero-standing-charge tariff?

Low-consumption households. The Ofgem impact assessment indicated the break-even point sits below the typical-consumption value, so households using less than around 1,800 kWh of electricity a year tend to gain, while heat-pump households, EV households, and off-gas-grid all-electric homes tend to pay more.

When will Ofgem make a final decision?

Ofgem signalled an initial direction in late 2024 and is expected to issue a substantive policy decision through 2026. Implementation is unlikely before the second half of 2026 at the earliest, with full integration into the price cap framework expected into 2027.

Does the consultation cover Northern Ireland?

No. The Ofgem consultation covers Great Britain only. Northern Ireland's standing charges are set under the Utility Regulator's price control framework, which is a separate process.

Sources