The price cap will soon have a ‘low or no standing charge’ option that aims to reduce costs for lower users – but Martin Lewis has warned there’s a ‘big hole’ in the plans
Ofgem’s latest plans are set to shake up the energy market by introducing tariffs that have low or no standing charges. This move will allow customers to merge these costs into their unit rates under a new option within the price cap.
MoneySavingExpert.com’s guru Martin Lewis hailed the move as “progress” but highlighted “one big hole in what’s currently proposed”.
He pointed out that while the ‘low or no standing charge’ price cap option should “reduce costs”, it relies on consumers actively opting in and said that it is designed to protect those “who don’t, can’t or are scared to switch or change tariff”.
Standing charges are a fixed daily cost included in energy bills, regardless of consumption, and go towards maintaining energy supply and infrastructure.
The financial whizz commented: “This is progress. Standing charges are by far the most complained-about part of an energy bill. It costs in excess of £300 a year just to have the facility of gas and electricity, even if you don’t use any. They’re a moral hazard that disincentivises lower users from cutting their bills, and leaves many older people, who only use gas for heating in the winter, still paying for it every day in summer.”
Lewis also pointed out a significant flaw in the proposed energy scheme, saying: “However there is one big hole in what’s currently proposed. The new ‘low or no standing charge’ Price Cap option should reduce costs for lower users but to get it people have to opt in.
“Yet the Price Cap’s primary purpose is to protect those who don’t, can’t or are scared to switch or change tariffs – and it’s many of those people for whom this option will be most suitable and needed. Thus, there’s a risk many vulnerable lower users may miss out.”
Charlotte Friel from Ofgem has weighed in after a deluge of public reaction: “We know from the huge response we’ve had that many feel standing charges are unfair. However, we also know that vulnerable, high-energy users – including those who rely on medical equipment at home or low-income families in poorly insulated houses – would suffer disproportionately if these costs were added to the unit rate for everyone.
“That’s why we’re moving forward with plans that will give customers a choice and more control over how they choose to pay for their gas and electricity. We’re looking closely at how these tariffs will work in practice, but everyone will need to carefully consider which option best suits their needs.
“The costs included in the standing charge ultimately have to be paid. But while they may not save everyone money, they will give people a choice, and greater control over their bills.”
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