​Requirement to offer lower standing charge tariffs

What this is about

Ofgem is proposing to mandate, through the Standard Licence Conditions, that every domestic supplier offer at least one tariff with a lower (or zero) standing charge in every region of England, Scotland and Wales. This is the regulator's second attempt at the same problem. In February 2025 it consulted on building a zero-standing-charge variant directly into the price cap. That route created a structural difficulty: a cap variant has to be a single nationally specified construction, and any standing charge removed from the daily rate has to be recovered somewhere, which pushes up the unit rate by an amount Ofgem itself sets. The supplier has no room to manage the trade-off. The consumer gets one prescribed swap, not a choice.

The new proposal abandons the cap-variant mechanism and shifts the obligation onto suppliers. Rather than Ofgem engineering one no-standing-charge cap product, suppliers must each put at least one lower-standing-charge tariff on the shelf, priced as they see fit within existing rules, with clear disclosure of the rates so customers can compare. The framing is "more control" and "more choice": Ofgem's consumer research and an online behavioural experiment found that people object less to the level of standing charges than to the absence of any way to avoid or reduce them. The standing charge is a fixed daily cost recovered regardless of consumption: it carries network costs, metering, supplier operating costs, and a growing stack of socialised policy and resilience costs (most visibly the supplier-of-last-resort and failed-supplier mutualisation following the 2021-22 exits). Because it is flat per day, it falls hardest, per unit of energy, on low-consumption households: small flats, single-occupant homes, well-insulated properties, second homes, and the fuel-poor who self-ration. Moving cost from the standing charge to the unit rate is redistributive: low users pay less, high users pay more, and the people who pay more are not uniformly the people who can most afford it (large, poorly insulated, electrically heated homes also sit at the high-consumption end).

This consultation should be read alongside the parallel "Standing charges energy price cap variant: next steps" and the "Lower or zero standing charge tariffs: technical working paper", which together set out why Ofgem moved off the cap-variant approach and onto a licence-condition requirement.

Options on the table

The consultation document released here does not enumerate formally numbered options. What it does is set one approach against the one it replaces, and the real decision space sits in the design parameters of the proposed requirement. Three distinct choices are visible.

Licence-condition requirement to offer a lower-standing-charge tariff (Ofgem's preferred approach)

Suppliers would be obliged under the Standard Licence Conditions to offer at least one tariff with a reduced standing charge, in every GB region, with clear published rates. Suppliers retain discretion over how far they cut the standing charge and how much they load onto the unit rate to recover the fixed costs they still incur. The winners are low-consumption households who can self-select onto the product and stop subsidising the fixed-cost recovery of high users. Suppliers win relative to the cap-variant route because they keep control of cost recovery and pricing: the obligation is to offer, not to hit a regulator-set number. The losers are high-consumption households who either stay on the default and see no change, or whose default tariffs absorb a slightly higher fixed-cost share if low users migrate away from the standard book. The weakness, and the thing the consultation needs evidence on, is that "must offer one" is a thin obligation: a supplier can satisfy the letter of the rule with an unattractive, narrowly drawn product that almost nobody takes up, in which case the policy delivers disclosure and optics but little distributional effect.

Zero-standing-charge price cap variant (the rejected February 2025 approach)

The earlier proposal would have constructed a no-standing-charge product inside the price cap itself: nationally specified, with the removed standing charge recovered through a higher capped unit rate set by Ofgem. This is being set aside, not chosen. Its merit was uniformity and a guaranteed genuinely-zero option that every capped customer could access on identical terms. Its defects were the ones that killed it: a single national construction cannot reflect regional network cost differences, the recovery uplift on the unit rate is an administered number rather than a market-discovered one, and it removes supplier flexibility to manage cost recovery, concentrating the design risk on the regulator. Including it here matters because it defines the counterfactual: the question is not "do nothing versus act" but "prescribe one capped product versus require suppliers to offer their own".

Do nothing / rely on the existing market

The implicit third option is to leave standing-charge choice to ordinary competition. Ofgem's own consumer research is the case against it: despite standing charges being a live public grievance, the competitive market has not reliably produced accessible low- or zero-standing-charge options across all regions, and where they exist the trade-off against the unit rate is poorly disclosed. The counter-argument, which respondents who favour minimal intervention will press, is that mandating a product the market has not spontaneously sustained risks either tokenistic compliance or cross-subsidy distortions, and that the cleaner fix is better comparison tooling and disclosure rather than a new licence obligation.

Questions being asked

The published consultation page does not reproduce the formal numbered questions; these sit inside the online consultation form at the response link. From the proposal as set out, respondents should expect Ofgem to be seeking evidence on the following themes, and should structure submissions around them.

Scope and definition of the requirement

What counts as a "lower" standing charge: a relative reduction against the supplier's own default, a fixed monetary or percentage threshold, or a genuine zero option. [This is the load-bearing question. A relative test lets suppliers comply with a trivial reduction; an absolute or zero test bites harder but constrains cost recovery.] Whether the obligation should be one tariff per supplier or one per region, and whether it must be available to all payment types including prepayment and on all meter types including legacy and economy-seven configurations.

Cost recovery and the unit-rate trade-off

How suppliers should recover the fixed costs displaced from the standing charge, and whether Ofgem should constrain the resulting unit-rate uplift or leave it to suppliers. [Effectively: should this be a free supplier design choice, or a regulated swap with guardrails so the "lower standing charge" tariff is not made unattractive by a punitive unit rate.] How socialised costs currently sitting in the standing charge (network charges, last-resort and mutualisation costs) should be treated when they are shifted onto consumption.

Distributional impact

Evidence on which consumer groups gain and lose, and by how much, under plausible standing-charge / unit-rate splits. [Ofgem is exposed here: electrically heated and poorly insulated low-income homes are high-consumption and would lose from a unit-rate shift, cutting against the assumption that low standing charges are pro-vulnerable-consumer.] Whether the requirement should interact with the Warm Home Discount, fuel-poverty protections, or the price cap methodology.

Disclosure and consumer comprehension

What suppliers must publish about the rate structure so consumers can judge whether a lower-standing-charge tariff is actually cheaper for their consumption level. [The behavioural experiment showed people want control; the risk is they self-select badly. This asks what comparison information or tooling is needed to prevent harm.] Whether Ofgem should require a personalised "is this cheaper for you" prompt at the point of choice.

Implementation and licence drafting

Timing of the new Standard Licence Condition, transition period, and how compliance will be monitored and enforced (including whether take-up or merely availability is the test). Interaction with the parallel price-cap-variant workstream and the technical working paper.

Respondents with hard data, on consumption distributions, on the cost stack inside the standing charge, on regional network cost variation, will have disproportionate influence, because the central weakness of the proposal is that "offer at least one" is unenforceable against tokenism without quantitative anchors.

How to respond

This consultation is closed. It was published on 24 September 2025 and closed for responses on 23 October 2025 (the body text gives a 22 October 2025 completion date for the online form; the page's "Closed date" field states 23 October 2025). Status is "Closed (awaiting decision)", so the operative next step is Ofgem's decision, not a further response window.

For reference, responses were submitted via Ofgem's online consultation form, with queries directed to standingcharges@ofgem.gov.uk. Anyone tracking the outcome should watch for the decision document and follow the linked "Standing charges energy price cap variant: next steps" and the "Lower or zero standing charge tariffs: technical working paper", which carry the supporting analysis and will frame whatever Ofgem decides to implement through the Standard Licence Conditions.