Requirement to offer lower standing charge tariffs

We want your feedback on introducing new rules stating that energy suppliers must offer their customers at least one lower standing charge tariff option. ## Who should respond We would like to hear from: * energy suppliers * energy consumers and the public * consumer groups * charities * industry groups * network companies ## Background In February 2025, we considered [introducing a zero standing charge variant](https://consult.ofgem.gov.uk/energy-supply/introducing-zero-standing-charge-variant/) within the energy price cap. We also undertook [domestic consumer research and an online behavioural experiment.](https://www.ofgem.gov.uk/research/domestic-consumers-views-energy-pricing) This was to understand consumers’ attitudes towards standing charges. Through this, we identified that they wanted more control over how they pay for their energy costs. We are now proposing a different approach to the ‘zero standing charge price cap variant’. Under this new proposal, energy suppliers are required to offer customers at least one tariff with lower standing charges in all regions in England, Scotland and Wales. This approach should give more flexibility to allow suppliers to recover their costs while providing consumers with more choice. We would make this a requirement under the Standard licence conditions. They would also need to clearly explain what the tariff rates and charges are to their customers so they can make informed decisions. ## Before you start Read Requirement to offer lower standing charge tariffs​. You'll find it in the 'Related' section on this page. Please refer to this document when giving us your views. ## Why your views matter We want to know your thoughts on our proposals for standing charges before we decide to amend the licence conditions for energy suppliers. Your feedback will help us make sure that consumers are protected when the new rules are in place. --- Consultation Requirement to offer lower standing charge tariffs Publication date: 24 September 2025 Response deadline: 22 October 2025 Contact: Sabreena Juneja Team: Email: Retail Pricing Strategy standingcharges@ofgem.gov.uk This is our statutory consultation which sets out proposals requiring domestic energy suppliers to offer a lower standing charge tariff. We particularly welcome responses from consumers, energy suppliers, consumer groups and charities. We would also welcome responses from other stakeholders and the public. This document outlines the scope, purpose and questions of the consultation and how you can get involved. Once the consultation is closed, we will consider all responses. We want to be transparent in our consultations. We will publish the non-confidential responses we receive alongside a decision on next steps on our website at ofgem.gov.uk/consultations. If you want your response – in whole or in part – to be considered confidential, please tell us in your response and explain why. Please clearly mark the parts of your response that you consider to be confidential, and if possible, put the confidential material in separate appendices to your response. Consultation – Requirement to offer lower standing charge tariffs © Crown copyright 2025 The text of this document may be reproduced (excluding logos) under and in accordance with the terms of the Open Government Licence. Without prejudice to the generality of the terms of the Open Government Licence the material that is reproduced must be acknowledged as Crown copyright and the document title of this document must be specified in that acknowledgement. This publication is available at www.ofgem.gov.uk. Any enquiries regarding the use and re-use of this information resource should be sent to: psi@nationalarchives.gsi.gov.uk 2 Consultation – Requirement to offer lower standing charge tariffs Contents Requirement to offer lower standing charge tariffs ................................ 1 Foreword ................................................................................................ 6 Executive Summary ................................................................................ 8 What are standing charges? ................................................................. 8 Our proposals ..................................................................................... 8 1. Introduction .................................................................................... 10 What are we consulting on .................................................................. 10 Background ....................................................................................... 10 Document overview ............................................................................ 11 Next steps ........................................................................................ 12 How to respond ................................................................................. 13 How to track the progress of the consultation ......................................... 15 2. Context and policy aims .................................................................. 16 Recap of previous consultations ........................................................... 16 Background .................................................................................. 16 Previous stakeholder feedback ......................................................... 16 Stakeholder feedback on requiring lower or zero standing charge options ................................................................................................... 17 Our proposed approach .................................................................. 17 The case for change ........................................................................... 18 Background .................................................................................. 18 Stakeholder feedback ..................................................................... 18 Updated case for change following stakeholder feedback and further analysis ........................................................................................ 19 Policy objectives and intent ................................................................. 21 Ofgem’s consumer objectives and framework .................................... 21 Background .................................................................................. 22 Stakeholder feedback ..................................................................... 23 Our proposed approach .................................................................. 23 3. Setting a lower standing charge tariff requirement ......................... 25 Stakeholder feedback ......................................................................... 26 Our proposed approach ....................................................................... 26 Mandating a zero versus lower standing charge .................................. 26 Our proposed approach to defining a ‘lower’ standing charge ............... 27 4. Consumer eligibility and minimum consumption threshold ............. 29 Consumer eligibility ............................................................................ 29 Background .................................................................................. 29 3 Consultation – Requirement to offer lower standing charge tariffs Stakeholder feedback ..................................................................... 29 Our proposed approach on consumer eligibility .................................. 30 Minimum consumption threshold .......................................................... 31 Background .................................................................................. 31 Stakeholder feedback ..................................................................... 32 Our proposed approach on minimum consumption threshold ................ 33 Calculating a minimum consumption threshold ................................... 34 Implementation of the minimum consumption threshold ...................... 35 5. Supplier eligibility and new licence conditions ................................ 37 Supplier eligibility .............................................................................. 37 Background .................................................................................. 37 Stakeholder feedback ..................................................................... 37 Our proposed approach on supplier eligibility ..................................... 38 Application of the Standard Licence Conditions (SLCs) ............................. 39 Background .................................................................................. 39 Stakeholder feedback ..................................................................... 39 Our proposed approach on the application of SLCs .............................. 40 6. Consumer price protection and compliance approach ..................... 42 Ensuring reasonable unit rates ............................................................. 42 Background .................................................................................. 42 Stakeholder feedback ..................................................................... 43 Our proposed approach .................................................................. 43 Ensuring informed choices ................................................................... 45 Background .................................................................................. 45 Stakeholder feedback ..................................................................... 45 Our proposed approach .................................................................. 45 7. Interactions with other workstreams and next steps ...................... 47 Interactions with other workstreams ..................................................... 47 Cost allocation and recovery review .................................................. 47 Consumer Confidence work programme ............................................ 47 Debt and affordability ..................................................................... 48 Next steps ........................................................................................ 48 Appendices ........................................................................................... 49 Appendix 1 – List of consultation questions .......................................... 50 Appendix 2 – Proposed modifications of Standard Licence Conditions (SLCs) ................................................................................................... 51 To: All holders of an electricity supply licence....................................... 52 Notice of statutory consultation on a proposal to modify the standard conditions of all electricity supply licences ............................................. 52 4 Consultation – Requirement to offer lower standing charge tariffs New condition 22AA of the Electricity Supply Licence – Lower Standing Charge Tariffs .................................................................................... 54 Notice of statutory consultation on a proposal to modify the standard conditions of all gas supply licences ...................................................... 56 New condition 22AA of the Gas Supply Licence – Lower Standing Charge Tariffs .............................................................................................. 58 Appendix 3 - Impact Assessment .......................................................... 60 Scope and approach ........................................................................... 60 Summary of findings .......................................................................... 61 Impact on consumers ......................................................................... 62 Impacts on suppliers .......................................................................... 64 Impact on regulation and Ofgem costs .................................................. 65 Competition assessment ..................................................................... 66 Public sector equality duty (Equalities Act 2010) ..................................... 67 Appendix 4 – Privacy notice on consultations ....................................... 68 Personal data .................................................................................... 68 5 Consultation – Requirement to offer lower standing charge tariffs Foreword The energy system is evolving rapidly, and with it, the expectations of consumers. More households are adopting low-carbon technologies, generating their own energy, and engaging more actively with their energy use. It’s vital that the way costs are recovered from consumers keeps pace with these changes. Under the current arrangements, many of the essential fixed costs of running the energy system – such as the infrastructure that gets energy to our homes and businesses– are recovered through standing charges. This means that each energy consumer pays a set amount each month to cover these costs. These are essential parts of our energy system – but we have heard loud and clear the views of many consumers that they don’t think standing charges are the best or fairest way to recover those costs. People feel that standing charges can limit choice and flexibility, through our recent consumer surveys and through the responses to our call for input in standing charges. And while there is no consensus for how tariffs should change, most respondents favoured a reduction – but not removal – of standing charges, even when told this could raise their bills. That consumer feedback has strongly informed the proposals we are setting out here. We plan to ensure domestic suppliers offer a lower standing charge tariff at all times, meaning consumers will be able to choose from a wider range of tariffs to meet their own preferences. However, we have adjusted our proposals so that those tariffs will be required in the competitive market, rather than as a variant to the price cap. By doing this, we hope to see greater competition and more choice for those consumers who want to take advantage of this kind of tariff. These proposals won’t result in cheaper bills for all consumers, the essential costs of running the energy system need to be paid for – but they can provide consumers with better choice and control in how they pay. This is an important step in our wider work that is looking at how the costs of the energy system should be allocated and recovered, which aims to better understand whether, as the energy system changes, other approaches to cost allocation could result in fairer tariffs that work better for consumers. We want to ensure costs are recovered in a way that is fit for the future and fair for consumers, particularly those in vulnerable circumstances. This is a comprehensive review and we will be bringing forward the next steps early next year. But when consumers have already been telling us for some time that they want more choices when it comes to standing charges, it would not be right to hold back the changes we can make now. How these new tariffs work, and consumers’ experience of them, will be kept under review as we carry out our wider work. 6 Consultation - Requirement to offer lower standing charge tariffs Ofgem’s core purpose is to ensure that we are protecting consumers’ interests, now and in the future. Where consumers tell us that an issue is important to them, as clearly and loudly as they have done on standing charges, it is vital that we listen and respond accordingly. When consumers are telling us that there is a genuine demand for something that is not being fulfilled by the market, it’s right that the regulator steps in. The proposals we’re publishing today reflect that commitment and represent an important step forward in delivering an energy market that works for consumers. Tim Jarvis Director General, Markets 7 Consultation - Requirement to offer lower standing charge tariffs Executive Summary What are standing charges? Standing charges play an important role in funding the costs of the energy market. They are designed to recover the fixed costs of the system; costs that do not vary by energy use. This includes suppliers fixed operational costs of serving each consumer, for example running their call centres. It also includes costs of network upgrades and maintenance necessary to keep all consumers connected, including to facilitate the energy system transition. However, we have heard feedback on the increases in standing charges expressing a desire for change. We cannot remove costs entirely, but we can give consumers more choice in how they pay for them or reallocate them. This statutory consultation sets out near-term proposals to give consumers choice and control over how they can pay for their energy use. Our cost allocation and recovery review (CARR) is considering how costs can be reallocated in the long term. Our proposals We launched our review with a standing charges call for input in November 2023. We then published an options paper in August 2024 and a policy consultation in February 2025. In July 2025, we published our next steps on standing charges which stated that we would be considering alternatives to making changes as part of the energy price cap and circulated a working paper to key stakeholders. We are proposing to require that suppliers must have available, at all times, in all regions, at least one lower standing charge tariff. We consider that this approach would allow the introduction of offers that would provide greater consumer choice and control into the market from early 2026. The proposals would also allow suppliers to set tariff pricing that reflects their business and customer base. In our proposals, we are aiming to achieve two key objectives. The first is to offer consumers choice and control over how they pay their standing charge costs. The second is to allow suppliers to recover efficient costs. This policy relates to our priority of ensuring fair prices, as we seek to increase choice and control over how standing charge costs are paid, which is balanced against supplier resilience and financeability. The proposals are not designed to be an affordability intervention and may not be suitable for all consumers. Affordability is the remit of government, and we continue to work closely with them to develop and deliver schemes to improve these outcomes. We consider there is a case to introduce more lower standing charge options into the market. Our omnibus survey has indicated that the majority (62%) of consumers consider standing charges to be unfair. In our online experiment, most participants (58%) stated that standing charges should be reduced or removed. Even when told their 8 Consultation - Requirement to offer lower standing charge tariffs bills would be higher from a standing charge reduction, 50% of higher energy users still opted to reduce standing charges. Our Impact Assessment highlights that this policy would bring the benefit of consumer choice. These tariffs are unlikely to provide bill reductions compared to the cheapest tariffs in the market and may even increase bills subject to a consumer’s energy use. However, based on evidence from our recent consumer research, we consider this policy positively impacts consumers by fulfilling a genuine demand for these tariffs that is not being fulfilled in the market currently. We are proposing to require suppliers to offer a tariff with a standing charge that is at least £150 below the price cap standing charge (i.e. nil consumption level). We are also considering whether we should go further, for example by requiring a £200 reduction. This range corresponds to around half of the expected standing charge in the coming year. However, we cannot make the costs go away entirely. Rigidly forcing suppliers to offer zero standing charges – for example - may reduce the choice that we are seeking to promote and may lead to more expensive tariff offerings. We consider that the lower standing charge tariffs should be available for consumers on all payment types and on both smart and traditional meters but propose to allow eligibility to be limited to consumers that meet a minimum consumption threshold. We are aiming to set this threshold in a way that vacant second homes do not benefit at the expense of others. Further, our proposed consumer protections for the tariffs include principles for reasonable unit rates and best practice for transparent communication of tariffs. We intend to ensure that these requirements are proportionate, by considering introducing a minimum consumer threshold for suppliers. We are looking more broadly at how all energy costs are distributed and paid for as part of the CARR. This review aims to ensure that costs are recovered from consumers in a way that is fit for a low carbon future. This will include the role of standing charges in future tariffs. We plan to set a time-limitation for the changes in this consultation, to ensure that they are continuing to achieve their objectives as the CARR progresses. We welcome views and evidence on this statutory consultation and request responses submitted via our Citizen Space consultation page or sent to standingcharges@ofgem.gov.uk by 22 October 2025. We will consider all responses with a view to publishing a decision by the end of the year. Should we make a decision to implement such a policy on this timeline, we would expect to see the new lower standing charge tariffs in the market from early 2026. 9 Consultation - Requirement to offer lower standing charge tariffs 1. Introduction This chapter outlines Ofgem’s ongoing work to reform how standing charges are applied in the domestic energy market. It explains the rationale behind standing charges and recent increases. The chapter also summarises the consultation process to date, including stakeholder engagement and consumer research, and sets out the proposal to require suppliers to offer at least one lower standing charge tariff. Finally, the chapter outlines next steps, including timelines for consultation, decision publication, and implementation in early 2026. What are we consulting on 1.1 1.2 1.3 We launched our review with a standing charges call for input in November 2023. This was followed by a domestic retail options paper in August 2024 and a policy consultation on introducing a zero standing charge price cap variant in February 2025. We have considered stakeholder feedback on all of these publications and published a summary of responses with our online consultation. In July 2025, we published our next steps on standing charges which stated that we would be considering alternatives to making changes as part of the energy price cap. We also circulated a working paper to key stakeholders setting out options on requiring suppliers to offer a lower or zero standing charge tariff. We have reviewed and considered responses received to our previous consultations and working paper. In the light of stakeholder responses and our own analysis to date, which we describe in this document, we are now formally consulting on changes to the Standard Licence Conditions (SLCs) to require suppliers to offer a lower standing charge tariff, to improve consumer choice and control over how consumers can pay their energy bills. 1.4 Accordingly, this Statutory Consultation is accompanied by statutory notices of our intention to modify SLC 22A. Background In response to our consultations, we have heard views from stakeholders, including consumers, highlighting a clear appetite for change in how standing charges form a portion of their bills. Additionally, while stakeholders were supportive of positive change, they were concerned that issues consumers are facing are heavily linked with wider affordability concerns. Our consumer research has indicated that most consumers feel that standing charges are unfair, and that they should be lower than they are currently. However, views are split on how the costs should be restructured, with only 1.5 1.6 10 Consultation - Requirement to offer lower standing charge tariffs some preferring to remove standing charges altogether. Our research suggests that at present, standing charges may currently be perceived as exceeding acceptable levels. The details of these research findings are discussed in our updated case for change. We have carefully considered feedback from suppliers and consumer groups to our July 2025 working paper and many raised concerns about requiring a lower standing charge tariff. Suppliers highlighted potential operational and cost implications, while consumer groups and charities (CGCs) questioned whether the policy would risk confusing consumers. These perspectives have informed our approach and are reflected in the proposals we set out in this consultation. Standing charges play a legitimate role in the retail energy market. They recover the fixed costs of the system: costs that do not vary by energy use. This includes suppliers fixed operational costs of serving each consumer, for example running energy supplier call centres, the cost of network upgrades and maintenance necessary to keep all consumers connected and fund the technologies to progress towards net zero targets. Average dual fuel standing charges for domestic Direct Debit consumers on standard variable tariffs have risen from £186 per year in October 2021 to £320 per year in October 2025. This coincided with sharply rising energy costs and household inflation. 1.7 1.8 1.9 1.10 Our current prediction is that electricity network charges will rise further in the future, due to increased investment required in electricity networks as part of the energy transition. For example, our recent projection was electricity standing charges will rise from around £190 in April 2025 to £230 by April 2026, and £280 by 2031. 1.11 We are also looking more broadly and longer-term at how energy costs are distributed and paid for as part of the Cost Allocation & Recovery Review (CARR). This will include a fundamental review of the standing charge and unit rate model as we consider whether it is the best fit for our transition to a clean energy system. Document overview 1.12 Chapter 2 sets out our case for change and policy aims for requiring suppliers to offer at least one lower standing charge tariff. It also summarises findings from the working paper and earlier consultations 1.13 Chapter 3 seeks views on defining lower standing charges. It explains why we have moved away from zero standing charge tariffs in favour of lower and sets out our proposed options for setting this. 11 Consultation - Requirement to offer lower standing charge tariffs 1.14 Chapter 4 discusses consumer eligibility for the tariffs and proposes to introduce a minimum consumption threshold to mitigate the largest risk of under-recovery and reduce the level of risk premium needed, therefore making these tariffs more attractive to consumers that may want to choose to pay their standing charge in a different way. 1.15 Chapter 5 addresses supplier eligibility and application of the Standard Licence Conditions (SLCs). This includes proposals on whether the policy should apply to all suppliers or a subset and the period for which the SLCs should apply and may be reviewed. 1.16 Chapter 6 outlines our proposals on consumer protection and compliance. 1.17 The appendices include: Appendix 1 - List of consultation questions, Appendix 2 – Proposed modifications of Standard Licence Conditions, Appendix 3 – Impact Assessment, and Appendix 4 – Privacy notice on consultations. Next steps 1.18 We welcome any written comments by 22 October 2025, submitted via our Citizen Space consultation page or sent to standingcharges@ofgem.gov.uk. Please include detail and supporting evidence in your comments wherever possible. We will carefully consider stakeholder feedback following the close of this statutory consultation. 1.19 Our aim is to publish a decision by the end of the year. If we make a decision to implement the policy on this timeline, we would then expect to see new tariffs in the market from early 2026. Consultation stages Stage 1 Consultation opens 24 September 2025 Stage 2 Consultation closes (awaiting decision). Deadline for responses 22 October 2025 Stage 3 Decision published by the end of 2025 Stage 4 Implementation early 2026 12 Consultation - Requirement to offer lower standing charge tariffs How to respond 1.20 We want to hear from anyone interested in this consultation. Please send your response to standingcharges@ofgem.gov.uk or submit via our Citizen Space consultation page . 1.21 We have asked for your feedback in each of the questions throughout. Please respond to each one as fully as you can. 1.22 We will publish non-confidential responses on our website at www.ofgem.gov.uk/consultations. Your response, your data and confidentiality You can ask us to keep your response, or parts of your response, confidential. We’ll respect this, subject to obligations to disclose information, for example, under the Freedom of Information Act 2000, the Environmental Information Regulations 2004, statutory directions, court orders, government regulations or where you give us explicit permission to disclose. If you do want us to keep your response confidential, please clearly mark this on your response and explain why. If you wish us to keep part of your response confidential, please clearly mark those parts of your response that you do wish to be kept confidential and those that you do not wish to be kept confidential. Please put the confidential material in a separate appendix to your response. If necessary, we’ll get in touch with you to discuss which parts of the information in your response should be kept confidential, and which can be published. We might ask for reasons why. If the information you give in your response contains personal data under the General Data Protection Regulation (Regulation (EU) 2016/679) as retained in domestic law following the UK’s withdrawal from the European Union (“UK GDPR”), the Gas and Electricity Markets Authority will be the data controller for the purposes of GDPR. Ofgem uses the information in responses in performing its statutory functions and in accordance with section 105 of the Utilities Act 2000. Please refer to our Privacy Notice on consultations, see Appendix 4. If you wish to respond confidentially, we’ll keep your response itself confidential, but we will publish the number (but not the names) of confidential responses we receive. We won’t link responses to respondents if we publish a summary of responses, and we will evaluate each response on its own merits without undermining your right to confidentiality. 1.23 1.24 1.25 1.26 13 Consultation - Requirement to offer lower standing charge tariffs General feedback 1.27 We believe that consultation is at the heart of good policy development. We welcome any comments about how we’ve run this consultation. We’d also like to get your answers to these questions: 1. Do you have any comments about the overall process of this consultation? 2. Do you have any comments about its tone and content? 3. Was it easy to read and understand? Or could it have been better written? 4. Were its conclusions balanced? 5. Did it make reasoned recommendations for improvement? 6. Any further comments? Please send any general feedback comments to stakeholders@ofgem.gov.uk 14 Consultation - Requirement to offer lower standing charge tariffs How to track the progress of the consultation You can track the progress of a consultation from upcoming to decision status using the ‘notify me’ function on a consultation page when published on our website. Choose the notify me button and enter your email address into the pop-up window and submit. ofgem.gov.uk/consultations Once subscribed to the notifications for a particular consultation, you will receive an email to notify you when it has changed status. Our consultation stages are: Upcoming > Open > Closed (awaiting decision) > Closed (with decision) 15 Consultation - Requirement to offer lower standing charge tariffs 2. Context and policy aims This chapter provides a recap of the previous consultation and working paper on standing charges and an overview of stakeholder feedback. We also set out our updated case for change, policy aims and intent for requiring lower standing charge tariffs. Questions Q1. What are your views on our updated case for change on lower standing charge options? Q2. Do you agree with our policy objectives and intent for requiring lower standing charge tariffs? Recap of previous consultations Background 2.1 2.2 2.3 In our February 2025 policy consultation, we consulted on introducing a zero standing charge price cap variant with the aim to provide consumers with more choice over how they pay for their standing charge costs. In July 2025, our working paper provided details of an alternative proposal that would require suppliers to have available at all times, in all regions, at least one lower standing charge offer. We noted that this option could allow suppliers with different consumer bases and commercial considerations greater flexibility with tariff design. We acknowledge the strong feedback we have received from consumers for change on standing charges. Therefore, throughout our standing charges review, we have also called for lower or zero standing charge tariffs to be introduced voluntarily but have not seen the pace of change needed to meet our policy goals. Previous stakeholder feedback As highlighted in our summary of responses, a significant number of suppliers expressed scepticism or opposition to the zero standing charge price cap variant proposals. In particular, suppliers highlighted that the proposals could cause consumer detriment and favoured more systemic reform. Many CGCs were also critical of the price cap variant. Some argued that the proposals were of limited benefit to consumers as the aim of the policy is to offer choice rather than financial savings. 2.4 16 Consultation - Requirement to offer lower standing charge tariffs 2.5 In response to our policy consultation, two suppliers and an industry body suggested offering a fixed term zero standing charge tariff as an option for consumers as an alternative approach to the zero standing charge price cap variant to achieve our objectives. This was considered a favourable alternative as it could reduce competitive distortion, and each supplier could reflect the realities of their consumer base. In addition, it was highlighted that this could improve our understanding of consumer preferences and how this innovation could be best delivered in the market. Stakeholder feedback on requiring lower or zero standing charge options 2.6 2.7 In response to our working paper, suppliers largely opposed the route of requiring lower standing charge tariffs. Many suppliers highlighted the risk of cost under recovery (particularly as consumers who have lower consumption may be more likely to select these tariffs). There was also wider support for delaying any standing charges intervention until the outcomes of the CARR were determined. Some suppliers also advocated for a later implementation date to allow greater time for system development and mitigation of potential risks. However, one supplier highlighted a preference for mandating these tariffs relative to implementing a zero standing charge price cap variant to avoid the increased under recovery risk of this option. CGCs also largely disagreed with our considerations on requiring lower standing charge options. Some groups highlighted that short-term standing charge reform could cause increased complexity for consumers and worse outcomes. Some groups also outlined that the primary motivation for change should be to protect those who suffer the most acute harms from standing charges (including prepayment meter (PPM) consumers). One consumer group advocated for an option that automatically switched consumers who could benefit onto the lower standing charge option, and that price protection is built in (akin to an option under the price cap). Our proposed approach We are proposing to require that suppliers must have available, at all times, in all regions, at least one lower standing charge offer. Through requiring these offerings, we expect there to be competitive pressure in the market where this requirement delivers choice to consumers who want a lower standing charge tariff. We have considered the option of introducing a zero standing charge price cap variant this winter. However, we are now proposing to require suppliers to introduce lower standing charge tariffs, with the option for this to be in the competitive market. This option may not be suitable for all consumers, but the aim would be to offer greater choice while 2.8 2.9 17 Consultation - Requirement to offer lower standing charge tariffs also providing suppliers with different consumer bases and commercial considerations greater flexibility with tariff design relative to a price cap variant. This approach would also allow us to see more choice for consumers sooner than if we were to implement a price cap variant, with the aim to introduce more options in the market from early 2026. We consider it important to provide this choice soon to consumers, and ahead of our longer-term work relating to CARR. 2.10 We have previously intervened in the competitive market in some circumstances to protect consumers. For example, preventing suppliers from increasing prices on fixed term tariffs and preventing them from automatically rolling consumers onto another fixed term offer when their current one ends and setting rules for treatment of domestic consumers when their fixed term contracts end. We have also previously introduced requirements to deliver greater choices for consumers in how they pay for their energy, including requiring that suppliers offer a range of payment methods to suit different consumer needs. In comparison to the zero standing charge price cap variant, requiring lower standing charge offers and giving the flexibility for this to be offered in the competitive market, could enable suppliers to price on their own commercial terms, and reflect their consumer needs. The case for change Background 2.11 2.12 In our February 2025 policy consultation, we outlined that many consumers value choice and control over their bills and how they pay for standing charge costs. We also noted that standing charge costs represent energy system costs that do need to be paid for, and so any policy option would reflect how costs are paid for, not whether they are paid. In the July 2025 working paper, we noted that consumers should have the option to move to a lower standing charge tariff. We have heard strong sentiment from consumers for more choice, and that they find the high upfront nature of fixed costs can be a barrier to managing energy costs. Stakeholder feedback In response to our February 2025 policy consultation, many CGCs supported the principle of reform, highlighting that standing charges can make up the majority of low energy users’ bills and a zero standing charge option could bring benefits for particular low-income consumers. Some suppliers also welcomed the policy intent to provide consumers with greater choice and flexibility in how they pay for energy. 2.13 18 Consultation - Requirement to offer lower standing charge tariffs 2.14 On the other hand, many suppliers disagreed with the case for change. Key 2.15 concerns expressed were that the prevailing concern amongst consumers was the overall size of their energy bills, rather than having control over the constituent parts of the bill and that there could be increased consumer detriment if their bills increase due to switching to a lower or zero standing charge tariff. Some CGCs felt that the measures lacked the robustness to address the deep-rooted affordability issues faced by households. In response to the working paper, many suppliers continued to express support for giving consumers more choice and control but considered that alternative mechanisms should be used to achieve this. For example, many suppliers considered the CARR could increase lower standing charge options in the market. One supplier pointed to addressing this issue more effectively through market wide half hourly settlement and further time of use tariff options. Suppliers also cited the limited data currently available about consumer interest, uptake and behaviour for these tariffs and expressed concerns about under recovery risk. Some CGCs also advocated for more a more systematic review of costs through CARR. Updated case for change following stakeholder feedback and further analysis 2.16 We consider that there is a case to require suppliers to offer lower standing charge tariffs. This is because our recent consumer research suggests that consumers perceive standing charges to be unfair and some consumers value the option to control how they pay for fixed charges even in the presence of higher bills. Therefore, we consider that the requirement could broaden choice for consumers by introducing lower standing charge tariff options that are not widely available currently. Earlier this year, we conducted a programme of consumer research to consider consumers’ attitudes towards standing charges and cost allocation. The omnibus survey conducted in January 2025 measured domestic energy consumers’ top-of-mind attitudes towards standing charges on energy bills. In addition, an online behavioural experiment conducted in March 2025 explored how information provision and cost allocation trade-offs related to standing charges influence consumer attitudes towards energy costs. We also conducted deliberate research on consumers’ views on the future of energy pricing in February to March 2025. In the omnibus survey, 62% of respondents said they think standing charges are unfair and around half said they would prefer a cost structure that removed or reduced standing charges and increased unit rates. The top reasons selected for preferring to reduce or remove standing charges tend to be 2.17 2.18 19 Consultation - Requirement to offer lower standing charge tariffs principle-based. Among those consumers who stated a preference for reducing or removing standing charges and raising unit rates, the top reasons provided were a preference for charges to be based on actual usage (61%), the view that standing charges penalise low energy use households (58%) and the belief that standing charges are too high (47%). 2.19 Within our online behavioural experiment, consumers were asked to actively choose the level they thought standing charges should be set at.1 They were presented with a zero-sum trade-off scenario, where they could adjust the standing charges, and would be shown the cost implication for the unit rate. In this scenario, most participants stated that standing charges should be reduced or removed (58%), of which 11% felt they should be removed. Seventeen percent thought that standing charges should remain the same and 25% thought that standing charges should be increased. Despite understanding the implications of reducing standing charges- namely, higher unit rates- on average participants still favoured a modest decrease. Even when told their bills would be higher from a standing charge reduction, 50% of higher energy user participants, still opted to reduce standing charges. This suggests that standing charges at the time of the experiment may have exceeded what consumers considered acceptable, even when they were informed of the increase in unit rate and potential for financial consequences.2 2.20 We also note that consumers who were provided with enhanced information allocated more to standing charges (48p versus 45p in the basic information group). This suggests that additional information around standing charges increases the allocation for it, but it is notable that even with this information many consumers still chose to reduce the standing charge level relative to the default. In addition, lower energy users were significantly more likely to report standing charges as unfair, suggesting that they are already aware of the personal impacts of a change in standing charges and reflected this in their responses in the experiment. 2.21 Based on these findings, we continue to consider that there is a case for consumers to have greater choice and control through introducing more lower standing charge options into the market. Introducing more of these options for consumers would allow for energy bills on these tariffs to reflect changes in consumption levels to a greater extent (through a greater allocation of costs to 1 The default level in the experiment was 60p, which was what most GB regions were paying for standing charges at that time. 2 It is important to note that standing charges have since decreased, and the results should be interpreted in that context. 20 Consultation - Requirement to offer lower standing charge tariffs 2.22 unit rates), which could help consumers feel an increased sense of control of their energy costs. The findings from our deliberative research as part of this package also indicated that participants favoured a simpler, more predictable energy system that protects energy consumers. Generally, participants were in favour of a fair energy pricing system. However, views on what is fair were highly subjective, with the concept meaning different things to different people. Some participants expressed concerns that more complex pricing structures could disadvantage consumers who may have limited ability to engage and therefore be more likely to end up on the ‘wrong’ tariff. Affordability of energy bills was seen as paramount. We recognise the trade-off between increasing consumer choice and increased complexity. We set out our proposals for consumer protection in Chapter 6, which includes appropriate tariff communication best practice. 2.23 We also recognise stakeholder feedback that favoured the wider CARR to take a more holistic approach to cost recovery, which may also result in more lower standing charge options. We will continue to work on the CARR which aims to make the system fairer and more efficient. However, alongside this we consider that there is a case to introduce lower standing charge options in the shorter term, to provide greater choice and control to consumers sooner. We can then review whether the requirement for suppliers to offer these tariffs continues to be fit for purpose in light of the outcomes of CARR. Policy objectives and intent Ofgem’s consumer objectives and framework 2.24 We consider that the requirement for suppliers to offer lower standing charge tariffs can bring the benefit of increased consumer choice. As a result of the proposals, consumers would have options of tariffs that provide greater choice and control over how they pay for part of their standing charge costs. We set out below a consideration of our statutory duties. We also discuss our policy intent, which includes suppliers setting reasonable rates and having appropriate communication to allow consumers to make informed choices. 2.25 We propose to implement a requirement that suppliers must have a lower standing charge offer, at all times, to all payment methods and in all regions via the Standard Licence Conditions (SLCs), which would set parameters for the introduction of these tariffs. When we exercise our powers to make amendments to the SLCs, we must consider our statutory duties, including our principal objective set out in the Electricity Act 1989 and Gas Act 1986. This is 21 Consultation - Requirement to offer lower standing charge tariffs to protect the interests of existing and future gas and electricity consumers, and wherever appropriate to further this objective by promoting effective competition. We have carried out a Public Sector Equality Duty (PSED) assessment as part of our Impact Assessment (IA). Our assessment is that the proposed changes do not overlap with the PSED significantly, we consider that consumers with disabilities or over a certain age are likely to see no impacts as they will likely not opt for the tariff as it could increase their bills. 2.26 Our decisions are ultimately guided by our statutory duties. One of the ways we assess policy options is to identify trade-offs between different consumer interests through the Consumer Interests Framework in our Multi-year strategy to help us fulfil our principal objective. For our proposal on requiring suppliers to offer lower standing charge tariffs, we consider that the ‘Fair Prices’ factor of the framework would be appropriate as we seek to increase choice and control for consumers over how standing charge costs are paid. We would also balance this against supplier resilience as we consider supplier recovery of efficient costs (financeability) on the lower standing charge offerings. ‘Quality and Standards’ is also important as we consider how suppliers communicate new tariff options to consumers to allow them to make active and informed decisions about which tariff is most appropriate for them. 2.27 This also ties into our Consumer Confidence programme as this work contributes to a more consumer-centric energy market, given the strong feedback we have received from consumers expressing desire for change on standing charges. Background 2.28 In our February 2025 policy consultation on a zero standing charge price cap variant, we set out two key policy objectives: • • to offer consumers choice and control over how they pay for their standing charge costs and to allow suppliers to recover efficient costs 2.29 In our July 2025 working paper, we also added three policy outcomes that we would expect to assess suppliers against their requirement to offer lower standing charge tariffs, including: • • • suppliers must have available, at all times, in all regions, at least one lower standing charge offer these tariffs are effectively communicated to consumers so that they are able to make informed choices about whether to switch the tariffs are also required to be priced reasonably while suppliers are able to recover their costs and make a reasonable return 22 Consultation - Requirement to offer lower standing charge tariffs Stakeholder feedback 2.30 Many suppliers who commented on our policy objectives generally noted agreement with the principle of offering greater consumer choice. However, they expressed concerns about their ability to design lower standing charge tariffs that are commercially viable but still attractive to consumers, particularly given greater costs being allocated to variable charges (unit rates) that can vary seasonally. Some suppliers asked for discretion over most design elements to support commercial viability. One supplier also proposed objectives for the requirement, including a simple, transparent approach that applies to all suppliers; an effective approach to maximise the benefits for consumers and suppliers; for the tariffs to commence from April 2026 and appropriate mitigations to address the risk of cost under recovery. 2.31 CGCs also widely emphasised the importance of clear consumer communication, linked to our outcome on consumers being able to make informed choices about whether to switch to these tariffs. Some consumer groups advocated for standardised presentation of tariff elements and tailored support for digitally excluded or low-literacy consumers in relation to any new lower standing charge options. Our proposed approach 2.32 Taking into account the stakeholder feedback, we have considered the best mechanism to help achieve our policy objectives. We are carrying forward our key policy objectives into this work as we consider they remain valid and appropriate to: • offer consumers choice and control over how they pay for their standing charge costs • allow suppliers to recover efficient costs 2.33 We also noted previously that lower or zero standing charge options are not designed to be an affordability measure or intervention. As an economic regulator, we cannot make these costs go away and suppliers should be able to recover efficient costs. Measures for targeted affordability support sit within the remit of government. 2.34 Our policy intent is captured in the following points: • Suppliers must have available, at all times, in all regions, at least one lower standing charge offer. This captures the intent to provide consumers with greater choice and control over how they pay for their standing charge costs, and providing this in all regions and, at all times, helps to maximise that consumer choice. We include this requirement within the proposed SLC drafting. 23 Consultation - Requirement to offer lower standing charge tariffs • These tariffs are effectively communicated to consumers so that they are able to make informed choices about whether to switch to a lower standing charge option. We recognise that these tariffs may not be suitable for all consumers, so aim to ensure that suppliers provide consumers with appropriate information (such as standing charge and unit rate levels) to allow them to make an informed choice about whether to switch. We note that existing SLCs set out requirements for tariff communication and ensuring that consumers can make informed choices (e.g. SLC 25), and we discuss some examples of best practice for these tariffs in Chapter 6. • Tariffs are priced reasonably while suppliers are able to recover their costs and a reasonable return. This reflects that unit rate pricing on these tariffs should be at a reasonable level, so that they are not unattractive to the majority of consumers. This is balanced against the requirement for suppliers to be able to recover their efficient costs. We include proposed SLC drafting on this point. This requires that suppliers ensure the unit rate is reasonable, including by having regard to the cost of supplying energy to the domestic consumer; comparative tariffs and their costs; and any other relevant matter. 2.35 We recognise that this approach is an untested area for the market, where it is difficult for us to accurately predict consumer and supplier responses. We propose to monitor the supplier offerings, taking the above policy intent into account, and stand ready to consider further measures if we do not see competitive offerings delivering real choice being brought to market. We discuss further our considerations around assessing supplier performance against each of these areas in Chapter 6. This includes considering how they meet our wider consumer outcomes, and how they fit with our proposed SLC changes and existing SLCs. 24 Consultation - Requirement to offer lower standing charge tariffs 3. Setting a lower standing charge tariff requirement This chapter sets out our approach to defining a requirement for suppliers to offer a lower standing charge tariff. We are proposing to amend the SLCs to require suppliers to offer a tariff with a standing charge that is priced £150 below the price cap nil consumption level. We are however considering whether we should go further and require a £200 reduction. Questions Q3. Do you agree with our proposal to require suppliers to offer a tariff with a standing charge £150 below the nil consumption price cap level? Do you have any views on whether we should require a higher reduction? 3.1 3.2 3.3 Following feedback from our July working paper and further consideration, we are not proposing to proceed with the option of requiring suppliers to offer a tariff in the competitive market with no standing charge. Instead, we are proposing to amend the SLCs to require suppliers to offer a tariff with a standing charge that is priced £150 below the price cap nil consumption level. We are however considering whether we should go further and, for example, require a £200 reduction. Our July working paper set out a number of options with regards to requiring suppliers to offer a lower standing charge tariff. This ranged from requiring a smaller reduction in the standing charge to requiring that suppliers must offer a tariff with no standing charge. We noted that a zero standing charge requirement may be simpler to implement and easier in terms of consumer communications, however recovering all fixed costs through the unit rate increases the potential for under-recovery of fixed costs significantly for suppliers. To manage this higher level of risk, suppliers may be more likely to price tariffs as either falling block tariffs3 or price in very large risk premiums to account for this risk. High risk premiums are likely to make the tariffs less attractive to consumers, limiting choice in the market. 3.4 When considering how to set a ‘lower’ standing charge requirement, one of the approaches we outlined in the working paper was to set the requirement to allow suppliers to recover ‘pass through’ costs such as policy, industry and 3 A falling block tariff uses two or more unit rates, with the first higher unit rate applying up to an initial level of consumption with the lower rate applied to any consumption above this point. 25 Consultation - Requirement to offer lower standing charge tariffs network costs. This option means that suppliers would need to recover their operational costs for these tariffs via the unit rate. Stakeholder feedback 3.5 3.6 3.7 3.8 In their responses to our July working paper, suppliers generally favoured a requirement for a ‘lower’ standing charge tariff as opposed to a zero standing charge tariff requirement. Some suppliers noted that the higher the required reduction in standing charge, the higher the revenue risk to their business which would consequently result in a higher risk premium attached to these tariffs. One supplier argued that Ofgem should allow suppliers flexibility to choose the level of standing charge reduction under the requirement, noting that they were best placed to understand the nature of their consumer base. Some suppliers noted they agreed with the approach outlined by Ofgem in the July working paper, whereby the requirement for a ‘lower’ standing charge would be set with reference to pass through costs within the price cap. It was however noted by most suppliers that these costs, particularly network and policy costs, are likely to change over the next few years and any requirement would need to take this into account. Where CGCs responded to this question, they tended to support a zero standing charge requirement. One respondent noted that PPM consumers currently build up standing charge debt throughout the summer and a zero standing charge tariff would help to support these consumers. Our proposed approach Mandating a zero versus lower standing charge Following feedback from our July working paper and further consideration, we are not proposing to proceed with the option of requiring suppliers to offer a tariff in the competitive market with no standing charge. Instead, we are proposing to amend SLCs to require suppliers to offer, as a minimum, a tariff with a ‘lower’ standing charge. As noted in the working paper and in supplier responses, a zero standing charge requirement has the potential to drive the highest under-recovery risk for suppliers and, as a result, is most likely to drive high risk premiums on unit rates to account for this. As set out in Chapter 2, one of our primary objectives is to increase choice for consumers in the market and very high unit rates driven by high-risk premiums is unlikely to achieve this. 3.9 3.10 26 Consultation - Requirement to offer lower standing charge tariffs 3.11 Our research on domestic consumer views on energy pricing found that when presented with information on how unit rates will increase if standing charges decreased, consumers are more cautious about reducing them. In the omnibus survey where respondents were asked about preferred cost structure, 28% preferred to remove standing charges entirely. However, respondents were less likely to select the removal of standing charges option when we presented them with a modified version of this question in the online experiment, just 11% felt they should be removed entirely. In this a ‘don’t know option’ was removed and they were shown, in real-time, the impact of reducing or increasing standing charges on unit rates. The online experiment participants were also more likely than survey participants to choose to increase standing charges and reduce/remove unit rates – a quarter of online experiment participants selected to increase standing charges. 3.12 We note the responses raised by CGCs and recognise that standing charges can contribute to build up of debt in the summer months. It is important to note that this policy is not able to provide affordability support and any reduction in standing charge will likely imply an increase in the unit rate. We note that a lower standing charge approach will still help to mitigate the build-up of debt in the summer for those consumers that choose to take up one of these new tariffs. We also note that some suppliers already offer zero standing charge tariffs for PPM consumers. 3.13 Taking these points together, we consider that requiring all suppliers to offer zero standing charge tariffs may result in less choice for consumers rather than more and therefore would not meet our policy objectives. The rest of this chapter focuses on our proposed approach to defining a requirement for suppliers to offer, as a minimum, a tariff with a ‘lower’ standing charge. Our proposed approach to defining a ‘lower’ standing charge 3.14 Following further consideration and feedback to our working paper, we are proposing to set a requirement for suppliers to offer a tariff with a fixed reduction against the nil consumption4 price cap level. Given current market offerings, we do not consider a requirement that allows suppliers to set their own level of standing charge reduction would achieve the outcomes set out in Chapter 2. 3.15 There are a number of options for setting a ‘lower’ standing charge requirement. As set out in our July working paper, one approach is to set a level 4 Ofgem’s price cap sets out the price cap at benchmark and nil consumption. The latter represents a cap for a customer that uses no consumption, this effectively acts as a cap on the standing charge. 27 Consultation - Requirement to offer lower standing charge tariffs with respect to the level of ‘pass through’ costs within the price cap. Under this approach, suppliers would broadly retain the ability to recover all fixed costs that they receive via third parties, while increasing the ability of consumers to choose how they pay supplier operating costs. We define pass through costs as the sum of the following cost lines in the price cap methodology: (i) Policy costs (ii) Network costs (iii) Industry costs (iv) Levelisation allowance 3.16 The above four cost categories account for approximately £168 of the average standing charge within the October 2025 price cap (c.£320). Setting a requirement with respect to these costs would mean consumers would see a c.£150 reduction in standing charges relative to the cap. 3.17 We want to ensure that the new tariff offerings reflect consumer demand and note that the approach set out in paragraph 3.16 represents a decrease in standing charges of less than 50% compared to the cap. We are therefore considering whether to go further, for example to require suppliers to offer tariffs that represent a £200 discount from the nil consumption dual fuel cap level. Depending on a reduction of £150 or £200, we propose that it is split between fuels as a reduction of £65 to £90 for electricity consumers and a reduction of £85 to £100 for gas consumers, broadly reflecting the ratio of non ‘pass through’ costs in the cap. 3.18 3.19 To guarantee that these offerings are available to consumers, we are minded to amend the SLCs to require suppliers to offer a tariff with a standing charge at least £150 below the price cap nil consumption level. We are however seeking views on whether this level should be increased as noted above. We consider that a range of £150 to £200 below the nil consumption level may be appropriate. In coming to a final decision on the level of reduction, amongst other considerations, we will use stakeholder feedback and further analysis to balance our objectives of increasing consumer choice while ensuring supplier financeability. We particularly welcome views from stakeholders on the degree to which this level may affect the likely choices available to consumers. 3.20 We note the concerns by some suppliers that there may be movements in future cap costs. Setting the requirement to move relative to the cap should help to mitigate this issue by ensuring the requirement is updated in line with the quarterly price cap updates. 28 Consultation - Requirement to offer lower standing charge tariffs 4. Consumer eligibility and minimum consumption threshold This chapter sets out our proposed approach to consumer eligibility for the tariffs, including all payment methods, and for consumers on both smart and traditional meters. It also sets out our proposal to allow suppliers to limit eligibility for lower standing charge tariffs to consumers that meet a minimum consumption threshold. Questions Q4. Do you agree with our proposal to require the tariffs to be offered to all payment types and both smart and traditional meter consumers? Q5. Do you agree with our proposal to allow suppliers to limit eligibility for lower standing charge tariffs to consumers that meet a minimum consumption threshold? Q6. Do you have views on our methodology for setting a minimum consumption threshold? Consumer eligibility Background 4.1 4.2 In the working paper, we set out a range of options on how lower or zero standing charge tariffs could be targeted at particular consumer groups. This included the tariffs must apply to all domestic consumers (covering PPM, Direct Debit and Standard Credit consumers); allowing suppliers to exercise discretion in which consumers they offer the tariffs to; or prescribing the tariffs for particular consumer groups. Within this, we considered targeting PPM consumers and/or smart meter consumers. For each of these choices, we considered the trade-off between suppliers having the ability to recover efficient costs (as the risk of under recovery could reduce if the tariff is available to a smaller number of consumers); against the amount of choice for consumers offered as a direct result of the policy. Stakeholder feedback Many suppliers expressed support for targeting the lower standing charge tariffs at PPM consumers. The key reasons provided for this were that many PPM consumers have been shown to be adversely affected by rising standing charges, due to accruing debt from these costs during periods of not using energy (for example gas standing charges accruing over summer). Furthermore, 4.3 29 Consultation - Requirement to offer lower standing charge tariffs 4.4 4.5 targeting a smaller consumer cohort could reduce supplier risk of cost under recovery. On the other hand, two suppliers opposed targeting PPM consumers, highlighting that this cohort have higher fixed costs, which could increase the level of under recovery risk. Another supplier commented that the higher unit rates of lower standing charge tariffs could increase the risk of self- disconnection for PPM consumers in the winter, when consumption levels are higher. It was also highlighted that PPM consumers already have access to lower or zero standing charge tariffs in the market. The majority of suppliers advocated for the tariffs to only be open to smart meter consumers.