Introduction: Rising Energy Costs and the Debate Over Fair Billing
As energy prices continue to rise across the UK, millions of households are struggling to keep up with soaring utility bills. Ofgem’s latest plan to reform energy standing charges has ignited a nationwide debate. The regulator suggests lowering standing charges but increasing the price per unit of energy used, a move that could drastically change how Britons pay for their electricity and gas.
While Ofgem argues the proposal promotes fairness and flexibility, leading energy executives warn that the reform could backfire — increasing costs for vulnerable customers and widening the gap between high- and low-income households.
What Are Energy Standing Charges — and Why Do They Matter?
The standing charge is a fixed daily fee that covers the cost of maintaining the energy grid and delivering gas or electricity to homes. Regardless of how much energy a household uses, this charge remains constant.
Under Ofgem’s new proposal, energy suppliers in England, Scotland, and Wales must offer at least one “low standing charge” tariff. However, this comes with higher unit costs, meaning customers who consume more power could end up paying significantly more.
According to Rachel Fletcher, Director of Regulation and Economics at Octopus Energy, this approach “will not solve affordability issues — it might actually make things worse.”
Industry Leaders Push Back: The Case Against Standing Charges
Executives from the UK’s largest energy companies — including EDF, Centrica, and Octopus Energy — voiced strong concerns during a recent Energy Security and Net Zero Committee hearing.
Their message was clear: the main issue isn’t how the bill is structured, but that energy itself has become unaffordable. The rising costs have led to record-breaking household debt — with consumers owing over £4.4 billion to energy suppliers as of mid-2025.
Some CEOs even called for the complete abolition of standing charges, while others advocated for a social tariff system, which would provide discounts to low-income families funded by a small contribution from other billpayers.
Social Tariffs: The Push for a Fairer Energy Model
Industry association Energy UK has urged the government to introduce long-term financial support for struggling households. They emphasize that the current system — including the Warm Home Discount of £150 — is insufficient to protect vulnerable citizens from rising prices.
A social tariff, experts argue, could provide targeted relief and ensure a more equitable distribution of energy costs. However, such measures would likely be funded by increases in standard tariffs for other users, creating a complex balance between fairness and affordability.
The Bigger Picture: Balancing Gas and Electricity Prices
Another pressing concern is the price imbalance between gas and electricity. Simone Rossi, CEO of EDF UK, told MPs that electricity prices are disproportionately high, discouraging customers from switching to cleaner, electric-powered technologies like heat pumps and EV chargers.
Energy Secretary Ed Miliband acknowledged that the government is considering shifting green levies — environmental policy costs — from electricity bills to gas, potentially lowering costs for households that use electric heating.
However, Miliband stressed fairness: “We will only do this in a way that genuinely reduces bills for ordinary people.”
Could Rebalancing Energy Policy Costs Accelerate the UK’s Net-Zero Goals?
According to the Climate Change Committee, moving policy costs away from electricity could accelerate the UK’s transition to net-zero energy. Research by Nesta found that policy costs currently make up 16% of electricity bills and 6% of gas bills.
Shifting these costs could reduce electricity prices, making heat pumps, electric vehicles, and solar systems more affordable. Energy UK’s analysis even suggests that a household using an air-source heat pump could save up to £7,000 over 15 years if energy bills are fully rebalanced.
However, this same move would raise costs for households relying on gas boilers, reigniting concerns over fairness and affordability.
The UK’s Energy Debt Crisis: A Growing Challenge
The energy crisis has created an unprecedented wave of debt among UK households. Over one million families have no repayment plan for outstanding energy bills, marking an all-time high.
Despite government interventions like the Energy Price Guarantee and price caps, the average annual energy bill remains high — hovering around £1,755 in late 2025.
As the winter months approach, experts warn that without significant structural reform, many families will continue to face energy poverty, a condition where heating and powering homes consumes an unsustainable portion of household income.
The Path Forward: Fair, Sustainable, and Affordable Energy for All
The debate over standing charges highlights a deeper issue: the UK’s need for a comprehensive energy reform that balances economic fairness with environmental goals.
Removing or adjusting standing charges could help some households, but without broader policy changes — including green investment, social tariffs, and renewable subsidies — the crisis will persist.
Energy suppliers, policymakers, and regulators must collaborate to design a fair energy market that rewards efficiency, supports vulnerable users, and accelerates the transition to clean, affordable power.
