Charities and consumer groups have warned that Ofgem’s proposals for standing charge reform could see many households end up worse off if they accept one of the proposed tariffs.
In a submission to the official consultation on the issue, the End Fuel Poverty Coalition describes how consumers would only need to use half of the “typical domestic consumption values” before their bills increase if on a “zero standing charge” tariff.
Given the risks posed by the proposals, campaigners stress that the consultation should proceed with extreme caution and only after thorough piloting and evaluation to assess potential negative impacts on consumer behaviour.
A spokesperson for the End Fuel Poverty Coalition explains the concerns:
“In essence, the proposals create only two groups who might see savings.
“Firstly, those who drastically self-ration or self-disconnect from energy, potentially putting their health and well-being at risk. There can be no ethical justification for forcing households to reduce energy use to dangerously low levels in order to maintain the benefits of a particular tariff.
“The second group who may benefit are those who can minimise usage through smart technology, but this risks creating further inequality in the energy market due to ongoing issues with smart meter rollout.”
Other concerns expressed by the Coalition argue that the proposals do not move costs away from energy bills and simply “rearrange the deckchairs”, that they present a flawed version of rising block tariff for consideration and do not contain wider proposals for reform previously put forward (pdf).
It is argued that the current consultation also fails to address the unfair burden of standing charges, particularly for prepayment meter customers, who often accrue standing charge debt when disconnected.
National Energy Action warns that under the next price cap, some gas prepay users could face nearly £60 in charges before they can reconnect their supply and that 67% of prepayment users expect to ration their energy, highlighting the financial hardship imposed by the existing system.
Unlike other consumers, prepayment customers often lack a direct relationship with suppliers, making it unlikely they will switch to proposed zero-standing charge tariffs.
Campaigners are calling for more targeted policy solutions, including shifting standing charge accrual to the back of prepayment meters to prevent debt accumulation. They argue this measure would be minimally disruptive for suppliers while significantly helping vulnerable households.
The spokesperson continued:
We know that some of these issues need to be addressed working with the Government and are not in Ofgem’s gift. We urge the regulator to think again and meet with Ministers to discuss how their decisions can positively alter the affordability of energy bills, avoid discriminatory pricing and deliver longer-term reforms that bring down the cost of energy.
ENDS
Full consultation response available: https://www.endfuelpoverty.org.uk/news/reports-and-correspondence/