No Standing Charge Electricity Tariffs: OFGEM says they’re coming, but will they save us money ?

Warning to low Electricity and Gas users: 

If you are anything other than a high user of both fuels, don't be tempted by offers from your supplier to fix your tariffs now. These are coming in thick and fast on the back of the latest price cap rise, with OFGEM  actually 'co-conspiring' with suppliers to try to get you to fix. The rationale being peddled is to "...protect yourself against future price cap rises...". If you do succumb to the temptation, however, you'll lock yourself into a contract lasting at least a year with exit penalties, and won't be able to take advantage of any No- or reduced-SC tariffs that appear this winter....companies want to avoid subscribers switching to these tariffs, since they know they could lose money as a result, and are using fixing as a deterrent, so beware. One item of note to surface very recently is that EDF are now offering a fixed rate product with a reduced SC in a desperate effort to get you to fix. This suggests the industry has now accepted they'll need to do something about SCs for domestic customers and are trying to limit the damage - again, don't be tempted, there will be more and better offers to come.

See also latest update 5.10.25 below for more info on likely tariff structures....

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Why are No-SC tariffs important, and when are we likely to see them ?

Our Electricity prices in UK are acknowledged to be the highest in Europe. 

Despite this rather serious indictment of our pricing structure, as discussed in a previous blog, our Electricity and Gas suppliers have continued to penalise low users by first re-introducing, then continually hiking up their standing charges (SCs) to hitherto unprecedented levels. This has not so far been actively challenged by the regulator, OFGEM, but has caused much resentment and complaints amongst consumers, who object to 'paying through the nose for not using any energy' as they see it. 

Figure 1 shows the true injustice of the policy by comparing the effective per unit price paid by consumers at different levels of annual consumption. A very low user (e.g. someone living on their own and only using electricity for lighting and low wattage appliances) with an annual consumption of only 200 KwH would pay a whopping £1.31 per KwH, whereas someone on the UK 'average' of 3000 KwH would pay only ca 31p per unit. This cannot be regarded as 'fair' in any sense of the word.

The policy has for many years disadvantaged the low-user community, mainly made up of singles living on their own.  Particularly hard hit have been some pensioners who do not qualify for pension credit or have not been able to apply for it. The rapid increases in their fuel costs in recent years and only the meagre state pension to exist on, has severely challenged their finances, in some cases even leading to a stark choice between 'heating and eating' over the winter months. An additional blow to 10 million pensioners this autumn was Reeves’ cruel and indefinite withholding of their winter fuel payment. It was also a relatively cold winter by recent standards, with some significant rises in the excess death rate statistics already emerging as a result. This should (but apparently hasn't so far) challenge the consciences of our policy makers...... 

Consumers generally have now wakened up to the fact that our energy charges are the highest in Europe, and have started to question the inefficiency and profiteering of the supply industry which appears to be responsible for this, and the 'green levies' government conrinues to impose. The above-inflationary price cap rise from April already announced (Feb 25th) certainly won't help dispel the widespread impression that OFGEM is effectively 'in the cartel's pockets', and the recent announcement of a slight fall in the capfor the summer quarter won't help much either.

The marketing policy adopted by the UK’s suppliers is undoubtedly aimed at maximising standing charges across the board, as you might expect. This policy actively singles out low users by forcing them to pay an effective per unit rate that is much higher than is paid by higher rate users. At a time when our focus is on reducing consumption of fossil fuels and indeed energy generally, which is necessary to eke out increasingly scarce fossil fuel supplies and help mitigate climate change,  the morality of this behaviour is at best questionable..... 

‘Net Zero by 2050’ is now enshrined in UK law, thus any behaviour which positively encourages those who over-consume and penalises 'energy savers' in the name of profit could well also prove to have legal consequences for suppliers in the future.

‘…"Twas ever thus" the pragmatists among us would say, “..in a capitalist world, market forces will always prevail”. 

We cannot, however, afford to go on turning a blind eye to our suppliers being given 'carte blanche' to promote wasteful use of the scarce resources they are privileged to supply us with, in the name of profit.  Apart from encouraging yet more  consumer debt, they are effectively encouraging us to continue polluting the one and only atmosphere that supports life on this planet with fossil fuel emissions...and driving even more rapid climate change. A new model which encourages more restraint clearly must be introduced….and soon.

OFGEM, whose ‘light touch’ approach has allowed suppliers to get away with their profit-focused excesses for many years, finally took note of adverse public opinion on the matter in 2024, and published their plans to introduce a requirement on all suppliers to offer at least one No-Standing Charge (SC) tariff as an alternative to their existing portfolio, since virtually all of their current offerings have some form of SC element. 

We don't yet know whether the tariff structure will be a simple replacement of the standing charge by a single higher unit rate, or a tiered structure with a higher rate for the first x units used over a set period of time. 

“…Great..and high time too….” I hear many of you say, but what type of pricing structure will they allow companies to introduce for the new tariffs…and when will it actually happen ?  Believe it or not, there is still some doubt as to whether the 'can will be kicked down the road' on this issue yet again - the present government have already shown themselves to be rather adept at doing this with anything remotely beneficial to the consumer/taxpayer.

Whatever happens (or doesn’t !), you can be sure of one thing…the industry will need to be ‘dragged kicking and screaming’ back into the No-SC tariff arena if any progress is to be made.  The idea of not being able to continue charging all of us just for having a supply and not using any gas or electricity is way out of their marketing ‘comfort zone’. OFGEM will need to be far more robust with them than it has in the past to make it happen, and must also mandate a cap on the maximum No-SC unit rate they can charge.

This cap on unit rates needs to be no more than 50% above the unit rate of their standard variable rate (SVR) tariff. If OFGEM don’t impose this, energy suppliers will simply set the unit rate so high that switching will always be more expensive for the majority of users, and few consumers, if any, will then decide to bother doing so. If we want to be fairer to low users and encourage lower energy use across the board, we have to provide suitable incentives in the form of more favourable pricing.

What is the timetable for the changes ? Firstly, we should be cautious about assuming it will happen at all. As discussed, this government (and indeed its predecessors!) have shown themselves adept at kicking important projects which are perceived to be 'too difficult' into the long grass...witness their latest effort in deferring the readout of yet another Adult Social Care report until 2028. Assuming things do eventually change, significant reform could still be years in the making on this critical aspect of our healthcare system. (I note that Streeting recently announced a preference for any new money to go towards Social Care rather than hospitals - perhaps the message is getting through at last).

That said, OGFEM actually published consultation documents in December 2024, with a closing date for comments of 6^th February 2025 and I quote “..will publish a consultation on the standing charges proposals in the New Year..”, which does suggest they at least may mean business...this time.

How long it will actually take them to produce any recommendations, let alone mandate new No-SC tariffs, is anyone’s guess, although there is strong pressure from consumer lobbies to make at least some No-SC tariffs available before the start of winter 2025-6. In common with all so-called 'Qwangos' just now, OFGEM will be keen to justify their existence in an attempt to avoid being swallowed up by Starmer's voracious government 'maw' and going the way of NHS England.  Let's hope this spurs them into decisive action at last.

In this context, it is interesting to note that a plethora of fixed term tariff-switching offers have appeared recently - the suppliers involved claim to be doing this to "....beat the April price cap increase...". The real reason, I suspect, is that they want to tie as many of their customers as possible into conventional SC tariffs with exit penalties before the No-SC tariffs are mandated by OFGEM and start to become available this autumn. If they don't do this, they risk losing significant numbers of their existing customers, particularly if their unofficial cartel agreement breaks down and a 'switching price war' develops.

Apart from anything else, there is an immediate need to prevent further increases in the consumer energy debt burden, which has mushroomed since energy companies were allowed to continue ‘ripping off’ consumers with ever increasing SC charges and escalating unit rates. The energy companies themselves are concerned about this particular consequence of their actions as it will affect their balance sheets; the consequent developing consumer debt default problem has even started to worry the Treasury.

Is the new No-SC tariff I’ve been offered worth switching to ?

Assuming we are ever offered No-SC tariffs by our suppliers, how do we, as consumers, work out whether a new No-SC tariff our current supplier is forced to offer us is likely to save us money ?

The calculations involved in answering this question may not be straightforward for everyone, since the answer will depend on personal usage and circumstances. It will also depend on the complexity of the tariff structures suppliers come up with in an attempt to deter uptake and thus maintain their profit margins. 

Help is available , however....

I compiled a simple app some years ago for my own use in the balmy days before the cost of living crisis hit, at a time when No-SC tariffs were still widely available from competitive smaller suppliers. As a relatively low user myself, I did this to help me assess the viability of No-SC offers which were on the market at the time. I’ve revised it and made it available for general use with a step by step guide on how to use it.

I hope it may be a help to those who would prefer to avoid poring over their fuel bills with calculator trying to figure it all out for themselves from scratch. 

The app requires MS Excel 2010 or later, and you can download it (No-SC Tariff Calculator.xlsx)  from my website’s download page. (It was originally written for pc, but as a simple macro-free workbook, it should also run on Android or Apple smartphone Office emulator apps such as WPS Office)

The Excel app requires values for your average Gas and Electricity consumption over a full year (you can get this by looking at your past bills or just estimating based on your current monthly consumption). You will also need to enter the Standing Charges included in your current tariff in pence per day, and the per unit rate in pence per kilowatt hour (KwH) for each fuel. 

Once you’ve entered these values, the app will tell you the No-SC unit rate that would cost you the same as your current tariff does at your current level of consumption. You can then see immediately whether the new No-SC unit rate offered would be more favourable. 

If you also enter the unit rate for any new No-SC tariff you’ve been offered or are considering, the app will tell you how much you would be likely to save (or lose!) if your consumption levels stay the same. There is a user guide attached on a separate sheet and on-screen help in the form of comments (red triangles attached to the relevant cells). 

If you wish to model a 2-tier monthly threshold structure for your usage level, I've included modelling for the two alternative types of No-SC tariff that have been mooted so far - one of these is already offered by Utilita. Their tariff waives the standing charge in return for charging at a substantially higher unit rate for the first 2 KwH used on each day. All subsequent units are charged at a rate marginally above their SVR rate. For very low users, this can still work our cheaper for electricity than SVR even though all their units are charged at the higher rate. It does of course require a smart meter, since it would not be practicable for consumers to submit daily readings themselves. Please follow the instructions in the guide if you wish to model these options.

One word of warning concerning switching - you’ll note I’ve highlighted the phrase dealing with consumption level; it’s important to note that a No-SC tariff will always have a significantly higher rate to cover costs normally included in the standing charge element. 

Switching may well leave you worse off financially if your consumption rises unexpectedly after you’ve switched, particularly if you opt for a fixed rate tariff with an exit penalty. (Any new No-SC tariffs are likely to have exit penalties attached for deterrence purposes.) The reason this could happen is because a No-SC tariff favours low usage, and the more power or gas you use, the sooner the cost will overtake that of your current SC tariff. You might perhaps need to use more energy because of illness, or changes in personal circumstances – please do consider this possibility before making the decision to switch.

Final Thoughts

I hope this blog, and the calculator that comes with it, will be useful - now OFGEM’s consultation is complete (closed in late March 2025) it's likely that suppliers will be obliged to offer at least one No-SC tariff again from this autumn onwards. 

The recognition that standing charges are unfair to a lot of consumers in the energy industry leads logically to the question "who's next ?"...dare I suggest the water industry, perhaps ?

If I were in charge of OFWAT, I would already be 'girding my loins for the fray'. Given the recent furore over Thames Water, who appear to have just escaped nationalisation by the skin of their teeth recently, more detailed scrutiny of charging practices in the water industry is inevitable...and will probably come probably sooner rather than later.

More on this in a future blog, I suspect....

Update 15.3.25: This month's announcement of OFGEM's new price cap has finally filtered through to suppliers' revised tariff charges. It looks from an email from one (British Gas) just received that there has been some slight movement in the electricity standing charge for the SVT tariff (down ca 13% from April 1st), although all other elements (including the gas standing charge) have risen again by around 10%. This may reflect a decision based on the current OFGEM consultation on SCs,  which was introduced in recognition of marked customer dissatisfaction with suppliers' habit of disproportionately increasing standing charges. The consultation phase is due to complete on March 20th. As yet there is no word on how (or by how much) fixed costs will be transferred from the SC to the unit rate. I still suspect a 'fudge' will be made to ensure suppliers' profits don't suffer....

Update 27.8.25: Although things do seem to have gone very quiet recently, the following has emerged since OFGEM's end of consultation date in late March:

1) OFGEM has said that it wants to see at least one NSC tariff available from each supplier by 1st Jan 2026. This is something of a retrograde step since its March announcement, when it was suggested the new tariffs would be "available from Autumn 25". It does, at least, still offer us some hope of relief from the £300 compulsory charge we pay each year just for having electricity and gas supplies 'piped in', even if we do have to wait until the New Year for it.

2) The suppliers are obviously trying to minimise the 'hit' to their profit margins and have proposed that the NSC tariffs should fall outside the price cap. This is the 'thin end of the wedge' when it comes to discouraging adoption. As Martin Lewis has recently pointed out, if OFGEM accepts this rather sneaky proposal from the suppliers, it will allow them to charge unit rates as high as they like to discourage low users from switching.

3) The July price cap revision brought bills down slightly, but OFGEM has just raised it again as from October 1st. What's more, the 'fine print' reveals that this rise is largely in the form of significantly higher standing charges, with that for gas anticipated to rise by ca 15%, which will as we've already outlined, affect low users disproportionately more. Their justification is the government's expansion of the warm homes scheme to everyone on benefits, for which largesse everyone else has to pay. Once again it shows clearly why we should stop tying the price of our electricity to the Gas price - there is little justification for doing so now that on some days the majority of our power is renewables-generated, and the number of gas-fired power stations is dwindling fast.

Low users and others keen to switch to a No SC option should note that OFGEM has not yet promised that they will be introduced, but merely stated that they will:

"... work with suppliers, consumer groups and other interested parties on options over the summer. We are aiming to see new tariffs being offered in January 2026, subject to consultation in autumn 2025..."

That could, of course, mean anything from a mandate starting on 1.1.26 to...well, no change at all. Just don't hold your breath !...

Further updates to follow…..

Update 5.10.25: Looks like OFGEM have succumbed to pressure from the supplier industry cartel and chickened out on mandating ZERO standing charges - see this link for news article. 

Thus we may now only be offered a reduced SC with a higher unit rate to match. 

There are also rather disturbing idications that the new tariffs will be conditional on consuming a set level of energy PER DAY to qualify for the reduced SC - the current Utilita tariff adopts this format and requires you to consume at least 2KwH per day - significantly more than a low user might do for most of the year, except in the depths of winter, and obviously of little use to someone with a property left unheated all year. 

A further caveat, hidden in the small print of OFGEM's own press release, is that this measure is only temporary pending a full scale review of the industry and its pricing. Thus we nay well see the cartel removing the tariffs within a few moths of introducing them.

Why has the Government not stood firm and sided with the consumer on this ? The answer is simple - TAX. 

Reeves will not want to see any of the nice juicy tax revenue she currently gets from utility companies' profits reduced at a time when she is desperate to fill the various 'black holes' she has lumbered herself with over the past year. You can be sure that behind closed doors a deal has been done to preserve supplier company profits to this end, with the cartel threatening that reduced profit margins, and therefore tax takes would ensue if genuine zero-SC tariffs were mandated across the board. I wouldn't be surprised if Milliband had also agreed - he'll be conscious that he depends on the good offices of the cartel to get his 'energy greening'  project fully implemented, and won't have wanted them digging their heels in either....

Just goes to show this government are as sleazy as the last lot, with no thought for the hard-pressed consumer and a confirmed antipathy to their pensioner population, who are likely to be the ones affected most by this obvious 'stitch-up' in favour of vested interests.....

First published 20.1.25

Revised 5.10.25

 Figure 1: Electricity: Effective Cost per Unit vs Annual Consumption (SC=56.1p; UR=24.1p/KwH)