Octopus Energy customers given £676 after daily charge ditched | Personal Finance | Finance
Octopus Energy customers could save up to £676 on their energy bills if a daily charge is ditched on a new tariff.
Under new plans announced by energy regulator Ofgem, energy suppliers will be obligated to offer “zero standing charge” tariffs to customers, alongside existing ones.
Standing charges are a fixed daily amount that is added to energy bills by suppliers – regardless of how much energy you actually use – which cost the average dual fuel household £338 per year on average.
The charges have come under fire as they disproportionately affect households that use less energy, as the fixed costs make up a higher proportion of their overall bill.
MoneySavingExpert founder Martin Lewis has described standing charges as a “£388-a-year poll tax on energy bills”, which are a “moral hazard disincentivising lower users from cutting their bills”.
But under Ofgem’s plans, suppliers must offer zero standing charge tariffs to households, alongside other tariffs, by next winter. It means that Octopus Energy customers on a two-year fix would make a saving of £676 if the charges were scrapped today.
The move comes as part of efforts to help address spiralling household energy debt and will come alongside new standards for suppliers to make it easier for struggling customers to get support.
From January 1, standing charges on standard variable tariffs dropped slightly from 60.99p to 60.7p per day for electricity and from 31.66p to 31.65p per day for gas.
Some suppliers already offer low or no standing charge tariffs at all, but while these tariffs are at least 10% below the price cap they have a higher unit rate so they are more likely to benefit customers who use less energy.
Ofgem said tens of thousands of consumers have called for standing charges to be axed altogether, but those who use a lot of energy – often for medical and health reasons – would see their bills rise significantly, so it decided it was important for households to retain a choice of tariff.
For lower energy users, the new tariffs would see the costs move to unit rates instead. So higher energy users would be unlikely to save anything if they switched, but for those who don’t use much electricity or gas, the higher price per unit would be offset by the loss of the standing charge, meaning those users would save up to £338 a year (or £676 over two years) against a standard tariff.
Tim Jarvis, director general of markets at Ofgem, said: “We know that many households continue to struggle with bills after the events of the energy crisis, which is why earlier this year, we took steps to consider all the issues around affordability and debt – including the impact of the standing charge.
“Many people feel very strongly that standing charges are unfair and prevent them from being able to manage their bills effectively.
“We want to give consumers the ability to make the choice that’s right for them without putting any one group of consumers at a disadvantage. And by having a zero standing charge tariff, we would create that choice for everyone.”
