Martin Lewis, founder of Money Saving Expert, has labelled Ofgem’s standing charges a ‘moral hazard’ during his appearance on Good Morning Britain (GMB). Discussing the current energy prices with Susanna Reid, he responded to an ITV viewer’s question who asked “when will Ofgem reduce the skyhigh standing charges?”.
The expert said: “Well people know I’ve been one of those leading the campaign on reducing standing charges. I think it’s a moral hazard, it’s a poll tax on energy use that you’re paying over £300 a year even if you don’t use any energy.
“There is a consultation being put out on it. The submissions to that consultation closed on September 26. They’re planning to shift some of the standing charge to the unit rate which causes a problem for high users, vulnerable high users. But that’s the nature of it. So I think we’re probably still a few months away from an announcement on that [standing charges]. But at least we’re in the process now.”
The standing charge is a daily fee that customers pay their energy supplier each day to cover the fixed costs of providing gas and electricity, regardless of how much energy they use. This charge covers the fixed costs that energy suppliers have to pay for services such as providing and maintaining the wires, pipes and cables that deliver power to a customer’s home, staff wages and buildings required for the energy business.
The standing charge comes under the ambit of the energy price cap which delineates the maximum suppliers can levy for it. It’s not compulsory for energy companies to impose a standing charge, and they stand free to set rates below the cap dictated by the price ceiling.
Expanding on the topic in his MSE blog, Martin Lewis points out: “Keeping the standing charge high means lower users can save proportionately less and less by reducing usage – that disempowers them – and is a disincentive to energy reduction generally, which is not great for the environment.”
Highlighting a pressing issue for some prepayment customers, he reveals that even when they’re not consuming power in summer, energy debts can accumulate “the meter is still ticking over because of the standing charge”. Describing this as a “terrible, unnecessary situation for the payment type used by many of the most vulnerable” Martin Lewis has been advocating for reduced standing charges and notes that “MSE has submitted our consultation response to a new Ofgem proposal on this about shifting some of the cost of the unit rates.”
