Martin Lewis issues standing charges update as | European Markets

Martin Lewis has issued an replace on the dreaded ‘standing charge’ on vitality payments being axed for some fuel and electrical energy customers.

Lengthy dubbed a ‘ethical hazard’ by the founder of Cash Saving Skilled, Lewis has now defined to households how a change by Ofgem to the best way the standing expenses work may avoid wasting people money.

Power regulator Ofgem is set to introduce a new tariff for vitality prospects which might permit them to axe the every day standing charge from their payments.

The standing charge is a every day price paid to be related to the fuel and electrical energy networks. In addition to paying for the maintenance of the grid, the price additionally covers the fee of any provider going bust and different associated prices.

It implies that prospects are sometimes paying as a lot as £1.20 a day to have fuel and electrical energy provides, earlier than they’ve even switched on or used a single unit of vitality.

The standing charge thereby punishes decrease vitality customers particularly, as a result of even should you don’t use a lot, you continue to must pay more than £300 a yr simply to be related to the grid.

Now, Martin has defined how Ofgem plans to introduce a zero-standing expenses tariff and who would save money from it.

He posted on X: “ENERGY STANDING CHARGES NEWS.

“@ofgem’s simply detailed its new ‘low or no standing expenses’ Value Cap option proposal. It is progress, although I consider it should choose within the susceptible prospects it fits or it received’t work…this new proposed Value Cap option could have decrease/no standing expenses however larger unit charges. It should considerably benefit decrease customers, however larger customers ought to stick on current one.”

On his MSE website, Martin explained that the new tariff is ‘progress’ but that the only flaw with the new tariff is that people have to opt into it, and won’t be moved to it automatically.

He wrote: “That is progress. Standing expenses are by far essentially the most complained-about half of an vitality invoice. It prices in extra of £300 a yr simply to have the ability of fuel and electrical energy, even should you do not use any.

“They’re a moral hazard that disincentivises lower users from cutting their bills, and leaves many older people, who only use gas for heating in the winter, still paying for it every day in summer.

“Nonetheless there’s one massive gap in what’s at present proposed.  The new ‘low or no standing charge’ Value Cap option ought to scale back prices for decrease customers – my guess is maybe these paying below £120 a month – however to get it, people must choose in.

“Yet the Price Cap’s primary purpose is to protect those who don’t, can’t or are scared to switch or change tariff – and it’s many of those people for whom this option will be most suitable and needed. Thus, there’s a risk many vulnerable lower users may miss out.”

Ofgem continues to be consulting on the modifications till March. The choices it units out embrace a single unit charge, with a zero standing charge. This is able to be prone to have a larger price per unit to make up for having no standing charge, however would benefit low vitality customers as they’re saving on the standing charge.

One other option in its session is a unit charge which falls should you use a certain quantity of vitality. This ‘falling block tariff’ expenses you more for the primary two items of fuel and electrical energy after which a decrease quantity for the remaining and is at present how Utilita’s no-standing charge tariff works.

Alternatively, a rising block tariff would see households pay a decrease unit charge till they hit a sure utilization stage after which costs would rise thereafter.

Ofgem mentioned in its session that it plans to introduce the tariffs in time for winter 2025-2026, so prone to be in place round November 2025.

Charlotte Friel, Director for Retail Pricing and Methods at Ofgem, mentioned: “We know from the huge response we’ve had that many feel standing charges are unfair. However, we also know that vulnerable, high-energy users – including those who rely on medical equipment at home or low-income families in poorly insulated houses – would suffer disproportionately if these costs were added to the unit rate for everyone.

“That’s why we’re shifting ahead with plans that may give prospects a selection and more control over how they select to pay for his or her fuel and electrical energy.

“We’re looking closely at how these tariffs will work in practice, but everyone will need to carefully consider which option best suits their needs. The costs included in the standing charge ultimately have to be paid. But while they may not save everyone money, they will give people a choice, and greater control over their bills.”