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Standing charges: the charge that won’t stand still  

Written By Ceri Jones

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May 22, 2024

Despite a 12.3% cut in April’s energy price cap, business energy bills are still increasing as standing charges are raised. The UK energy regulator Ofcom decides the price cap. However, energy suppliers set the standing charges. They can raise these charges whenever they want. This is problematic for businesses already struggling with high energy costs.

We’ve all seen the headlines recently: the energy price cap has been reduced. This means suppliers can charge less for each unit of gas and electricity. Bills will be lower. The price cap is only for domestic users, not for those on a business tariff.

Even if you are on a domestic tariff, its bad news. When we take a deeper dive into these headlines, all is not how it seems. That’s because – yet again – standing charges are rising.  This charge is a fixed daily fee added to your energy bill, regardless of your consumption. 

This leads us to ask the question…are energy prices really going down? 

Are your energy bills really going down?  

Energy supplier E.On, is just one example of an energy supplier spinning this PR stunt. On its Next Flex tariff, electricity charges are due to rise from 62.205p to 67.9041p – an increase of just over 9%. For gas, charges go up from 29.595p to 31.894p (up almost 8%). 

Whilst raising these standing charges, E.On simultaneously sent its customer a cheery letter claiming “Great news! Your unit rates are going down.”  Well, that’s simply not the case, is it, E.On? 

Energy companies are enjoying great PR by ‘lowering’ prices, but they are offsetting this by increasing standing charges.

According to the BBC, standing charges have doubled over the last few years for most areas across the UK. 

What regulation is there for standing charges? 

As the UK energy market regulator, Ofgem oversees regulation of UK energy suppliers. However, the standing charge is decided by the individual supplier. This means that suppliers can raise this for customers whenever they decide.

Ofgem claims that “The principal reason for the increase in standing charges in electricity is that they include network costs and the costs of supplier failure”. Yet, there has been enough outcry to prompt Ofgem to call for input responses. In a November report, they noted how “standing charges have also been rising and are a particular burden for some consumers”.

“These costs need to be met and will ultimately fall in some way to all billpayers. We cannot, as the regulator, make these costs go away”.

This means Ofgem can’t do anything about the increasing standing charges, so your energy bills are likely to keep rising.

Public figures call for lower standing charges

Its clear that the issue of standing charges needs urgent attention, as highlighted by the harsh criticism from public figures, including Martin Lewis (famously known as ‘The Money Expert’) and UK Energy Secretary Claire Coutinho. 

Raising standing charges significantly impacts businesses. Regardless of how energy-efficient a business is, a high standing charge will substantially increase its bills. 

In April 2024, the Federation of Small Businesses called on Ofgem to address the escalating standing charges faced by small businesses. Many of these businesses have closed their doors over the past few months due to these rising costs. 

“Small firms were put through the wringer by the energy price crisis, which sadly spelled the end for many otherwise viable businesses who saw their utility bills become completely unmanageable,” – The Federation of Small Businesses. 

Take back control of your energy with IEG 

So it seems overall, energy prices are decreasing as we emerge from the energy crisis. However, the higher standing charges imposed by energy companies means that this isn’t the case for businesses, who are closing at an alarming rate in a direct consequence of energy pricing. 

This means businesses are forced to raise prices, which can turn even more customers away.  

Energy companies who continue to raise their standing charges are putting businesses in an impossible position.  

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Enquire today to find out more about our flexible finance solutions, with monthly payment plans starting from as little as £200 per month. Start your journey of greener, cheaper energy with IEG, and start making savings.  

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