New Ofgem regulations lead the way

Consumers are celebrating as Octopus Energy announces a new plan that could see customers save up to £676 over two years.

This significant step forward is tied to new regulations by Ofgem, the UK’s energy regulator, which will mandate energy suppliers to provide “zero standing charge” tariffs, alongside their existing offerings.

Starting in January, this shift promises substantial relief, particularly for households that use less energy.

Here’s what this ground-breaking initiative means for energy consumers - and just why it matters.

The lowdown on standing charges

Standing charges are fixed daily costs added to energy bills, regardless of how much electricity or gas a household uses. They cover essential infrastructure maintenance and administrative expenses. For a dual-fuel household, these charges currently amount to an average of £338 annually. For lower energy users, these fixed costs disproportionately increase their bills, making it harder to achieve savings even with energy-efficient habits.

From January 2025, the average standing charge for electricity will slightly decrease to 60.7p per day, and for gas, to 31.65p per day. While these reductions are modest, the new Ofgem mandate requiring suppliers to offer zero standing charge tariffs could make a far more significant impact.

For customers like those of Octopus Energy on a two-year fixed tariff, eliminating standing charges could mean savings of £676 compared to today’s costs.

A win for low-energy households

The introduction of zero standing charge tariffs aims to address long-standing concerns about fairness in energy pricing.
Consumers who use minimal energy, whether due to eco-friendly choices or financial constraints, stand to benefit the most. Under these tariffs, costs are shifted to unit rates - the price paid per unit of energy consumed - allowing households with lower consumption to avoid paying for unused capacity.

For example, households currently pay an average of 24.5p per kilowatt-hour (kWh) for electricity and 6.24p per kWh for gas, in addition to the standing charges. With zero standing charge tariffs, those who use less energy can focus on reducing their consumption further, knowing their bills will reflect their efforts more directly.

What about high-energy users?

While the new tariffs offer significant savings for low-energy households, the implications for high-energy users are less straightforward. Many of these households include individuals with medical needs or families reliant on energy-intensive equipment, who may see their bills increase under zero standing charge tariffs. To ensure fairness, Ofgem’s approach retains a choice of tariff structures, allowing high-energy users to stick with plans that better suit their needs.

This balanced approach highlights the importance of consumer choice in energy markets. By offering diverse tariff options, suppliers can cater to the varying needs of households, ensuring that no group is unfairly disadvantaged.

Tackling energy debt

The move toward zero standing charge tariffs is part of a broader effort by Ofgem to address the rising issue of household energy debt. The energy crisis of recent years has left many families struggling to keep up with their bills. In response, Ofgem is introducing a “debt guarantee” initiative aimed at improving support for customers in financial distress.

This new standard will require suppliers to offer “consistent, compassionate, and tailored support” to indebted households. By creating clearer guidelines for managing energy debt, Ofgem hopes to alleviate some of the financial pressure on vulnerable consumers.

A new age of energy fairness

These developments underscore the importance of policy in driving meaningful change. The introduction of zero standing charge tariffs not only promotes fairness but also encourages energy efficiency by rewarding those who consume less.

Here’s how eco-conscious households can make the most of these changes:

1. Invest in energy efficiency: with standing charges removed, every unit of energy saved translates directly into cost savings. Why not consider upgrading to energy-efficient appliances, improving home insulation, and using smart thermostats to reduce consumption.
2. Adopt renewable energy: households generating their own electricity through solar panels or wind turbines can benefit even more from zero standing charge tariffs, as their reliance on the grid decreases.
3.  Monitor usage: tools like energy monitors and apps can help track consumption in real-time, enabling informed decisions about usage patterns.
4. Advocate for change: this regulatory shift is a reminder of the power of collective action. Tens of thousands of consumers petitioned Ofgem to address standing charges, demonstrating the impact of public pressure on policy decisions.

A broader perspective on energy equity

The move to eliminate standing charges for some tariffs also raises broader questions about equity in energy markets. As the UK transitions to a greener grid, policymakers must balance the costs of renewable infrastructure with the need for affordable energy. Zero standing charge tariffs represent one way to address this challenge, but they are not a silver bullet. Continued innovation and investment will be needed to ensure that the energy system of the future is both sustainable and inclusive.

The role of Octopus Energy

Octopus Energy has long been a leader in providing innovative and customer-focused energy solutions. By embracing zero standing charge tariffs, the company is setting an example for the industry, demonstrating that it is possible to align financial sustainability with customer fairness. For eco-conscious consumers, Octopus’ commitment to renewable energy and affordable pricing makes it a standout choice in a crowded market.

So… what’s next?

As we approach 2025, consumers should stay informed about their options.

Here are some key steps to take:

• Review your tariff: contact your energy supplier to learn about the tariffs they plan to offer under the new regulations. Compare zero standing charge options to standard plans to determine which is best for your household.
• Switch… if necessary: if your current supplier doesn’t meet your needs, consider switching to one that offers more competitive or environmentally friendly tariffs.
• Plan for the future: use this opportunity to reassess your long-term energy strategy. Whether it’s installing solar panels, investing in home insulation, or exploring green tariffs, small steps today can lead to significant savings and environmental benefits tomorrow.

The introduction of zero standing charge tariffs marks a significant step toward a fairer, more sustainable energy system. By giving consumers greater choice and reducing costs for low-energy households, this policy change aligns financial incentives with environmental goals. For Octopus Energy customers, the potential savings of £676 over two years are a welcome relief and a powerful motivator to embrace energy efficiency.

As the energy landscape continues to evolve, eco-conscious consumers have an opportunity to lead the way, demonstrating how sustainable choices can benefit both the planet – and our pockets.

Carl Dodd, Property Revolutions Ltd.