HOUSEHOLDS face paying £200 more for their energy bills after a hike to standing charge caps, an industry expert has warned.
A “standing charge” is a fixed cost you have to pay – it covers the cost of running and maintaining the energy network.
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It also covers the cost of failed energy firms and more than twenty have gone bust recently because of rocketing wholesale prices.
This charge is also price capped. It rose from April 1 from £0.25 to £0.45 for electricity and from £0.26 to £0.27 for gas.
According to research from Ideal Economics, this will leave the poorest 10% of families spending £265 on standing charges.
One of the main drivers behind increasing standing charges is because of the number of energy companies which have recently gone bust.
But former senior economist at Ofgem David Osman told Telegraph Money that the standing charge should only be £60 a year.
He said: “Ofgem’s policy of raising the standing charge instead of the price per unit of energy is perverse.
“Capping it [at £60] would not only protect vulnerable consumers, reduce emissions and improve energy security, but also boost competition as consumers would only need to consider unit rates to find the cheapest option.”
Mr Osman is not the only expert who has raised concerns about standing charge rates.
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Fuel Poverty Action wrote an open letter to Ofgem said the regulator’s decision to “load the cost of failing energy suppliers onto the standing charge element of energy bills is unjust to people who are on low incomes, who must still pay the standing charge for however little energy they use”.
It estimated roughly £68 of the £75 annual increase in the standing charge is down to the cost of collapsed energy suppliers.
An Ofgem spokesperson told Telegraph Money that its “top priority” was to protect consumers, including making sure bill payers pay a fair price.
“We are strengthening the retail market through effective stress testing of suppliers, which will reduce the cost of companies leaving the market as far as possible,” they added.
Standing charges are taken into account when calculating the energy price cap, which shot up to £1,971 from April 1.
The price cap limits how much suppliers can charge customers for energy, and now households will have to find an average of nearly £700 more to pay for their bills after it went up.
How can I save money on energy bills?
Making sure your home is insulated can help reduce energy bills.
You can calculate all the waste energy lost room by room in your house, and you might be able to switch something off or plug a draughty gap.
Energy saving devices could help lower your bill, like smart lightbulbs or an airfryer.
One savvy saver uses smart radiator valves to reduce his energy consumption, helping cut his bill by £220 a year.
Showering at a specific time could save energy, as could other water saving measures.
Martin Lewis revealed that you could save £100 a year by turning off your router overnight.
In fact, switching off “vampire” appliances that are using energy unnecessarily – like computers, outdoor lights, and electric towel rails – could save you up to hundreds of pounds a year.
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