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3 Mar 2022

Explained: why are energy standing charges going up?

As energy providers increase standing charges ahead of April's price cap rise, we explain what they mean for your bills
Woman looking at an energy bill in a kitchen

Next month's 54% energy price cap increase means 22 million people will wake up to higher energy payments on 1 April. By now, your provider should have informed you of any changes to your bills.

If you haven't switched energy supplier or tariff in a while - or took no action when your last fixed deal ended - you'll be on a default, or variable tariff and in line for a price rise. Because there haven't been any switching options available for the last six months or so, most people in the UK are currently in this position.

We've heard from dozens of energy customers who have told Which? that they were paarticularly surprised to find that in amongst the announced price increases, one part of their energy payments - the standing charge - is set to climb significantly in their next bill.

Many energy companies have increased their standing charges this month, some by more than 100%. People are reporting that they'll soon be paying as much as 51p a day for electricity.

Help to beat the risingcost of living withour money-saving tips

What are energy standing charges?

The standing charges that come as part of your energy payments are the fees you pay to your energy provider to access energy, before you've even started paying for what you use. You could think of them as similar to the line rental you pay to your telecoms company.

It's a fixed amount within your gas or electricity tariff, so you'll pay the same price for every day (or month) that you have your energy tariff, even if you don't use any fuel at all. In the past, we've seen some suppliers offer £0 standing charges, but these are no longer available in the current market.

Energy companies justify standing charges by explaining that they cover their costs for maintaining their networks, as well as other elements that come as part of running their business, such as paying government levies and grants like the Warm Home Discount.

Find out more about: help if you're struggling to pay your energy bill

Why are standing charges going up with the price cap?

Woman looking shocked at the price of her energy b

If your energy tariff is out-of-contract, also known as standard, default or variable, it will be subject to Ofgem's price cap. This is set to increase by 54% in April 2022, pushing a medium user's annual bill from£1,277 to £1,971.

The standing charge you pay counts as part of the price-capped amount. It's paid in addition to the unit rate - that's the amount you pay for the energy you actually use and report through your meter.

Simply put, gas and electricity providers can't charge you more than the price cap for the combination of your standing charge and unit rate if you're on one of these tariffs.

But how they split the balance is up to them. We've seen many energy companies vastly increase their standing charges this month ahead of the 1 April price cap change. For gas, it looks like many companies have hiked up the unit charge, with smaller changes to the standing charge. For electricity, we've seen large increases to both.

And with wholesale gas prices and inflation both forecast to stay high, it's very unlikely we'll see either standing charges or unit rates drop any time soon.

Suppliers' standing charges appear to have doubled or tripled in recent months. It's frustrating to customers, as it's the one element of your bills that you can't control without switching provider.

It's worth remembering though that for most energy customers, standing charges will still only make up a small proportion of your payments.For most users, the unit rates you pay for the electricity and gas you do use make up the majority of your bill, so it's always worth trying to reduce your usage where you can.

Find out more about theprice cap and what it means for you.

Reducing your gas and electricity bills

Woman in orange top adjusting temperature of touch

With your energy usage most likely making up the majority of your energy payments, reducing it if at all possible, will help shrink your payments.

Given that household incomes are already being squeezed from every angle, by rising inflation, grocery prices, petrol prices and national insurance rates, any small cutbacks you can make to your energy usage could help softten the blow.

Steps you can take to cut down your energy usage include:

  • Turning down your thermostat Lowering the dial by just one degree could reduce your annual reduce bills by around £80-85.
  • Turning off standby devices Taking a look at appliances that aren't always in use and turning them off at the power if they're on standby. For a typical home, this could save £55 a year.
  • Choosing energy-efficient appliancesGoing for energy-efficient household white goods could save over £300 a year, when your old appliances need replacing.
  • Adding insulationUp to a third of heat disappears through the roof, so it makes sense to add insulation. Which? has found that installing loft insulation, if you do not have it already, could save you up to £215 per year in energy bills depending on your home.
  • Replacing lightbulbs Swapping old-style bulbs with energy-saving LED bulbs saves running costs of around £7 per year per bulb.
  • Draught-proofing This can be as simple as buying a draught-excluding cushion and putting it in front of your door in some cases. To maximise savings tackle draughty windows, doors, chimneys, floorboards, skirting boards and loft hatches. Which? found that draught-proofing could save consumers £25 a year.
  • Washing below 30 °C where possible Lowering the temperature of washing machines is an eco-friendly way to save money. Our washing machine temperature research found that even a 20°C wash can do the trick in some cases, particularly when using liquid detergent rather than powder.

Read more:how to reduce your energy bills.