Energy boss asks Ofgem to help drive down standing charges in energy bills

Ofgem should help drive down standing charges for energy bill payers around Britain, the head of one of the country’s largest suppliers has said, after announcing that his popular Octopus Energy firm would knock 4 per cent off the standing charge for customers whose bills are regulated by the energy price cap.

“Customers really do want to see standing charges come down, and I think Octopus can take a lead on it. I just hope that Ofgem follows,” Jackson told the PA news agency.

Asked if other suppliers should follow suit, he said: “If you’re Costa Coffee, I don’t know whether you’d call on Starbucks to do what you do. Other suppliers can do what they like.

“I think what’s important here is that Ofgem should start moving costs out of the standing charge and they should do so with a sense of urgency because standing charges are pernicious for low-energy users.”

The UK is currently facing a cost-of-living crisis, with inflation hitting historic levels. The rising prices of energy bills – prompted by the Russian invasion of Ukraine – is the main catalyst of this situation, which could leave as many as 40 per cent of British families facing fuel poverty in the winter.

Earlier this month, newly appointed UK prime minister Liz Truss set out her plan to shield households and firms from the energy crisis by freezing energy bills at £2,500. The measure will replace the existing energy price cap set by regulator Ofgem, which was set to increase to £3,549 come October.

However, despite the measure, Octopus Energy stressed that consumers will still have to pay standing charges and argued for measures that promote conscious energy use, as a means to help lower the cost of these bills. 

“If you reduce your energy consumption, you’re still paying your standing charges, so it reduces the incentive to save energy,” Jackson added. “And saving energy has got to be the biggest thing this winter. It is one of the first things we can do to reduce our reliance on the global gas market and the government subsidies.”

Ofgem recently consulted on changes that would move part of the standing charge to the per-unit cost for electricity. According to the organisation, the consultation’s findings showed that this measure would disproportionately impact some of the most vulnerable who struggle to reduce their energy use.

Although Jackson expressed his support for the government’s scheme to support people with their energy bills, it stressed the need for a long-term plan to address the looming energy crisis. 

“I think the big question now is, how do we come out of this as a nation, so we don’t end up kicking energy bills into the long grass forever?” he said. “I think it’s entirely right that the government has brought in a scheme of this scale, to help absorb what’s happening in the global gas market, driven by the war in Ukraine.

“Now what we need is an exit ramp, through greater energy security, market reform and through energy efficiency. We should treat this with the same sort of urgency as we treated the vaccine during the pandemic.” 

In the case of the pandemic, vaccine production – which usually takes as long as 15 years to reach the markets – was accelerated and a product was available to the public in under a year’s time. In Jackson’s view, a similar approach should be taken to the construction of energy plants, which can be held up for as long as seven years in the permission and planning stages. 

Last week, business and energy secretary Jacob Rees-Mogg announced the end of the moratorium on fracking in the UK, but faced an immediate political backlash from all parties, including prominent Tory MPs, as the measure unequivocally breaks a clear Tory manifesto promise.

In contrast, more than 77 per cent of Britons back renewable technologies to tackle the rise in energy costs, according to a poll of 6,114 residents across all British constituencies commissioned by RenewableUK. Overall, 68 per cent of respondents said they want the government to increase or maintain investment in renewables, compared with just 14 per cent who wanted to see it reduced.

In July, Parliament debated a bill to fast-track offshore wind projects in the House of Lords, against a backdrop of record-breaking temperatures and spiralling energy bills fuelling a cost-of-living crisis. Earlier this year, the government announced a £31m fund to help drive further deployment of floating offshore wind projects, and secured 11 gigawatts of winning bids for various renewable technologies at a record-low price.