Octopus Energy customers handed £676 boost after standing charges scrapped

Octopus Energy customers are in for a treat as they could see up to £676 slashed from their yearly energy bills. This comes after a decision to scrap the daily standing charge for those on a new tariff, a relief for consumers amidst the cost-of-living crisis.

Under incoming Ofgem rules, energy providers will have to offer "zero standing charge" tariffs as an option next to current offerings. These charges, which currently raise dual fuel bills by £338 annually on average, disproportionately impact low energy users, making up a greater part of their bill.

From January, Octopus patrons who fix their tariff for two years might see significant savings if these charges were removed immediately. The initiative is part of broader strategies aimed at reducing growing household energy debt while setting new standards for helping customers in financial difficulties to access necessary support.

Presently, the average standard variable tariff sees households paying 24.5p per unit of electricity with a standing charge of 60.99p daily, and for gas, 6.24p per unit with a standing charge of 31.66p each day.

From the start of the New Year, standing charges will see a reduction to 60.7p per day for electricity and 31.65p per day for gas. While there are suppliers offering tariffs with low or no standing charges already, these often come with slightly higher unit rates, reports the Express.

Such tariffs can be beneficial for households using less energy – they're about 10% below the price cap, though more costly per unit used. .

Ofgem reveals consumer appeals for the elimination of standing charges. Yet, concerns exist that removing these fixed costs could lead to higher bills for those who consume large amounts of energy, sometimes due to health needs.

To maintain choice for consumers, Ofgem has opted to keep standing charges in place.

Lower consumption users could benefit from new tariffs where costs focus on unit rates rather than fixed daily charges. High usage customers might find little financial advantage in switching, but low consumption users could see significant savings – up to £338 annually against standard tariffs.

Tim Jarvis, director general of markets at Ofgem, commented on the issue: "We know that many households continue to struggle with bills after the events of the energy crisis, which is why earlier this year, we took steps to consider all the issues around affordability and debt – including the impact of the standing charge."

He also acknowledged public concern over standing charges: "Many people feel very strongly that standing charges are unfair and prevent them from being able to manage their bills effectively."

"We want to give consumers the ability to make the choice that's right for them without putting any one group of consumers at a disadvantage. And by having a zero standing charge tariff, we would create that choice for everyone."

Ofgem also unveiled proposals for a "debt guarantee" aimed at enhancing the level of service provided by suppliers to customers in debt, which it claimed would ensure households receive "consistent, compassionate and tailored support".