What is a Standing Charge

When comparing energy deals, the two main costs to look out for are the unit rate and the standing charge - lower these and you'll lower your energy bills.

The unit rate is the amount you pay for the energy you use, while the standing charge is a fixed daily fee that you pay regardless of how much energy you use. This fee covers the cost of supplying gas and electricity to your house, and is charged even if you don't use a single kWh of energy.

So, could you save money with an energy deal that does away with the standing charge?

What is a no standing charge tariff?

As the name suggests, a no standing charge tariff is a gas, electricity or dual fuel deal that does away with the daily standing charge.

This means that energy deals with zero standing charge only include a unit rate, so you're only billed for the energy you use - if you don't use any gas or electricity, you're not charged a penny.

Do I need to pay a standing charge?

Although Ofgem has removed the requirement for energy tariffs to have a standing charge, following recommendations from the Competition and Markets Authority (CMA) back in 2016, there are still very few no standing charge energy deals to choose from.

This means that the most competitive deals all come with a standing charge, and if your energy deal includes a standing charge, then you have to pay it. Standing charges even apply to properties that are unoccupied for large parts of the year, such as a holiday homes.

The amount you pay in standing charges depends upon your energy supplier and the tariff you're on, and you can expect to pay anything from 5p for 60p a day for electricity, and between 10p and 80p a day for gas. That's why it's so important to compare energy tariffs and make sure you're on the best possible deal.

What are the advantages of a no standing charge tariff?

The main advantage of a no standing charge tariff is that you only pay for the energy you use. This means that you won't be charged if you don't use any gas or electricity. Although this is unlikely, it could be a good option if you spend prolonged periods of time away from home, or you own a second property that you rent out at certain times of the year.

Most zero standing charge tariffs will also reduce the unit rate after a certain amount of gas or electricity has been used, which could be ideal if you rent out a number of flats that are all on the one gas or electricity meter.

What are the disadvantages of a no standing charge tariff?

The main disadvantage with no standing charge tariffs is that they often charge a much higher unit rate than other tariffs. This means that although you'll be saving the cost of the standing charge, you could still end up paying more each month, particularly if you're a medium-to-high use energy customer.

What is the average dual fuel bill?

A dual fuel energy deal is one in which you get a single bill from the same supplier for both gas and electricity, and the average dual fuel bill works out at £104.50 per month, or £1,254 a year, according to figures from Ofgem, the energy regulator.

Your energy bills will vary depending on whether you're on a fixed rate energy deal or a standard variable rate plan.

If, for instance, you use 12,000 kWh of gas and 3,100 kWh of electricity (the national average according to Ofgem figures) you can expect to pay around £899 a year for gas and electricity if you're on a fixed rate deal. If you use the same amount of energy on your supplier's standard variable rate, this rockets to £1,164 a year.

Your supplier's standard variable rate is the rate you're automatically rolled onto once your fixed rate deal ends. That's why it's so important to switch energy deals regularly, to make sure you never overpay for gas and electricity.

Standing charges on prepayment meters

Prepayment meters essentially offer pay-as-you-go energy, as you top up your meter with credits that then run down according to the amount of gas and electricity you use. These are often the most expensive way to pay for energy, and suppliers will still impose standing charges on prepaid energy, even if you don't have any credit on them. If you leave your meter without credit for a number of days – you'll have to pay all the standing charges you owe next time you top up.

Standing charges for prepayment meters will vary depending upon which tariff and supplier you're with and whereabouts you live, but are generally charged at around 28p a day.

How easy is it to switch to a no standing charge tariff?

Unfortunately, because no standing charge energy tariffs aren't as common as those that come with a standing charge, they don't often show up in the results page when you run an energy price comparison.

When you use an energy price comparison site, you generally enter your monthly usage figures and the comparison tool then assumes in its calculations that you use this (seasonally adjusted) every month. But if you want a no standing charge tariff, your usage is more likely to vary quite significantly over the course of the year, meaning any estimates could be way out.

There are four main suppliers who currently offer no standing charge tariffs - Ebico, E.ON, Npower and Utilita Energy - so if you're looking for a tariff that does away with standing charges, email The Energy Shop at help@theenergyshop.com with your contact details, and we'll be in touch with a suitable deal.