Ofgem’s recent consultation on standing charges has caused some discomfort and Energy UK’s Chief Executive, Dhara Vyas, has expressed concerns regarding the proposed introduction of an alternative price cap option.
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Vyas emphasises that while the current single price cap provides a safety net for all customers, the new proposal could complicate the system and potentially disadvantage vulnerable households. The necessity for customers to actively choose between tariffs may lead to confusion and unintended consequences, especially for those less engaged or informed about energy tariffs. I find that this is an interesting take because I already find it very difficult to hold on to the idea of what the energy price cap is in the first place.
I decided to go with an analogy this time. Think of the energy price cap as a speed limit on a highway. It sets the maximum speed (price) that energy suppliers can charge customers for gas and electricity.
Just like a speed limit prevents reckless driving and keeps people from getting unfairly ticketed, the energy price cap makes sure that suppliers can’t overcharge customers, even if energy costs fluctuate. However, just as drivers still have to pay for fuel and road expenses, households must still pay for the energy they use just at a fairer and more controlled rate.
Now, the issue comes in when the price cap keeps going UP!! Now I just don’t feel the effect because the energy companies are free to up their prices too!
Either way, there are some benefits for low-usage households, but it could disproportionately impact larger households or those with higher energy needs, potentially leading to higher bills for these groups.
Implementing two distinct price caps could introduce complexities not only for consumers but also for energy suppliers. The necessity to manage different tariffs with varying unit rates and potential minimum usage requirements may pose challenges in energy procurement and billing systems.
ALSO, the proposed timeline aiming for implementation by the next winter season raises questions about feasibility and the readiness of both the industry and consumers to adapt to such changes promptly.
Energy UK’s response highlights the delicate balance required in energy pricing structures to ensure fairness and clarity for all consumers. As the consultation progresses, it will be crucial to consider the potential impacts on diverse customer groups and to ensure that any changes do not inadvertently exacerbate existing inequalities within the energy market.
Let’s see what happens…
References:
Energy UK. (2025, February 20). Energy UK responds to Ofgem’s consultation on standing charges. Retrieved from https://www.energy-uk.org.uk/news/energy-uk-responds-to-ofgems-consultation-on-standing-charges/
Google. (2025). Gemini (Imagen 3) [AI image generator]. https://ai.google.dev/gemini-api/docs/imagen
Ofgem. (2024, August). Standing charges: domestic retail options. Retrieved from https://www.ofgem.gov.uk/call-for-input/standing-charges-domestic-retail-options