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- New plans could see more energy deals launched and debt reduced
Energy companies will have to offer their customers gas and electricity deals without permanent charges by next winter, regulator Ofgem proposes.
Permanent charges are daily bills that are paid regardless of how much gas and electricity is used, and total £388 for the average household.
Many households hate these charges as they cannot be avoided simply by using less energy and can put households into debt.
Some energy companies already offer no-standing-fee deals, but they are rare.
The disadvantage of these agreements is that the unit rates (the price of the energy used) tend to be higher.
Today’s Ofgem consultation says many consumers want ongoing charges removed from energy bills entirely.
Feeling the cold: Many hate ongoing charges for adding unavoidable costs to bills
A statement from Ofgem said: “Tens of thousands of consumers responded to our call for views on standing charges, with many calling for standing charges to be scrapped entirely, saying that reducing or eliminating standing charges would make it easier for them to manage their bills or pay debt.’
The regulator will launch a consultation in early 2025 that will propose that all energy companies offer capped price deals with no ongoing charges, alongside existing deals that include them.
However, Ofgem said banning standing charges would mean energy bills would rise for groups who tend to use a lot of energy, such as the elderly and disabled.
“Many people strongly believe that standing charges are unfair,” said Tim Jarvis, director general of markets at Ofgem.
“We want to give consumers the opportunity to make the decision that is best for them without putting any group of consumers at a disadvantage.”
Peter Smith, policy and advocacy director at fuel poverty charity National Energy Action, said: “Households using prepaid meters are particularly affected by continued high charges.”
“When your credit has been depleted, ongoing charges accumulate as a debt on the meter that must be paid off in full before you can access power again.”
Energy debt reaches record levels
Ofgem is also proposing measures to help clear record levels of energy debt, which rose to £3.82bn in September, up 91 per cent in two years.
The average household with energy debt owes £1,541.
The regulator is not suggesting that energy companies eliminate this debt.
Instead, he wants to overhaul the way gas and electricity companies handle energy debt, which he hopes will shave £1 billion off the debt pile.
For example, Ofgem suggests new standards requiring suppliers to provide ongoing and attentive support to indebted customers.
The regulator also wants to establish a plan to improve energy companies’ treatment of indebted customers.
It also wants energy suppliers to accept debt settlement offers from reputable third parties, such as debt counseling agencies or consumer organisations.
Ofgem hopes this will make it easier for households struggling with their bills to get help.