Why are energy standing charges so high since the Russian invasion of Ukraine?

The Russian invasion of Ukraine in 2022 resulted in a huge spike in energy prices which has settled down in recent years. Unfortunately, while unit prices have fallen, standing charges are at levels far higher than pre 2022. Energy UK, the trade association for the energy industry, put out a report explaining what has caused the rise in standing charges.

Standing Charges Explained: What Are They and Why Is Everyone Talking About Them?

If you've ever looked closely at your energy bill, you've likely seen a "standing charge." It's a fixed daily fee that often causes confusion and debate. This charge has been on the rise in recent years, leading to calls for it to be reduced or even scrapped entirely.

So, what exactly is this charge, why has it become so controversial, and what might happen next?

What is a Standing Charge?

A standing charge is a fixed amount you pay to your energy supplier each day, regardless of how much gas or electricity you actually use. Think of it as a line rental for your energy supply. While your unit rate changes based on your consumption, the standing charge remains constant.

This fee isn't just an arbitrary number; it covers the essential, fixed costs of getting energy to your home. According to Energy UK, these costs include:

• Network Costs (£95.20/year): The biggest slice of the charge, this pays for operating, maintaining, and expanding the gas pipes and electricity cables that make up the national grid.

  
  

• Operating Costs (£138.28/year): The cost for the supplier to run their business, including call centres, IT systems, and other operational expenses.

  
  

• Policy Costs (£24.96/year): This portion covers government environmental and social schemes.

  
  

• Other Costs: Smaller amounts go towards smart meter installation (£15.67) , supplier profit (£7.49) , covering debt and uncertainty (£19.00) , and VAT (£15.03).

Why Have Standing Charges Risen?

Standing charges have increased significantly in recent years due to two main factors:

1. Regulatory Changes: A 2022-2023 review by the energy regulator Ofgem, called the Targeted Charging Review (TCR), aimed to make the distribution of network charges fairer. However, a key outcome was that it shifted a large portion of these network costs from the per-unit energy rate directly onto the fixed standing charge.

   
   

2. Inflation: High inflation has also pushed up standing charges. For example, the electricity standing charge for 2024/25 was calculated based on the 9.2% inflation rate from December 2022. 17

   
   

This combination has caused the average electricity standing charge on a price cap tariff to jump from 22p per day in October 2019 to 51p per day as of July 2025.

The Heart of the Controversy

The debate around standing charges centres on fairness.

• Impact on Low-Energy Users: Because it's a flat fee, it makes up a much higher proportion of the bill for households that use less energy, which campaigners argue is unfair. Even if you use no energy at all for weeks, you still have to pay the daily charge.

  
  

• Discouraging Green Technology: High standing charges can discourage people from adopting low-carbon technologies like electric vehicles. The necessary grid reinforcements to support new technology are paid for through these charges, meaning customers face higher fixed costs regardless of whether they use smart tariffs or consume less energy at peak times. This also affects businesses looking to electrify their processes or vehicle fleets.

  
  

• The Other Side: However, for low-income households that have high energy needs (due to poorly insulated homes or medical equipment, for example), the overall unit cost of energy has a greater impact on their total bill than the standing charge does.

  
  

In 2024, Ofgem reviewed standing charges but decided against moving the costs back to the unit rate, concluding that while many would see a small benefit, some customers, including low-income households, could face very large cost increases.

Ofgem's Proposal: A Zero Standing Charge Tariff

In early 2025, Ofgem consulted on a new idea: requiring suppliers to offer a "zero standing charge" tariff.

This tariff would have no daily fixed fee, but a higher price per unit of energy used. The goal isn't to reduce overall costs but to give customers more choice. The costs for maintaining the energy system don't disappear; they are simply moved from the standing charge to the unit rate.

Who might benefit?

This option could be good for people with properties that are empty for long periods (like a holiday home) or for those who want more direct control over their daily costs. 31If you use no energy on a given day, you wouldn't be charged anything. However, only a small minority of customers with consistently low energy use are expected to be better off financially.

Who could lose out?

The majority of customers would likely not save money. Vulnerable customers who rely on energy for medical equipment or to keep their homes warm would be at significant risk of facing very high bills if they switched to this tariff.

Energy UK has expressed concern that this proposal could undermine the price cap's main purpose as a safety net for customers who don't switch tariffs. Adding a choice between two capped tariffs adds complexity and increases the risk of households ending up on the wrong one.

What's Next?

The debate is ongoing. Ofgem is currently running trials with suppliers to understand customer behaviour around different tariff structures. A "split standing charge" trial is set to run from October 2025 to March 2026.

The regulator is also conducting a broader review on how to allocate energy costs in a fairer and simpler way, looking beyond the current system of standing charges and unit rates.  As our energy needs change, finding the right way to pay for our national grid remains a complex but critical challenge.