Households that use less electricity and gas are to have their energy bills cut under new plans to reduce fixed-rate charges.
Ed Miliband, the energy secretary, is to hold talks with the energy regulator Ofgem and call on it to reduce the standing charges paid by consumers before they even use any energy.
Standing charges for domestic electricity customers have increased significantly since 2021. For a customer who pays their electricity bills by direct debit, they have more than doubled from £86 per year to £186 per year on average.
The move would mean a greater proportion of bills are made up of the unit cost of electricity, increasing the charges for households that use more power.
Miliband believes the move will help poorer households, with an analysis showing that five million low-income households could benefit.
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Government sources described standing charges as a “poll tax”, saying that “something has gone badly wrong” with a system that places significant fixed costs on consumers before they use any electricity.
They added that “mitigation measures” would be put in place to help low-income households who for unavoidable reasons have to use more power.
Ofgem is undertaking a consultation into the impact of reducing the proportion of gas and electricity bills that are fixed regardless of usage.
Its research suggested that 5.5 million low-income households could save at least £35 a year by reducing standing charges by 50 per cent and putting the costs on to the unit cost of power.
However, it found that up to 4.5 million middle-class households would lose out, with their energy bills increasing by £27 a year.
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High-income households would be the worst hit, with their bills going up by almost £30.
Homes in rural areas, which traditionally use more power, would also be negatively affected, as would people who use a lot of power for medical reasons.
Standing charges have risen disproportionately in recent years, partly as a result of deliberate changes to energy pricing rules taken by Ofgem and the rollout of smart meters.
The consumer rights expert Martin Lewis has said it is “outrageous” that most homes pay £300 per year “just for the facility of having gas and electricity, even if you don’t use any”.
“Keeping the standing charge high means lower users can save proportionately less and less by reducing usage. That disempowers them, and is a disincentive to energy reduction generally, which is not great for the environment,” he has said.
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Ofgem said it had received more than 30,000 responses to its call for evidence about reforming the system and would come forward with proposals in “due course”.
Sources close to the energy secretary said the regulator could be in no doubt about the new government’s intentions.
Rachel Fletcher, the director of regulation and economics at the energy supplier Octopus, said there was “no doubt” that standing charges were too high and had “become a tax on bills which consumers cannot do anything to avoid”.
Gillian Cooper, the director of energy at Citizens Advice, warned the change would hit some families on low incomes who are more likely to live in “cold and draughty homes”. “Any changes to standing charges must be accompanied by action to prevent people facing higher bills,” she said.
