Zero Standing Charge Tariffs: Will You Save Money

A tariff with no daily standing charge sounds like an obvious way to cut your energy bill. If you use very little energy, the idea is especially appealing: why keep paying a fixed amount every day when you barely use electricity or gas?

But there is a catch. A zero or lower standing charge does not make the underlying cost of supplying energy disappear. The supplier can recover much of that money through a higher price per kilowatt-hour. That means a tariff with a £0 standing charge can actually cost more than a conventional tariff for a household that uses a lot of energy.

Ofgem has spent several years reviewing standing charges and how households pay the fixed costs of the energy system. Its original proposal was to create a zero-standing-charge version of the price cap. Following consultation, Ofgem moved towards a broader approach: a pilot of lower standing charge tariffs designed to test how customers respond and whether changing the way these costs are recovered gives households more useful choice. The pilot began in June 2026 and initially involves eligible customers of EDF, E.ON, Octopus and British Gas.

So the real question is not simply "Is a zero standing charge tariff cheaper?" It is:

"At my actual level of energy use, is the saving from a lower standing charge greater than the extra cost created by the higher unit rate?"

That calculation can produce very different answers for a low-use flat, a family home, a property heated by electricity and an occasionally occupied second home.

This guide explains how the new Ofgem approach works, who is most likely to benefit, how to calculate the break-even point, why the October 2026 price-cap announcement matters, and what to check before changing tariff.

Understanding the new Ofgem standing charge option

What is a standing charge?

A standing charge is a fixed amount you pay each day for having an energy supply, regardless of how much electricity or gas you consume.

It contributes towards costs associated with supplying customers, including maintaining the energy system and infrastructure. Ofgem says suppliers add a daily charge to gas and electricity bills to cover the cost of running the energy system.

For the current price-cap period, from 1 July to 30 September 2026, the average Direct Debit rates across Great Britain include:

Energy	Unit rate	Daily standing charge
Electricity	26.11p/kWh	57.19p/day
Gas	7.33p/kWh	29.04p/day

These are averages across England, Scotland and Wales and include VAT. Actual rates vary by region, payment method and meter type.

At those average rates, the electricity standing charge alone is roughly £209 a year, while the gas standing charge is about £106 a year.

That explains why removing or substantially reducing the standing charge can look attractive.

Is Ofgem introducing a universal zero standing charge tariff?

Not exactly.

This distinction matters because headlines about "zero standing charge tariffs" can make the policy sound further along than it actually is.

In February 2025, Ofgem consulted on introducing a zero-standing-charge variant within the price cap. Under that model, costs normally recovered through the standing charge would instead be incorporated into the unit rate.

After considering responses, Ofgem moved away from simply creating one mandatory zero-standing-charge price-cap variant. In September 2025 it proposed requiring suppliers to offer at least one lower-standing-charge tariff instead. Ofgem explicitly warned that these tariffs might not reduce bills because a lower standing charge would normally be accompanied by a higher unit rate.

That approach is now being tested through a one-year pilot.

What is the 2026 pilot?

Ofgem says its lower standing charge tariff pilot started in June 2026. Eligible customers of EDF, E.ON, Octopus and British Gas are among those being offered pilot tariffs, with a limit on the number of customers who can participate.

The purpose is not simply to give everybody a cheaper energy bill.

Ofgem wants evidence about:

• Which households choose lower standing charges
• How consumption affects whether the tariffs represent value
• How customers understand the different pricing structure
• Whether suppliers can offer these tariffs sustainably
• How consumers respond when fixed costs are shifted into unit rates

The pilot therefore represents an experiment in tariff design as much as an attempt to reduce standing charges.

Why doesn't Ofgem simply make standing charges £0?

Because the costs behind them still exist.

If a supplier stops collecting £200 a year through a standing charge, it still has to recover the underlying costs somehow. One option is to add more to the unit rate.

For example, imagine a hypothetical electricity tariff where the conventional standing charge costs £200 a year. A zero-standing-charge version could theoretically recover that £200 by adding 4p to every kWh.

A household using 1,000kWh would pay an additional £40 through its unit rate.

A household using 5,000kWh would pay an additional £200.

The first household could benefit significantly from the change. The second might be no better off.

That is the central economics behind the Ofgem debate.

When does a lower standing charge actually save money?

The short answer

A lower standing charge is most likely to save money when your energy consumption is low enough that the reduction in fixed costs outweighs the higher unit rates.

The easiest way to judge a tariff is to compare the total annual cost rather than focusing on either the standing charge or unit rate on its own.

The basic calculation is:

Annual cost = annual energy consumption × unit rate + annual standing charge

Suppose two hypothetical electricity tariffs look like this:

	Standard tariff	Lower-standing-charge tariff
Standing charge	55p/day	25p/day
Unit rate	25p/kWh	28p/kWh

The lower-standing-charge tariff saves 30p a day.

Over a year, that is approximately £109.50.

But it costs 3p more for every kWh used.

The break-even point is therefore:

£109.50 ÷ £0.03 = 3,650kWh

A household using less than roughly 3,650kWh a year would be better off with the hypothetical lower-standing-charge tariff.

A household using more could be worse off.

The actual break-even point will depend on the rates offered to you.

Why low-energy households may benefit most

Consider someone living alone in a well-insulated flat.

They might have:

• Efficient appliances
• Low heating demand
• Limited hot-water consumption
• No electric vehicle
• No electric heating
• Relatively low annual electricity consumption

For that household, a substantial standing charge can make up a surprisingly large proportion of the total bill.

Moving some of that cost into the unit rate may therefore work in its favour.

This is one reason Ofgem's work has repeatedly focused on low-usage customers. Its research found particular interest in changing how standing charges are paid among lower-energy users.

Why high-energy households need to be careful

Now consider a household with an electric vehicle, heat pump, electric hot-water system or extensive electric heating.

Its electricity consumption may be several times higher.

Even a modest increase in the unit rate can then become expensive.

For example, an extra 2p per kWh costs:

• £20 a year at 1,000kWh
• £60 at 3,000kWh
• £100 at 5,000kWh
• £160 at 8,000kWh

That is why "zero standing charge" should never automatically be interpreted as "cheaper energy".

What about households that use almost no energy?

This is where lower standing charge tariffs can become particularly interesting.

A property that is empty for long periods still has to pay the conventional standing charge.

For example, a household using very little electricity might pay a fixed charge for 365 days despite consuming only a small number of kilowatt-hours.

Moving some of the cost into the unit rate makes the relationship between consumption and payment more direct.

However, there can be eligibility rules or minimum-consumption conditions. Ofgem's earlier proposals specifically considered safeguards around minimum usage so that vacant properties did not gain disproportionately from a redesigned tariff.

How to calculate whether you should switch

Step 1: Find your actual annual consumption

Do not start with the headline "typical household" figure.

Look at your actual electricity and gas consumption over the last 12 months.

Your supplier's bill or online account should show the relevant kWh figures.

If your circumstances have changed recently, adjust the figure. For example, buying an electric car or installing a heat pump can materially alter future electricity demand.

Step 2: Write down both prices

For each tariff, record:

• Electricity unit rate
• Electricity standing charge
• Gas unit rate
• Gas standing charge
• Payment method
• Contract length
• Exit fee
• Any special eligibility conditions

Do not compare a standing charge on one tariff with a unit rate on another and make a decision from there.

You need the complete annual cost.

Step 3: Calculate annual standing charges

Multiply the daily charge by 365.

For example:

50p × 365 = £182.50

A 20p daily reduction would therefore save £73 a year before considering the effect of any higher unit rate.

Step 4: Calculate the unit-rate difference

If the new tariff charges 2p more per kWh, multiply that difference by your annual consumption.

At 2,000kWh:

2p × 2,000 = £40

At 5,000kWh:

2p × 5,000 = £100

The difference becomes obvious once you use your own numbers.

Step 5: Compare total annual costs

The tariff with the lowest standing charge is not necessarily the cheapest.

The tariff with the lowest unit rate is not necessarily the cheapest either.

The winner is the one that produces the lowest total cost for your actual consumption pattern.

Step 6: Check the tariff's other conditions

A lower headline cost could be offset by:

• An exit fee
• A fixed-term commitment
• Smart-meter requirements
• Different payment requirements
• Restricted availability
• Higher rates at particular times
• Separate electricity and gas pricing

Read the full tariff information before switching.

Who is most likely to benefit?

There is no single household that automatically wins, but some patterns make a lower standing charge more attractive.

Household type	Likely suitability	Why
Very low electricity user	High	Uses fewer kWh over which extra costs can be recovered
Single-person efficient flat	Potentially high	Lower consumption can favour a reduced fixed charge
Empty or rarely occupied property	Potentially high	Fixed charges are significant when consumption is tiny
Average family home	Depends	The unit-rate increase becomes more important
Electric-vehicle household	Often lower	High electricity use can magnify unit-rate increases
Electrically heated home	Often lower	Very high consumption can outweigh standing-charge savings
Heat-pump household	Depends	Requires calculation based on actual electricity consumption

These are general patterns rather than guarantees.

Your own consumption is the deciding factor.

Why the October 2026 Ofgem price cap matters

The next price-cap announcement is scheduled for 26 August 2026, covering the period from 1 October to 31 December 2026. Ofgem reviews the cap every three months.

That makes late August an important point for anyone considering an energy switch.

The current July-to-September 2026 cap is £1,862 a year for a typical dual-fuel household paying by Direct Debit. That figure rose 13% from the previous quarter, driven largely by higher wholesale gas costs.

But remember what the headline number means.

The £1,862 figure is not a maximum annual bill

The price cap limits the unit rates and standing charges suppliers can apply to default tariffs.

It does not mean your total bill cannot exceed £1,862.

If you use more energy, you pay more.

If you use less, you pay less.

Ofgem also stresses that actual rates vary according to location, payment method and meter type.

This is particularly relevant when comparing lower-standing-charge tariffs because the headline typical household bill may tell you very little about whether a particular deal works for your home.

Should you wait until the October cap is announced?

There is no universal answer.

If you are currently paying too much, waiting several weeks purely because the cap is changing could mean missing a cheaper deal.

On the other hand, if you are evaluating a tariff that tracks or references the price cap, the 26 August announcement provides important information about the next quarter.

A sensible approach is to compare the tariff on offer now with your expected costs under alternative scenarios rather than trying to predict energy markets perfectly.

The biggest mistake: focusing on the standing charge alone

Standing charges attract attention because they are easy to understand.

"£0 a day" sounds much better than "60p a day".

But energy bills are not priced on standing charges alone.

Suppose one tariff has:

• £0 standing charge
• 30p/kWh electricity

And another has:

• 50p/day standing charge
• 25p/kWh electricity

The first saves around £182.50 a year in standing charges.

But it costs 5p more for every unit of electricity.

At 4,000kWh, that extra unit-rate cost is £200.

The apparently cheaper tariff is now approximately £17.50 more expensive.

At 2,000kWh, however, the higher unit rate costs only £100, leaving the zero-standing-charge option approximately £82.50 cheaper.

The same tariff can be excellent for one household and poor value for another.

That is the most important lesson to take from the entire standing-charge debate.

What Ofgem's pilot could tell us about the future

The lower-standing-charge pilot is part of a much broader debate about how energy-system costs should be allocated.

Ofgem says its wider Cost Allocation and Recovery review is examining how costs are split between standing charges and unit rates, how different tariff structures could work, and how costs should be shared among different consumer groups.

This could eventually lead to more varied tariff structures.

Tariffs may become more personalised

The traditional model is straightforward:

standing charge + unit rate × consumption

But future tariffs could increasingly give households choices about how fixed costs are recovered.

That could include:

• Lower fixed charges
• Higher unit rates
• Time-of-use pricing
• Peak-use incentives
• Smart-meter-based discounts
• Tariffs designed around flexible consumption

Ofgem has already tested a split-standing-charge design where part of the charge could vary according to electricity use during peak periods.

Smart meters could become more important

Smart meters make it easier for suppliers to understand when electricity is being consumed.

That creates opportunities for tariffs that reward customers for shifting demand away from expensive or congested periods.

For households with batteries, electric vehicles, heat pumps or flexible appliances, the cheapest tariff of the future may therefore depend on when energy is used as much as how much is consumed.

Lower standing charges will not solve affordability by themselves

This is another important distinction.

Changing the structure of a bill does not necessarily reduce the underlying cost of energy.

Ofgem itself warned that lower-standing-charge tariffs are unlikely automatically to reduce bills

because suppliers may recover the difference through higher unit rates.

That means standing-charge reform should be viewed as a question of consumer choice and cost allocation, not a magic solution to high energy prices.

Common mistakes to avoid

Assuming £0 standing charge means £0 fixed costs

It does not.

The cost may simply have moved into the unit price.

Comparing tariffs using only the Ofgem typical bill

Your actual usage matters more than the headline typical household figure.

Ignoring gas and electricity separately

A tariff could be attractive for electricity but poor for gas.

Calculate both.

Forgetting seasonal consumption

A low-use summer household can become a high-use winter household, particularly if it relies on electric heating.

Switching without checking exit fees

A small annual saving may not justify a large cancellation charge.

Assuming the cheapest tariff today will remain cheapest

Energy prices change. Fixed, variable and tracker tariffs carry different risks.

Confusing Great Britain with the whole UK

Ofgem's domestic energy price-cap and standing-charge work discussed here applies to Great Britain: England, Scotland and Wales. Northern Ireland has a different energy-market and regulatory framework.

A practical decision rule for households

If you are considering a lower or zero-standing-charge tariff, use this five-question test:

1. How many kWh do I actually use each year?
2. How much will the standing charge fall?
3. How much will the unit rate rise?
4. What is my resulting annual cost?
5. Are there contract, meter or eligibility conditions that change the calculation?

If the lower-standing-charge tariff produces a lower annual cost after all charges are included, it may be worth switching.

If it only looks cheaper because you have focused on the daily charge, it is not a saving.

The best tariff is the one that matches your consumption profile, not the one with the most attractive headline.

Key Insights

• Zero standing charge does not automatically mean cheaper energy. Fixed costs are normally recovered elsewhere, often through higher unit rates.
• Low-energy households are more likely to benefit because they have fewer kWh over which a higher unit rate can be spread.
• High electricity users should be cautious, particularly households with electric heating, heat pumps or electric vehicles.
• Ofgem's 2026 pilot is focused on lower standing charges, rather than simply imposing a universal zero-standing-charge tariff.
• The next Ofgem price-cap level is due on 26 August 2026 for the October-to-December quarter.
• Always calculate total annual cost using your own electricity and gas consumption.
• Check eligibility, exit fees, payment conditions and meter requirements before switching.
• The longer-term direction is toward greater tariff choice, with Ofgem also examining how energy-system costs should be allocated more broadly.

FAQ

1. What is a zero standing charge tariff?

A zero standing charge tariff is an energy tariff that does not charge a separate daily fixed fee. Instead, some or all of the costs normally recovered through the standing charge are incorporated into the energy unit rate.

2. Does zero standing charge mean I pay nothing when I use no energy?

Not necessarily. The tariff may have no daily standing charge, but the supplier still needs to recover its costs. Those costs can be reflected in a higher price per kWh.

3. Are zero standing charge tariffs available in 2026?

Some low or no-standing-charge tariffs exist, while Ofgem is testing lower-standing-charge tariffs through a one-year pilot that began in June 2026. The pilot initially involves eligible customers of EDF, E.ON, Octopus and British Gas.

4. Who benefits most from a lower standing charge?

Low-energy households are generally the strongest candidates because they use fewer kWh and therefore face less exposure to any higher unit rate attached to the tariff.

5. Could a zero standing charge tariff cost more?

Yes. If the unit rate is sufficiently higher, the additional cost of every kWh can exceed the money saved on the standing charge.

6. How do I calculate whether it is cheaper?

Multiply your annual consumption by the tariff's unit rate, then add the annual standing charge. Repeat the calculation for the alternative tariff and compare the totals.

7. Is the Ofgem price cap a limit on my total energy bill?

No. The price cap limits the rates suppliers can charge on covered default tariffs. Your total bill depends on how much energy you consume, as well as your location, payment method and meter type.

8. When is the next Ofgem price cap announced?

Ofgem says the price-cap level covering 1 October to 31 December 2026 will be published by 26 August 2026, although it can publish earlier if circumstances require it.

9. Should I wait for the October 2026 price cap before switching?

Not automatically. Compare the deal available now with your expected costs and consider whether the tariff is fixed, variable or linked to the price cap. Waiting can be useful for information, but it does not guarantee a cheaper deal.

10. Are lower standing charge tariffs better for people living alone?

They can be, particularly where annual energy consumption is low. However, the unit rate still matters, so a single-person household should calculate its total annual cost rather than assuming the lower fixed charge guarantees a saving.

11. Are lower standing charges good for electric vehicle owners?

Not necessarily. Electric vehicles can significantly increase electricity consumption. If the lower standing charge comes with a substantially higher unit rate, the additional cost across thousands of kWh can outweigh the fixed-charge saving.

12. Can a heat-pump household benefit from a zero standing charge tariff?

It depends on the tariff and the property's electricity consumption. Because a heat pump can increase electricity use, the higher unit rate on a lower-standing-charge tariff must be carefully compared with the saving on the daily charge.

13. Does Ofgem require every supplier to offer a zero standing charge tariff?

Ofgem's current approach is not simply a universal requirement for a zero-standing-charge tariff. It moved toward testing lower-standing-charge tariffs and is using a pilot to gather evidence about consumer and supplier behaviour.

14. Do standing charges vary around Great Britain?

Yes. Ofgem says standing charges vary according to factors including location, regional energy use, supplier purchasing costs and the cost of building and improving the energy network.

15. What is the biggest thing to check before switching?

Check the total annual cost based on your own consumption. Compare the standing charge, unit rates, payment method, contract length, exit fees and any eligibility conditions rather than choosing a tariff solely because its standing charge is low.

Final Thoughts

The attraction of a zero standing charge is easy to understand. Paying only when you actually consume energy feels fairer, particularly if your household uses relatively little.

But the economics are more complicated.

Ofgem's work is essentially testing whether consumers should have more choice over how the unavoidable costs of supplying energy are recovered. A lower fixed charge can be valuable, but the money has to come from somewhere. In many cases, that means a higher unit rate.

For households considering the new tariff options, the smartest approach is therefore simple: ignore the headline and run the numbers.

Use your actual annual kWh consumption. Calculate the annual standing-charge saving. Calculate the extra cost created by the unit rate. Then check the contract terms and compare the result with other available deals.

The October 2026 price-cap announcement will provide another important reference point when Ofgem publishes the next level on 26 August.

But even then, there will be no single tariff that is cheapest for every household.

A low-use flat, a busy family home and an electrically heated property can all get very different results from exactly the same pricing structure.

Disclaimer: The information provided in this article is for general informational and research purposes only. Company details, features, services, and market positions may change over time. Readers are advised to visit official company websites and conduct independent research before making any business decisions or purchasing services.