Ofgem confirmed in its January 2026 announcement that, from April 2026, energy suppliers must offer a lower-standing-charge tariff variant alongside their main default tariff. The first wave covers EDF, E.ON, Octopus Energy and British Gas, with universal availability across Great Britain by end of January 2026 under the regulator's Lower standing charge tariffs: next steps programme. The political pressure for this came from the rise in standing charges through 2022-2025, which left low-usage households paying more than 50% of their annual bill on fixed daily charges. The catch is in the trade-off: lower standing charges mean higher unit rates, and Ofgem itself was clear in its consultation that the change "is unlikely to reduce bills" overall. So who actually saves?
The mechanics of the trade-off
A standing charge funds the costs of being connected to the network — distribution, transmission, metering, supplier of last resort levies, the Warm Home Discount levy, and a slice of policy costs. Those costs do not disappear; they get recovered somewhere. Moving them out of the fixed daily charge and into the per-kWh unit rate means a customer using very little electricity pays less, while a customer using a lot pays more. The break-even point varies by region and by tariff design, but on the indicative numbers Ofgem published with its January 2026 paper, a household using under roughly 2,400 kWh of electricity a year tends to come out ahead on a low-standing-charge variant; above that, it tends to lose. For gas, a similar pattern applies around the lower end of typical consumption.
Importantly, an additional change took effect from 1 April 2026: the cost of funding the Warm Home Discount has shifted from standing charges to unit rates regardless of which tariff a customer is on, a result of Ofgem's price-cap consultation in late 2025 confirmed in its April 2026 cap announcement. So even on a "standard" default tariff, the standing-charge component dropped slightly in April 2026 and the unit rate rose to compensate. This is separate from the new lower-standing-charge variant and applies to everybody.
Who the pilot helps
Three groups benefit clearly. First, second-home owners and people who own properties they do not occupy continuously — the daily charge runs whether or not the lights are on, so any reduction in the fixed element is a direct saving. Second, very small flats with low heating demand and no electric heating — typically older retirees in well-insulated properties, or single occupants who travel. Third, customers who already use solar PV or battery storage to displace grid imports during the day; their net imports are low, so the unit rate change matters less than the standing-charge reduction.
The pilot does not meaningfully help families in larger homes, anyone with electric heating, EV owners who charge at home, or businesses on domestic-style tariffs (the rules apply only to the domestic default-tariff cap, not to non-domestic supply). For small businesses on non-domestic single-rate or two-rate contracts, the standing charge is set by the supplier's commercial pricing rather than by the cap, and the equivalent transparency obligation is the line-item disclosure we walk through in our UK business electricity bill walkthrough.
The structural review running underneath the pilot
Ofgem's "Cost allocation and recovery review" — distinct from the pilot — is examining how energy bill costs should be allocated more broadly between standing charges and unit rates, and across different consumer types. The review's interim findings, due later in 2026, will likely shape the next price-cap period and could feed into broader REMA reforms. The review's terms of reference explicitly include the question of whether some elements (network charges, in particular) should sit in unit rates rather than fixed charges as a matter of fairness. For households tracking their bills, the takeaway is that the standing-charge debate is far from settled, and any tariff structure chosen in 2026 should not be treated as permanent.
For more on the broader transmission-charging picture — which sits in the same family of debates and was reformed via the Targeted Charging Review — our Triad reform article covers what that change did to large-business electricity bills. The principle is the same in both cases: where you put a cost on the bill changes who pays.
What to do if this affects you
- Within 30 days: pull your last 12 months' electricity and gas usage. The figure you need is total kWh per fuel.
- If electricity usage is under roughly 2,400 kWh: ask your supplier for the specific unit-rate and standing-charge values on their lower-standing-charge variant, and run the calculation yourself rather than relying on the supplier's headline.
- If you have an EV or electric heating: stay on the standard variant. The higher unit rate will eat any saving on the daily charge.
- If you have solar or battery storage: model the outcome on a typical winter month (when grid imports are highest) as well as on an annual average. The variant that wins on average can lose in winter.
- For any non-domestic site: this pilot does not apply. The relevant fairness question is the line-item make-up of your contract, which we cover in contract review.
Frequently asked questions
Q: Can I switch to the lower-standing-charge variant mid-contract?
A: It depends on the supplier's terms. Default-tariff customers can move at any time. Fixed-tariff customers usually need to wait until renewal unless their fixed contract specifically allows tariff switching.
Q: Does the lower-standing-charge variant come with a worse exit fee?
A: For default-tariff customers, no — there are no exit fees on the default tariff. For fixed-term equivalents (where suppliers offer a lower-standing-charge fixed product), check the terms.
Q: Are prepayment meter customers eligible?
A: Prepayment customers are part of the universal-availability rollout to end of January 2026. The economics are similar but the unit-rate differential is sometimes smaller.
Q: What happens if I move house mid-year?
A: The variant follows the tariff, not the address. You would need to choose again at the new property. Use the move as a natural moment to re-run the calculation.
Sources: Ofgem, "Ofgem confirms plans to introduce lower standing charge tariffs", press release January 2026; Ofgem, "Lower standing charge tariffs: next steps", policy page 2026; Ofgem, "Changes to energy price cap between 1 April and 30 June 2026", April 2026 cap announcement (Warm Home Discount funding shift); Ofgem Cost Allocation and Recovery Review terms of reference, 2025-2026.