Standing charges: domestic retail options

Summary

This section sets out our views on longer term standing charge reform, including allocation of both network and policy costs.

What we want to do

We want to review how network and policy costs are allocated. The aim would be to reduce the impact of growth in fixed costs to reduce and keep standing charges down.

Details

Standing charges are made up of costs that are better to pay on a fixed basis than each unit of energy that is used. The costs included in the standing charge are:

• electricity network costs
• operating costs, like billing and meter readings
• policy costs, like the cost of government schemes such as Warm House Discount

It is expected that a net zero energy system will be cheaper to run, and result in lower bills, but a higher proportion of that bill is likely to be made up of fixed costs. This is due to necessary investment into, for example, electricity infrastructure.

We are planning to review how network charges and broader system costs are allocated to understand whether we could make further changes that would benefit customers as a whole. This will involve balancing the interests of different stakeholders impacted by any shift of fixed to volumetric costs. Any change needs to:

• consider how different allocations of costs could lead to fairer outcomes for consumers
• be mindful of the ability for industry participants to recover their efficient costs
• consider the impact of these costs on price signals in the market, which was the main reason for our Targeted Charging Review decision in 2019
• make sure that underlying system costs are allocated as efficiently as possible to minimise additional system costs that could subsequently end up on bills

Before you give us your views

You’ll need to read the details in the Network and policy cost allocation chapter of the discussion paper (PDF, opens in separate tab).