A lower standing charge sounds like an obvious way to cut your energy bill.

If one electricity tariff charges you 55p every day just for having the supply, while another charges little or nothing, surely the second tariff must be cheaper?

Not necessarily.

A tariff with a lower standing charge may recover more of its costs through the unit rate instead.

That creates an important trade-off:

Pay less every day regardless of how much energy you use — but potentially pay more for every kWh you consume.

For some households, that can work very well.

For others, the higher unit rate can more than wipe out the standing-charge saving.

The answer depends on how much energy you actually use.

What is a standing charge?

A standing charge is the daily amount you pay for your energy supply regardless of how much energy you use.

So even if you use no electricity on a particular day, a conventional tariff can still charge that day’s electricity standing charge.

Ofgem explains that energy tariffs contain both unit rates and standing charges, and that the price cap limits these charges for customers on standard variable tariffs.

From 1 October to 31 December 2026, the average electricity standing charge under the Direct Debit price cap is 54.83p per day, although the actual rate varies by region and circumstances.

At 54.83p a day, that’s approximately:

£0.5483 × 365 = £200.13 a year

before you’ve used any electricity.

It’s easy to see why a tariff that reduces that charge can look attractive.

But the standing charge is only one part of the tariff.

What happens when the standing charge is reduced?

The costs don’t necessarily disappear.

They can instead be recovered through other parts of the tariff — particularly the amount charged for each unit of energy.

That’s why Ofgem has been cautious about simply removing standing charges.

Its current lower-standing-charge pilot was introduced partly to understand what happens when consumers are given a different balance between fixed and usage-based charges. Ofgem has also acknowledged concerns that lower-standing-charge tariffs could be more expensive for consumers with higher consumption.

So the important comparison isn’t:

Which tariff has the lowest standing charge?

It’s:

Which combination of standing charge and unit rate produces the lowest cost for the amount of energy I use?

Let’s calculate it

Imagine you’re comparing two electricity tariffs.

Standard tariff

Unit rate: 25p/kWh

Standing charge: 55p/day

Low-standing-charge tariff

Unit rate: 30p/kWh

Standing charge: 10p/day

The second tariff saves:

45p per day

in standing charges.

Over a year:

£0.45 × 365 = £164.25

So before considering your electricity use, the low-standing-charge tariff appears to save you £164.25 a year.

But its electricity costs:

5p more per kWh

That’s where your consumption becomes important.

A low-energy household

Suppose you use:

1,500 kWh of electricity a year

Standard tariff

Energy:

1,500 × £0.25 = £375

Standing charge:

365 × £0.55 = £200.75

Total:

£575.75

Low-standing-charge tariff

Energy:

1,500 × £0.30 = £450

Standing charge:

365 × £0.10 = £36.50

Total:

£486.50

The low-standing-charge tariff is:

£89.25 cheaper

for this household.

The household doesn’t use enough electricity for the higher unit rate to outweigh the standing-charge saving.

But now change the consumption.

A higher-energy household

Suppose another household uses:

5,000 kWh a year

Standard tariff

Energy:

5,000 × £0.25 = £1,250

Standing charge:

£200.75

Total:

£1,450.75

Low-standing-charge tariff

Energy:

5,000 × £0.30 = £1,500

Standing charge:

£36.50

Total:

£1,536.50

Now the result has reversed.

The conventional tariff is:

£85.75 cheaper

despite having a much higher standing charge.

Why?

Because the second household uses enough electricity for the additional 5p/kWh to outweigh the £164.25 standing-charge saving.

There is a break-even point

This is where the comparison becomes particularly useful.

We know the low-standing-charge tariff saves:

£164.25 a year

in standing charges.

But it costs an additional:

5p for every kWh used

So:

£164.25 ÷ £0.05 = 3,285 kWh

At approximately:

3,285 kWh a year

the two tariffs cost the same.

Below approximately 3,285 kWh, the low-standing-charge tariff is cheaper.

Above approximately 3,285 kWh, the standard tariff is cheaper.

That’s why a low standing charge isn’t automatically a cheap tariff.

There is a household-specific point at which the answer changes.

What about a zero standing charge?

The same calculation applies.

Imagine the alternative tariff charged:

0p/day standing charge

but had a higher unit rate.

Removing a 55p daily standing charge would save:

£200.75 a year

But if the unit rate increased from 25p/kWh to 32p/kWh, every unit would cost:

7p more

The break-even point would therefore be:

£200.75 ÷ £0.07 = approximately 2,868 kWh

Below approximately 2,868 kWh, the zero-standing-charge tariff would be cheaper in this simplified example.

Above it, the conventional tariff would be cheaper.

So even a standing charge of:

£0

doesn’t automatically mean the tariff has the lowest overall cost.

This is happening in the real energy market

This isn’t just a theoretical calculation.

Ofgem launched a one-year lower-standing-charge tariff pilot from June 2026. EDF, E.ON, Octopus and British Gas were identified as participating suppliers, with places on the tariffs limited.

And early tariff designs illustrate exactly why consumers need to compare the complete tariff rather than just the standing charge.

For example, reporting on the pilot found that some lower-standing-charge options from E.ON and Octopus combine reduced standing charges with higher unit rates. Both suppliers indicated that the arrangements were generally more likely to benefit households using below around 1,800 kWh of electricity and/or 7,500 kWh of gas, although the actual comparison depends on the tariffs available to the individual household.

That is the same principle our examples demonstrate:

Lower consumption can favour lower fixed charges. Higher consumption can make the unit rate increasingly important.

Low users may benefit most

Standing charges are unusual because reducing your consumption doesn’t reduce them.

Someone who uses very little electricity can therefore have a relatively large proportion of their bill made up of standing charges.

For that household, moving some of the tariff cost from a fixed daily charge into the unit rate may be beneficial.

But a high-use household experiences the opposite effect.

Every additional kWh magnifies the difference between the unit rates.

That’s why two households can compare exactly the same tariffs and reach different answers.

Don’t compare the standing charge in isolation

If you’re offered a lower or zero standing charge tariff, compare:

• electricity unit rate

• electricity standing charge

• gas unit rate

• gas standing charge

• your annual electricity consumption

• your annual gas consumption

• tariff length

• exit fees

• any time-of-use conditions

• the resulting estimated annual cost

If you’re considering a time-of-use tariff, the proportion of electricity you can move to cheaper off-peak periods can also change which tariff is cheaper.

Use the same consumption when calculating each tariff.

That’s what allows you to see whether the standing-charge saving survives once the higher cost of the energy itself is included.

The price cap doesn’t make everyone’s standing charge identical

Ofgem’s published price-cap figures are averages across England, Scotland and Wales.

Standing charges and unit rates can vary according to factors including where you live, how you pay and your meter arrangements.

So don’t use a national headline standing-charge figure if you have the actual tariff rates available to you.

Use the rates you’re genuinely being offered.

So, are low or zero standing charge tariffs cheaper?

They can be.

But “lower standing charge” and “cheaper tariff” aren’t the same thing.

For a low-use household, reducing or removing the daily charge can produce a meaningful saving.

For a higher-use household, a higher unit rate can eventually outweigh that saving.

The important question is therefore not:

How low is the standing charge?

It’s:

At my consumption, what will the whole tariff cost?

That’s the principle we’re building Likewise Compare around.

Use your actual energy consumption.

Compare the unit rates and standing charges together.

Calculate the estimated annual cost of each option on the same basis.

Because sometimes the tariff with the lowest standing charge won’t be the tariff with the lowest bill.

Want to know which tariff is actually cheaper for you?

Likewise Compare is being built to compare energy tariffs using your own consumption, unit rates and standing charges — rather than assuming that the tariff with the most attractive headline rate is automatically the best deal.

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