UK energy suppliers have been instructed by Ofgem to offer consumers and businesses zero standing charge tariffs for gas and electricity.
The move will allow businesses to only pay for energy when they use it and should help smaller businesses and those with seasonal base loads.
Critics point out that this will not actually make energy cheaper, rather inflate unit rates whilst reducing standing charges.
The first deals of this kind are now emerging in the business energy market and should increase in volume and variety throughout 2025.
This blog gives you the lowdown on the move and should help you consider whether a zero standing charge tariff would be suitable for your business.
What are standing charges?
The Standing Charge (SC) is the price you pay for the maintenance of your gas or electricity meter. It is a fixed daily fee that is added to your energy bill regardless of how many KWh you use.
On your bill, it will usually be presented in pence or pounds per day and should be multiplied by 365 to understand your annual standing charge cost. You can then add this to your annual unit rate and additional charges to get your full estimated energy cost for the year.
A zero standing charge tariff will not include this charge, but will usually have a higher unit rate to compensate for this in the overall cost.
Standing charges are calculated via a range of different variables, including your location in the UK, your meter type and your usage profile.
What are the advantages of zero standing charge tariffs?
For those whose use of energy is not similar every day or even on a weekly basis, having no standing charge ensures you only pay for your energy when used.
This can be a significant advantage for business cashflow and protect seasonal businesses such as holiday parks when their trade is lower.
Theoretically, if your business closes completely and no appliances are used, your energy charge for that period would be negligible.
What are the disadvantages of zero standing charge tariffs?
Suppliers still have to procure or generate the same amount of energy to fulfil your consumption needs, so the overall cost your business will pay for energy is unlikely to be vastly different. Only the profile of your payments will change.
Some meter types are far more costly for suppliers to service on an annual basis, which means your unit rate could be disproportionately affected depending on what your MPAN says. This means your energy costs will still be influenced by what your theoretical standing charge would be, even on zero standing charge tariffs.
Because this mandate is relatively new, there are only a small number of tariffs of this type available on the market at present and only certain business types are eligible.
Is a zero standing charge tariff suitable for my business?
This is a relatively easy question to answer, theoretically. Businesses with unpredictable and uneven energy usage will benefit from these deal types.
Large baseload businesses with regular consumption should not consider these tariffs as a rule of thumb. This does come with a classic caveat: UK businesses are all completely unique and have their own set of circumstances. Two businesses in the same sized units in the same industry could have completely different load profiles based on shift patterns, footfall, machinery brands or any other number of variables.
As always, we would advise any business considering zero standing charge tariffs to consult an expert, such as Procure Smart, before signing on the dotted line. With more than 1,300 customers now using our super simple switching service, Procure Smart can help you make the right choice in your energy procurement process, regardless of business size or type.
Simply fill out a form below and we will contact you at a convenient time. All quotes are free and no-obligation.
