Ofgem’s new powers could finally cut household energy bills

The energy price cap will rise by £63 in October, the third increase this year. But buried in the same Ofgem announcement is a more consequential change: new powers to force suppliers to treat customers fairly. The End Fuel Poverty Coalition reported that the regulator will gain statutory teeth to cap standing charges, fine poor performers, and demand compensation for billing errors.

As reported by the End Fuel Poverty Coalition, the move follows a decade of rising standing charges, from 25p a day in 2014 to over 60p today. For a typical 3-bed semi using 12,000 kWh of gas and 2,900 kWh of electricity, that adds £300 a year before a single unit of energy is used.

Who qualifies, and who doesn’t

Ofgem’s new powers apply to all licensed suppliers, but the biggest impact will hit the 4 million households on prepayment meters. These customers pay the highest standing charges, up to 80p a day in some regions, because suppliers claim they are more expensive to serve. The new rules could cap these at the same level as direct debit customers, saving £150 a year.

Yet the government has not confirmed when the powers take effect. The End Fuel Poverty Coalition says the legislation is ‘expected by spring 2025’, but officials have not set a date. Households on standard variable tariffs will see slower benefits, as standing charges are only one component of the price cap.

What it costs a typical 3-bed semi

The average standing charge for a dual-fuel household is now 58p per day for electricity and 32p per day for gas, a combined 90p daily, or £328 a year. Ofgem’s own data shows that network costs, which make up 40% of the standing charge, have risen 15% since 2021. A cap could shave 20p off the daily rate, saving £73 a year.

But the regulator’s new powers extend beyond standing charges. Suppliers will also face mandatory compensation for failed switches, delayed smart meter installations, and billing errors, currently voluntary. The Energy Saving Trust estimates that 1 in 5 households has experienced a billing mistake in the past year, with average overcharges of £85.

The catch, and what it misses

New powers are only as effective as the regulator’s willingness to use them. Ofgem fined suppliers £10 million in 2022 for poor customer service, but the largest, British Gas, EDF, and Octopus, paid less than 0.1% of their annual revenue. The new legislation must include automatic penalties, not negotiated settlements, to have real bite.

What this misses is the deeper problem: the energy market’s reliance on fossil fuels. Standing charges are high partly because network upgrades for renewables have been funded through household bills rather than general taxation. Until that changes, even the toughest regulator can only trim around the edges. Homeowners considering heat pumps or solar should factor in that standing charges will remain a fixed cost, making self-generation more attractive.

What you can do now

Households on prepayment meters can switch to direct debit through their supplier, a process that takes 2–3 weeks and typically cuts standing charges by 15p per day. Those on standard tariffs should check their EPC rating: homes rated D or below pay 12% more in standing charges due to higher deemed consumption. Improving insulation or installing a heat pump can lower your tariff band and reduce the standing charge proportion of your bill.

The new Ofgem powers are expected to be debated in Parliament in November. If passed, they will take effect from April 2025. In the meantime, compare tariffs on the Ofgem-accredited Energy Switch tool, the cheapest fixed deals are currently 8% below the price cap, saving a typical household £140 a year.