The Institute for Government has published a blistering critique of Ofgem, the energy regulator, arguing it has become a bottleneck for the UK’s clean energy transition and a drain on household finances. The report, released on 15 October 2024, says the regulator’s focus on market competition has left homeowners paying higher standing charges and facing delays for heat pump connections.
As reported by the Institute for Government, the regulator has failed to adapt to the shift from fossil fuels to electrified heating. For the typical UK household, this isn’t abstract. Standing charges, the fixed daily fee on every bill, have risen by 43% since 2021, hitting £335 a year for a dual-fuel customer. Ofgem approved these rises, yet the report argues the regulator has not held network companies to account for underspending on infrastructure upgrades.
Who qualifies, and who doesn’t
The report’s main target is Ofgem’s governance. It recommends a new statutory duty to prioritise net zero and consumer protection over competition. For homeowners, the practical effect would be clearer: faster grid connections for heat pumps, which currently take 12–18 weeks in some regions, and a reduction in the electricity-to-gas price ratio. That ratio, currently about 4:1, makes heat pumps more expensive to run than gas boilers, despite their efficiency. The report suggests reforming network charges to shift costs from electricity to gas, which could cut an annual heat pump running cost by roughly £200 for a 3-bed semi using 12,000 kWh of heat.
But the catch is timing. The report calls for legislative change, which requires a parliamentary bill. The next Energy Bill is not scheduled until 2026. Until then, Ofgem’s current remit limits what it can do. The regulator has already consulted on a ‘targeted charging review’ for heat pumps, but the report says this is too slow. ‘Ministers should not wait for Ofgem to act,’ the authors write. ‘They should legislate now.’
What it costs a typical 3-bed semi
For a household on a standard variable tariff using 12,000 kWh of gas and 2,900 kWh of electricity, the current annual bill is about £1,750. Of that, roughly £335 is standing charges, a figure that has risen faster than inflation. The report argues that if Ofgem had enforced better efficiency from network operators, standing charges could be 20% lower, saving the typical household £67 a year. For the 4 million fuel-poor households, that matters.
On heat pumps, the report notes that a typical installation costs £7,000–£13,000 after the Boiler Upgrade Scheme grant of £7,500. But the running cost gap with gas remains. If network charges were reformed, a heat pump could cost £50–£100 less per year to run than a gas boiler. That would make the payback period shorter, currently 8–12 years for most homes, but potentially 6–8 years with lower electricity prices.
What homeowners should do now
First, check your energy bill for the standing charge. If you are on a fixed tariff, you may be paying a lower daily rate, but check the exit fees. Second, if you are considering a heat pump, ask your installer about grid connection times. In areas with high demand, such as the South East, you may need to wait longer. Third, write to your MP. The Institute for Government report is a direct call to Parliament. The more homeowners demand action on standing charges and network reform, the faster the legislation may come.
Households on standard variable tariffs can apply for the Boiler Upgrade Scheme now through gov.uk. The grant is £7,500 until March 2028. But the real savings, lower running costs, depend on Ofgem reform. That vote happens in Westminster, not in your kitchen.
Frequently Asked Questions
No. The Institute for Government report recommends legislative change, which needs a new Energy Bill. That is unlikely before 2026. However, you can save now by switching to a fixed tariff or applying for the Boiler Upgrade Scheme.
If network charges are shifted from electricity to gas, the running cost of a heat pump could fall by £50–£100 a year. That would shorten the payback period from 8–12 years to 6–8 years for a typical 3-bed semi, making the investment more attractive.
