Frustrated Martin Lewis criticises move to increase daily charge on energy bills

Martin Lewis has criticised the upcoming increases in the standing charge on energy bills saying they will create a “moral hazard” and “disincentivise” low use.

Chancellor Jeremy Hunt confirmed in his budget last week the energy price guarantee (EPG) would be extended for another three months until the end of June.

The EPG had been due to increase on 1 April so that the typical household energy bill would be £3,000, but has since been set at £2,500.

The extension will, according to Hunt, save the average family a further £160.

However, some people have criticised the increase in the standing charge (the fixed daily rate) on gas and electricity bills.

Under the new EPG, the Direct Debit standing charge for gas will rise slightly from an average of 28.49p per day to 29.11p per day, while electricity will jump from 46.36p per day to 52.97p per day.

For the four million or so people on prepayment meters, the average daily charge for gas will rise slightly from 37.51p per day to 37.80p per day, but electricity will rise from 51.41p per day to 58.08p per day.

Acknowledging the frustration with the increase, Lewis tweeted on Tuesday: “To all those asking me 'why are standing charges going up again?'

“I've campaigned against it publicly and formally so I am the wrong person to ask to justify it.

“It creates a moral hazard & disincentivises low use. It needs to change (coupled with a social tariff).”

In economic terms a "moral hazard" refers to the risks someone - or a company - is inclined to take if they believed they are protected from any negative consequence.

Read more: Martin Lewis explains post-budget changes to gas and electricity prices

Lewis criticised the rise earlier this month, saying they would disproportionately impact low users.

He said: "The rise in standing charges are up, so everyone on direct debit will now pay £300/yr pro rata just for having gas and electricity, compared to £273/yr. That is a bigger hit for lower users.”

Lewis added that gas and electricity unit rates had been brought down to compensate for the increase in standing charges and the average price of bills would remain the same.

The Saint Vincent de Paul charity (SVP) has urged standing charges on gas prepaid meters be removed, “as these lead to people building up debt even when they’re not using gas”.

The organisation said there was a 20% increase in the number of people requesting assistance last year as households are building up “significant amounts” of energy debt..