Fears ‘stealth tax’ on fuel bills could rise even higher if more firms collapse

A ‘STEALTH tax’ on energy bills that has been used to cover the cost of dozens of failed suppliers could rise further still if more companies go under.

The standing charge traditionally covers the daily cost of connecting households to their supplies.

But it has climbed from an average £186 to £273 over the past year after regulator Ofgem approved the use of the charge to pay for supplier failures.

In total, this is believed to amount to an increase of more than £2billion.

Yet the fixed charge, which varies from region to region, has nothing to do with how much gas or electricity customers actually use.

That means it is effectively a regressive ‘ poll tax’, applying equally to millionaires in large, well-heated homes as to cashstrapped pensioners living frugally on their own. Campaigners have now called for the charge to be frozen or scrapped.

About 30 energy firms have gone bust over the last couple of years as wholesale energy prices soared, meaning they could not afford to supply their customers at the rate of the deals they were sold.

Now, ministers are bracing for a wave of further collapses, according to The Sunday Times.

One firm with 100,000 customers, Leicester-based Outfox the Market, was warned last month by Ofgem that it had three months to sort out its finances or be stripped of its licence. Parent company Foxglove declined to comment.

If more firms go under, it is likely to mean further additions to the

standing charge. There is also uncertainty about the bill for the collapse of Bulb, the energy company rescued by taxpayers at an estimated cost of £6.5billion before being offloaded to rival Octopus Energy. Tory MP Alexander Stafford,

a member of the Commons business committee, said: ‘I think that it is essential to freeze standing charges. People shouldn’t have to be paying the costs of these cowboy companies that went under due to playing fast and loose with other people’s accounts.’ Ruth London, of campaign group Fuel Poverty Action, said: ‘In time, standing charges should be abolished because they are unfair, particularly for people with a prepayment meter.’

An Ofgem spokesman said it had ‘looked long and hard’ at how the cost of energy supply failures should be spread across customers’ bills. It considered shifting them from standing charges to spreading them depending on how much customers used ‘ but the numbers just didn’t stack up’.

‘Our analysis shows it would disproportionately negatively affect some of the most vulnerable consumers who use high amounts of energy,’ they said. The regulator added: ‘We’ll continue to keep standing charges under review.’

A spokesman for the Government said the recovery of the cost of energy firm collapses was a matter for Ofgem.