Why Primary & Seconary Units?

Mikeinho

Hi,

When I fill up my tank at the petrol station, I don't get charged one price for the first 10 litres, then another price for the next 40 litres. So, why do energy companies charge different prices for primary and secondary units?

I know that this has something to do with price plans not inclusive of a standing charge, but what’s the standing charge for anyway?

It’s almost like promoting the use of more energy, i.e. it gets cheaper (overall) the more you use. Not very green is it?

Any ideas how this works?

spiro

Energy companies have costs they incur such as meter rental which they have to recoup even if you use little or no energy hence the reason for a standing charge.

oldwiring

Basically it's a way of collecting the standing charge under another guise. If anyone does a comparison for average and about use the prices will come out much the same (pence). However "no standing charge" tariffs are generally fairer on low users.

Mikeinho

spiro wrote: »

Energy companies have costs they incur such as meter rental which they have to recoup even if you use little or no energy hence the reason for a standing charge.

Fair enough spiro, but doesn't every business have overheads? Using my previous example, I don't expect the petrol station manager to charge me for using his pumps.

My house was build in the 50's, and the gas meter was installed in the early 90's. These things don't seem to break, and I even enter my own readings online now. Surely by now I've paid for the installation costs and maintenance of the *dam* thing!!

Anything else outside my property should be considered general running costs in an everyday business, should it not?

Magentasue

Standing charge is a way of making every customer pay, even if they go away for six months! If there was no standing charge, the unit cost would be higher. As said, fairer for low users.

Mikeinho

oldwiring wrote: »

Basically it's a way of collecting the standing charge under another guise. If anyone does a comparison for average and about use the prices will come out much the same (pence). However "no standing charge" tariffs are generally fairer on low users.

Thanks oldwiring... I've done the calcs myself before and noticed this is how it works. My primary units are calculated quarterly, and during the 'summer' months, I never seem to go over the primary units quota (for gas at least). So in fact, I save a little more by not being on a standing-charge plan.

However, it just seems really old-hat to continue this practice at all in this day and age. OK, so BT do the same thing for phone-line rental, but I recently changed to Sky's phone-line rental and it's even cheaper than BT... and these were the people who installed it in the first place. All they wanted in return was £20 to reallocate the line to Sky.

With this in mind, how can Sky do it cheaper than BT? If that is the case (which it is), then surely the cost for line rental could be reduced to ZERO in theory, with the general costs of maintenance being applied to standard call charges.

Come to think of it, most phone-companies charge a separate connection fee, then bill you per second or minute after that, so why the line rental charge at all?

Actually, I've bitten off more than I can chew here, so I'm just going to shut-up and sulk in the corner now. Thanks for replying... happy consuming!!

:beer:

CraigDent

Like the line rental on your phone, the standing charge is a cost that is there for paying the meter readers, paying national grid for the electric cable/gas pipe line. Also the admin of the account (sending out bills, processing a meter reading after estimated bills, recertifying the meter after its 'shelf-life (about 20 years))

Whether you pay the standing charge separate or in the unit prices, its always there.

Its a bit daft with "there more you use the cheaper it is", in Italy the more you use, the more it costs so is a good way to promote energy efficiency!!!

KimYeovil

And remember, this is Money Saving Expert. It's only going to get worse. Standing charges can only increase as companies target the more profitable customers who use more. And as the crunch and price rises hit and people respond by economising, again prices will rise further to maintain margins. (Dang, I seem to be agreeing with Carmine and friends about something. Must be a mistake in what I wrote somewhere.)

1carminestocky

KimYeovil wrote: »

And remember, this is Money Saving Expert. It's only going to get worse. Standing charges can only increase as companies target the more profitable customers who use more. And as the crunch and price rises hit and people respond by economising, again prices will rise further to maintain margins. (Dang, I seem to be agreeing with Carmine and friends about something. Must be a mistake in what I wrote somewhere.)

What price rises? We are in a global recession and the only good thing to come along with recession is cheaper prices.

KimYeovil

1carminestocky wrote: »

What price rises?

You're 'aving a larf?

Dustykitten

I understand the concept of the standing charges and low users being better off potentially on a non SC tariff.

For other users is the cost just about the same which ever way you go about it?