MSE News: Npower revamps energy bills – but low users could lose out

joncombe

Like the previous poster I've worked out I'm going to be hit hard by this new Standing Charge of NPower. I have (to my surprise) had a reply from Ofgem. I have quoted it in full below but I think the main points are:-

• The proposals have been published and are subject to consultation but have not yet been implemented.
• If the proposals are implemented, two tier rate charging (where an initial amount of units is charged at a higher rate) will be banned.
• Standing charges are not required - they can be zero (and therefore obviously cannot be set by Ofgem as the same for all suppliers as I've seen suggested previously).
• Other suppliers have introduced standing charges that are "significantly lower" than those NPower have decided to introduce.
• The best way of showing NPower you are unhappy is to go elswhere.

So reading between the lines it seems that NPower has jumped the gun by assuming these proposals are going to be implemented in full when they have not yet been finalised. They have introduced a standing charge which for gas at least is quite a bit higher than other suppliers I have compared.



Like the previous poster I'm leaving NPower too and moving to Scottish Power who do not have a standing charge. I got nowhere making a complaint to NPower, their response was that they were introducing a standing charge on all tariffs and that they were not going to change the policy. The tariff I have signed up to with Scottish Power gurantees prices for 1 year with no standing charge so at least if they do introduce them I have another year of not paying a standing charge.



Where I have found NPower to be misleading (or perhaps downright lying) is that they have told me over the phone OFGEM *requires* all suppliers to introduce a standing charge on all tariffs and those companies that haven't done so yet will be doing so. I suspect it's a case of introducing a high charge to make more money and trying to convince customers there is no point switching elswhere because they'll have standing charges soon. They also have some misleading information on their website, to quote.

To comply with Ofgem our industry regulator’s new rules all of our standard tariffs and any new tariffs going forward will have a standing charge and single unit rate (pence per kWh) structure.

Obviously not true as Ofgem have confirmed a standing charge is not required.



What I do find odd about the reply from Ofgem is they suggest that without the introduction of a standing charge it would mean energy suppliers offer a poor deal to low users, keeping better rates for higher users. Yet by introducing standing charges at the rate NPower are doing means that immediatly low users are paying more now than they were under the old "complex" system.



I also disagree with the idea that a standing charge is fair because it more reflects the fixed costs. Clearly it costs more to deliver gas and electricity to rural areas where wires and pipes will need to be built over long distances to serve a small number of houses (e.g. a small hamlet) compared with urban areas where pipelines and wires will serve a much larger number of households. On that basis it would be fairer that those in rural areas should be charged a higher rate. Yet that is not going to happen (and I agree that it shouldn't). In much the same way the post office can't charge extra for delivering or collecting mail from remote locations (e.g. off-shore islands with small populations). Charging a standing charge to cover "fixed costs" is to my mind aking to being charged a transaction fee when paying at a shop or being charged by a bank for them sending you a statement. Most business ensure their fixed costs are coverered in the rates they charge so I don't see why utility companies should be treated any differently and I find it very surprising if the cost of issuing bills, distributing gas and reading the meter occasionally (and no more than once a year) costs NPower £179.58 which is the annual cost of the standing charge for gas alone.



Here is the response I had from Ofgem:-

[FONT=&quot]Thank you for your email.[/FONT]

[FONT=&quot]As you are aware, Ofgem is currently undertaking a Retail Market Review which is designed to simplify tariffs. The proposals which have published are currently subject to consultation and the changes have not been implemented. Standing charges allow suppliers to recover their fixed costs. If they were banned it would mean that low users of energy, including vulnerable and fuel poor customers, may be an unattractive proposition for suppliers, as without a standing charge suppliers would be uncertain that they could recover their fixed costs from these low users. These factors risk creating a two tier market where the best deals are reserved for high users of energy, and uncompetitive deals are offered to low users, who are often the fuel poor. Suppliers that do not have standing charges at the moment have complex mutli-tier tariffs, which we will ban. [/FONT]

[FONT=&quot]I can confirm that Ofgem has not instructed Npower or any other supplier to apply a standing charge to their tariffs. Suppliers are responsible for setting the level of the standing charge which they can set at zero if they wish. We understand that there are still suppliers that are not applying a standing charge (although you may want to check with them if this will remain the case), and of the suppliers that have introduced one, we understand that in some cases they are significantly lower than the rate Npower has chosen to charge its customers. [/FONT]

[FONT=&quot]We published our consultation on 27 March, and you which can read about the proposals in our factsheet via the following link: http://www.ofgem.gov.uk/Media/FactSheets/Documents1/Factsheet 115 getting the best deal_WEB.pdf. If you would prefer to look at more detailed information it can be viewed on the following page of our website: http://www.ofgem.gov.uk/Pages/MoreInformation.aspx?docid=460&refer=Markets/RetMkts/rmr. The following paragraph is relevant: [/FONT]

[FONT=&quot]‘2.10. We propose to have tariffs with a simple two-part structure, i.e. a standing charge (which can be zero) and a unit rate. Suppliers will no longer be allowed to offer complex tariffs which vary the standing charge or unit rate for different levels of consumption. Suppliers will need to reflect in the standing charge or the unit rate any charges that are related to energy supply. We are also proposing to specify the list of surcharges that do not have to be incorporated in a unit rate or standing charge. We propose that these surcharges will also have to have a simple structure.’ [/FONT]

[FONT=&quot]Finally, I would suggest that you ask Npower to clarify any further queries you have on this matter. You may also wish to consider switching away from Npower, which is the best way a consumer can show a supplier that they are dissatisfied with the change to their terms.[/FONT]

[FONT=&quot]Should you wish to respond to the consultation, I would ask that you please do so by 23 April 2013. [/FONT]

[FONT=&quot]Yours sincerely,[/FONT]

[FONT=&quot]XXX[/FONT]
[FONT=&quot]Consumer Affairs
[/FONT]

[FONT=&quot]
[/FONT]

Nada666

joncombe wrote: »

Like the previous poster I've worked out I'm going to be hit hard by this new Standing Charge of NPower. I have (to my surprise) had a reply from Ofgem. I have quoted it in full below but I think the main points are:-

• The proposals have been published and are subject to consultation but have not yet been implemented.
• If the proposals are implemented, two tier rate charging (where an initial amount of units is charged at a higher rate) will be banned.
• Standing charges are not required - they can be zero (and therefore obviously cannot be set by Ofgem as the same for all suppliers as I've seen suggested previously).
• Other suppliers have introduced standing charges that are "significantly lower" than those NPower have decided to introduce.
• The best way of showing NPower you are unhappy is to go elswhere.

[FONT=&quot]
[/FONT]

So that confirms Ofgem are the 'baddies' not npower. Yes, they have jumped the gun but Ofgem are banning two-tier tariffs and forcing a standing charge (few suppliers are going to set the standing charge to zero).

Blatant rubbish from Ofgem. There is ABSOLUTELY NO REASON for them to ban two-tier tariffs. A disgusting and self-contradicting pile of rubbish.

25.6_Pre-contract_oblig

Thanks very much joncombe for making the Freedom of Information request to Ofgem and posting their reply.

As footyguy said in Post #23, Ebico are potentially a good choice for low users.

Like others, I have also checked with Ebico and they are not going to introduce a Standing Charge.

See also the survey at Which? - conducted in October and November 2012.
Energy companies rated
http://www.which.co.uk/switch/energy-suppliers/energy-companies-rated

Ebico are 3rd and npower are 15th (last).

25.6_Pre-contract_oblig