How to get Ofgem to set energy standing charges to zero?

wrf12345

The original Ebico deal was a single rate for all users, albeit quite high in comparison to some offers with s/c's. Then Ofgem or the govn decided that companies had to have default tariffs that were capped, the caps being lower than Ebico's rate so they had to offer several different tariffs to get around this, thus diluting their original offering.

It is likely that the new caps in April will be set at a level that means all of the energy companies will be offering the same rates (and s/c's if they are still in the mix), making the whole idea of competition between the companies non-existent and making it difficult to move between companies (not enough profit for them to take on new customers) so is there any point in having all these energy companies with their huge overheads, overpaid directors, etc?

I can't help thinking that moving to prepayment meters topped up online (or at the PO for ancients), combined with the grid operator buying gas en masse (with proper Ofgem caps limiting rip-offs) would take out roughly fifty percent of the cost for the end user. Surely such a radical reform is needed, as well as getting rid of s/c's!

Grizzlebeard

Gerry1 said:

Grizzlebeard said:

Gerry1 said:

IIRC Ofgem banned the misleading practice used by Ebico and others of promoting a No Standing Charge tariff but quietly clawing it back by surcharging the first few units.  The result was that most users still paid the equivalent of the Standing Charge: only owners of second homes and lock up garages would benefit.  Ofgem specified that there should be a standing charge, but that it could be zero.  IIRC Ebico then switched to a minimum usage amount.  Neither practice seems particularly equitable.

I disagree with your analysis Gerry. The practice was never banned and Ebico was quite clear in it's Ts&Cs when it introduced the Minimum Usage Fee for v4 and v5. It was not retro-applied to existing v3 customers.

You seem to have misunderstood what I was saying.  Ofgem did ban 'multi-tier' tariffs, i.e. those where the first few units were charged at a higher rate than the rest........

Grizzlebeard said:

Gerry1 said:

Ofgem didn't ban No Standing Charge tariffs: I've recently switched my electricity to one, British Gas Zero Fixed Oct 22.

IIRC Ofgem banned the misleading practice used by Ebico and others of promoting a No Standing Charge tariff but quietly clawing it back by surcharging the first few units.  The result was that most users still paid the equivalent of the Standing Charge: only owners of second homes and lock up garages would benefit.  Ofgem specified that there should be a standing charge, but that it could be zero.  IIRC Ebico then switched to a minimum usage amount.  Neither practice seems particularly equitable.

Ebico was quite clear in it's Ts&Cs when it introduced the Minimum Usage Fee for v4 and v5. It was not retro-applied to existing v3 customers.

Very few Ebico users payed any more - only those using less than £1 of energy a week. There was no uproar, no sudden exodus of customers, (zero exit fees anyway), and the only grumbles I ever heard were from people with empty properties and holiday homes.

ALL Ebico users who used more than £1 a week of Electric or Gas saw ABSOLUTELY NO change to their bills.^^

Most EBICO users did NOT PAY A PENNY toward the equivalent of a standing charge!

Agreed, but I never made any such claims (nor did you accuse me of so doing...)

You seem to have misunderstood what I was saying Gerry. The Two tier pricing system, banned many years ago, is a complete red herring and suggesting Ebico's Minimum Usage Fee is a con to circumvent it is highly misleading.

My main objection is to your claim that I've quoted and highlighted in bold.

Gerry1 said:

IIRC Ofgem banned the misleading practice used by Ebico and others of promoting a No Standing Charge tariff but quietly clawing it back by surcharging the first few units.  The result was that most users still paid the equivalent of the Standing Charge: only owners of second homes and lock up garages would benefit.

So I responded with -

Grizzlebeard said:

ALL Ebico users who used more than £1 a week of Electric or Gas saw ABSOLUTELY NO change to their bills.^^
......
Most EBICO users did NOT PAY A PENNY toward the equivalent of a standing charge!

I stand by this simple statement, which was the whole point of my original post. MOST users did NOT pay the equivalent of the Standing Charge.

And this statement is poorly phrased

Gerry1 said:

IIRC Ofgem banned the misleading practice used by Ebico and others..........

It implies Ebico adopted misleading practices then Ofgem banned them. Not true. And Ebico was never questioned for breaching any Ofgem rules.

wrf12345

As well as getting rid of standing charges the govn or ofgem could bring in a fixed tariff for the first £20/month of energy use, say 15pkwh for electr and then let the energy companies make up the difference with a higher rate for heavy users. This would emphasize the benefits of low use, esp when rates go up and the lower tier remains at the same rate.

MattMattMattUK

wrf12345 said:

As well as getting rid of standing charges the govn or ofgem could bring in a fixed tariff for the first £20/month of energy use, say 15pkwh for electr and then let the energy companies make up the difference with a higher rate for heavy users. This would emphasize the benefits of low use, esp when rates go up and the lower tier remains at the same rate.

Why are you so desperate to complicate a system which currently functions in a clear an simple way? Charging people for the cost of the network provision (standing charge) and the energy they use (per kWh), that is the best system, that is the "fairest" system, it means some users are not subsidising other users (outside of the social charge, which I think should be scrapped). 

Sailbad

Consider the other energy you buy - fuel for your car. You don't pay a daily standing charge to cover the cost of the network of filling stations, just a straight price per litre. Much fairer and simpler.

MWT

Sailbad said:

Consider the other energy you buy - fuel for your car. You don't pay a daily standing charge to cover the cost of the network of filling stations, just a straight price per litre. Much fairer and simpler.

... and the petrol station doesn't pipe it to your house.... not exactly a great comparison...

Try telephone lines, where you pay a line rental and a usage charge... that would seem closer to the point.

Astria

MWT said:

Sailbad said:

Consider the other energy you buy - fuel for your car. You don't pay a daily standing charge to cover the cost of the network of filling stations, just a straight price per litre. Much fairer and simpler.

... and the petrol station doesn't pipe it to your house.... not exactly a great comparison...

Try telephone lines, where you pay a line rental and a usage charge... that would seem closer to the point.

Maybe 20 years old yes, but now it's all "Line rental, which comes with free usage", for example, I pay £7.50 for my mobile phone contract which comes with the first 300 minutes free of charge.

Maybe energy companies could do likewise, £15/month standing charge with first 30 kWh per month included. It would have to be a smart meter only tariff though otherwise things could get messy. Probably easier to charge £9/month and bill for each kWh, like they do already.

savers_united

No need to complicate things, all fixed costs and obligations should be lumped into the standing charge so everyone pays their share to maintaining / improving the network, the social funds and any addtional costs such as SOLR costs and if it happens this new loan scheme.

The unit rate should only reflect the cost of the energy, supplier charges and the method of payment.

What is happening is that all these extra loans, SOLR costs, network costs are being unfairly levied onto the highest users via the unit rate for something that we all benefit from, whether that be the Ofgem supplier promise to keep supply flowing if there is a supplier failure, compensation if you lose power, a response from the network provider if you have gas leaks or power cut or if you need the meter replaced / upgraded. These are all fixed costs that should be shared evenly, outside of these charges if you use more energy you pay more, if you use less you pay less.

The petrol station comparison is totally different, as many of the costs mentioned above, social funds, compensation, fuel station going bust, a dedicated number for home response etc do not apply.

That would be better compared to having home heating oil delivered.

jrawle

While I do realise that things have changed with the current state of the energy market, in previous "normal" times, you have to remember that it was a free market with private companies deciding how to price their products. Even when the price cap was introduced, it was intended to stop people who don't bother to switch from being ripped off, not as a protection from soaring wholesale prices. I doubt anyone imagined the cap would one day serve the latter purpose.

Many people commenting here seem to be caught up with thinking the standing charge has to be for fixed costs, and the unit cost proportional to the cost of the energy used. I would just think of it as part of the way private companies choose to price their product. In "normal" times, it was the only way companies could differentiate themselves (OK, there is customer service levels, and any green credentials or extra gimmicks, but mostly it's about price) and the only sensible way to choose a tariff was to put your actual usage into a comparison site and see which ones come out cheapest for you. The only reason different suppliers are suitable for different people is because the customers use different amounts of energy. If there was just a simple kWh rate, why would anyone choose anything other than the cheapest supplier (all else being roughly equal)?

Now the the obligatory analogy. Pretty much anything you buy in a supermarket is cheaper if you buy a larger quantity. Milk in Sainsbury's is 60p for 1 pint, but only 89p for 2 pints. You can argue whether that's fair or not, but what people don't discuss is whether there should be a fixed cost to cover things like staffing, heating and lighting, and the remainder should be scaled with the volume of milk you buy. (Transport is tricky to categorise as it's more expensive to transport a heavier bottle.)

People have vested interests here. Light users want no standing charge, and heavy users want a cheaper unit rate. I'd suggest the solution is a balance between the two. What doesn't make sense is to link the pricing to a breakdown of the supplier's costs, any more than it does for products in the supermarket.

MWT

jrawle said:

People have vested interests here. Light users want no standing charge, and heavy users want a cheaper unit rate. I'd suggest the solution is a balance between the two. What doesn't make sense is to link the pricing to a breakdown of the supplier's costs, any more than it does for products in the supermarket.

The problem right now is the cap has become the price...

It does make sense to set a cap based on a breakdown of costs, the problem is when the costs are going up so fast that the methodology for the cap lags too far behind and the cap then becomes the price...