Time to ditch the standing charge?

gt94sss2

Hysteron said:

The idea of line rental of a telephone line is outdated but for now it is the main method for consumers to receive broadband access and in that case, then there has to be a payment due to the owner of the line no matter who supplies your internet access. Companies supplying broadband through cable such as Virgin do not charge line rental as the cost of their service is all-inclusive. Virgin users, therefore, have the option of getting rid of their phone line rental costs and using a mobile for calls.

All ISPs, including Virgin, have to advertise their monthly broadband charges including the line rental element.

It's not necessary to have a voice line though - even BT let you have internet only lines with no voice service

Chrysalis

You could argue the standing charge should have some weighting to it so it rises a bit on heavy usage, but the companies might argue thats already accounted for in the unit rate.  I expect the standing charge is literally to cover the fixed rate of actually the costs per household.

Of course when we talk about the ofgem standing charge levy which is basically what they added to recover credit fees, there is little doubt that households of single adults are more burdened on a per person basis vs say 2+ adult households.  For people with extremely low usage it will have a significant impact on bill % wise.  I expect ofgem simply didnt care, as they quote everything in "averages".

Ultrasonic

Hysteron said:

Ultrasonic said:

Arguably I and many other benefited from cheaper energy as a result. Given that energy companies did go bust there were definitely other real benefits too, much as we'd all have preferred they weren't needed.

Your argument though was that you "benefitted from the SOLR process" not that you may have gotten cheaper energy.

In what way then do you think you have benefitted from SOLR in comparison say with customers of Bulb, a company that also went bust and who haven't had any obvious "benefit" from SOLR?

There is no 'argument' that I and others benefitted from the SOLR process. We didn't lose credit balances or go hunting for new suppliers who wouldn't have wanted us as we'd have lost them money at price cap rates. I mentioned the cheaper energy part in specific response to a different post. What happened with Bulb only did because the SOLR process couldn't cope. This was an emergency measure not a previous plan.

PennineAcute

gt94sss2 said:

PennineAcute said:

My parents pay BT for a landline which is for emergency use only.  They use their mobiles for day to day use.  I think their line rental is £18 a month.

If your parents have the phone line with no broadband on it, they can reduce the line rental to around £12/month.

See https://www.ispreview.co.uk/index.php/2020/12/bt-to-continue-discount-for-landline-only-uk-phone-users.html

Much appreciated.  I'll pass this on to them.

Thrugelmir

Hysteron said:

Thrugelmir said

Which is only fair.  Until there's a system designed which is equitable to everyone.

You agree then that the system as it stands now is unfair as it is clearly not "equitable to everyone."

Quoting out of context is all too common these days. In an attempt to seek confirmation of ones own views. 

MWT

Hysteron said:

What is obviously fair is that you pay for what you use, that is true in everything else so why not energy? I don't get this "costs of infrastructure" since clearly, Sky didn't need a standing charge to bring Satellite TV into our homes or for Virgin to bring cable there, the standing charge is simply a way for the energy companies to guarantee a fixed return from the consumer even if they sell no energy at all. Nothing wrong with that as a way to do business but it absolutely is negative for the consumer for whom the standing charge forms a large proportion of their overall bill and it beats me as to why so many here speak up in favour of it.

The problem with your analogies is that you are comparing competitive markets with a regulated capped market.

When the Ofgem cap represented a limit on maximum pricing set above the cost of supply we saw competitive pressures delivering low or no standing charges with any levies absorbed into the total pricing structure.

What you see now is a direct result of the cap representing a limit set below the cost of supply which forces the suppliers to maximise their returns within the allowed limits.

You are also equating low income with low use which is not necessarily true either, if you shift the burden of paying the costs covered in the standing charge onto the the kWh cost then you also disadvantage those living in poorly insulated rental property, those will age/medical needs for increased warmth, and at the same time giving advantages to those with 2nd homes, large solar arrays etc.

The standing charge is naturally going to represent a higher percentage of the income of poorer people, and that is the same for a loaf of bread or a pint of milk, the answer though is not to try to shift the burden of paying for what they need onto another arbitrary allocation method (kWh use) but to make sure that the welfare system delivers adequate support to those in need.

merchcon55

Using the following example for a user of 3600 KWH electricity.

This is 300 KWH per month. If 28p per KWH = 84.00
Standing charge for 30 days at 45p per day =   13.50
Total monthly charge = 97.50

If we had a two tier price system (as things were give or take 20 years ago)

The first 50KWH per month charged at 60p per KWH = 30.00
The next 250KWH per month charged at 26p (vs 28p) = 65.00
Total monthly charge = 95.00

I do not recall from the two tier system if the first (in my example) 50KWH were priced at more than double the "after 50 KWH rate", but it was a rather large difference for sure.

Which is better? 

[Deleted User]

Chrysalis said:

Of course when we talk about the ofgem standing charge levy which is basically what they added to recover credit fees, there is little doubt that households of single adults are more burdened on a per person basis vs say 2+ adult households.  For people with extremely low usage it will have a significant impact on bill % wise.  I expect ofgem simply didnt care, as they quote everything in "averages".

Ofgem to all intents and purposes is Government as it is a non-Ministerial Department within BEIS. In a democratic and civilised society, nothing is ever fair on everybody. For example, a working couple with no children will pay two NI contributions whereas a couple with 3 young children and a non-working Mum will pay a single NI contribution - all will get access to the NHS but the family with children will get help with early years etc. My standing charges contribute towards WHD; free boilers etc for those most in need. As I am in the fortunate position of not needing that help then I could argue for a standing charge discount, but I won't.

I have though long argued that consumer credits should be protected by an industry bond. For example, airlines have to place a bond with the CAA to cover the total number of seats on all their aircraft. If they want to increase passenger numbers by increasing the size of their fleet, then this becomes a re-application to the CAA who will seek a higher bond. These costs are passed onto customers in the form of higher airline charges.

Ofgem could have done the same for energy companies but it elected to go down the Ofgem Levy route. In many ways this is similar to a public sector scheme that I paid into £30 years ago. I paid a very small sum of money each month and, in the event of my death, my widow would get an immediate cash payment to cover essential costs whilst my affairs were sorted out etc. Clearly, the cost of the scheme was covered by the many who would never make a claim. The levy works in a similar way - albeit, retrospectively.

I get it that people don't like standing charges or, indeed, high energy costs but the present cost of living crisis is much bigger than just energy. 

maisie_cat

Hysteron said:

Energy is not something anyone can do without, so you are forced to pay the standing charge no matter your circumstances or how much energy you use. This is just not working for the poorest households in our society who are paying a far greater % of their income as a result. The consequences of this will become a lot clearer before next winter is over.

Agreed we can't do without power, but you can disconnect from the grid if you feel that the fixed costs associated with the grid are too high. Households with lower incomes will always pay a greater % on essentials. Just our council tax, water & energy are 25% of our income. A few years ago it was 6% but times change.
As every household receives or potentially receives the benefit from the SC in equal measure it makes sense.

MattMattMattUK

Hysteron said:

The ultimate Supplier of Last Resort is of course the UK government who had to put Bulb into "special administration" because no energy company would dare take on an extra 1.7 million customers with the current market conditions.

The fact is that there is no scheme that is good enough to protect all consumers of energy from companies going bust without having the government available to step in when it all goes wrong and at the end of the day it is the consumers that will pay every penny of the additional costs of business failures through taxes or energy bills.

There is a fairly simple scheme which could cover it, but the smaller energy providers objected. The idea was that all customer credits went into an escrow/protected account, with the funds only drawn down on when used, the smaller providers objected because they used customer credits for cashflow and would not have been viable. 

Hysteron said:

FWIW I too believe the increase in standing charges to be a very unfair way of clawing back this money, a number of charitable organisations based in the UK totally agree with that and have produced reports in the past few days that state how the poorest are the most affected and end up paying a far greater % of their income on energy bills as a result.

Fairness is always highly subjective. The charities can claim what they think is fair or not, but in reality what they were asking for was for medium and high users to subsidise low users/second home/holiday let owners. The standing charge and unit cost system means that in theory everyone pays for what they use (network provision + units consumed), of course there is some variance as some people benefit from social tariffs where as others do not, but that is the general principal. What the charities were really saying is that they wanted one group of users subsidised by another, which in their mind was "fair".