High standing charges for gas and electric.

bristolleedsfan

MattMattMattUK said:

bristolleedsfan said:

MattMattMattUK said:

silverwhistle said:

I know the arguments have been rehearsed before, but on a skim of this thread I haven't seen any mention of how regressive high standing charges are, although there has been some mention of the impact on low users.

It is not progressive or regressive.

The standing charge covers (some) of the network costs, that is what it is designed for. Therefore everyone who is connected to the network pays for it. Those who want lower standing charges, charges which will be below the cost of maintaining their connection are asking to be directly subsidised by other energy users. That does not mean low users are contributing more than heavy users. 

Moving "up to" £30 per year from unit rate to SC  from April 1st was regressive
https://uk.search.yahoo.com/search?fr=mcafee&type=E210GB691G0&p=regressive+meaning
"taking a proportionally greater amount from those on lower incomes"

. It was not moved from one to the other. Both the standing charge and unit charge were increased proportionally to their allocated costs. 

https://twitter.com/OctopusEnergy/status/1527259378700767233

https://twitter.com/MartinSLewis/status/1527248734140104706?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1527248734140104706%7Ctwgr%5E%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fforums.moneysavingexpert.com%2Fdiscussion%2F6362160%2Felectric-and-gas-standing-charges

QrizB

bristolleedsfan said:

https://twitter.com/OctopusEnergy/status/1527259378700767233

https://twitter.com/MartinSLewis/status/1527248734140104706

Both those posts relate to the SoLR costs, and I respectfully disagree with Saint Martin of Lewis when he states:

It ... means cutting usage has less impact on bills.

On the October cap, redusing your electricity consumption by 1kWh reduced your bill by ~21p. On the April cap, the same reduction saves you ~28p. Cutting usage now has more impact on bills, not less.

Put another way, the entire electricity standing charge for an average user is around £165. If every penny of that was moved to the unit cost, it would increase the unit cost by just under 6p. That's a smaller effect than the April increase in the unit price was.

People who aren't motivated to reduce consumption by a 7p/kWh increase aren't likely to be any more motiviated by a 6p/kWh increase.

bristolleedsfan

QrizB said:

bristolleedsfan said:

https://twitter.com/OctopusEnergy/status/1527259378700767233

https://twitter.com/MartinSLewis/status/1527248734140104706

Both those posts relate to the SoLR costs, and I respectfully disagree with Saint Martin of Lewis when he states:

Greg Jackson clearly states within 1.5 minute video, three reasons standing charges have increased
1. Expansion of WHD
2. SOLR costs
3. Ofgem moving costs/charges from Unit Rate to SC, that is what Martin Lewis has requested Ofgem reverse and is what Octopus Energy ( they opposed) and Cornwall Insight refer to as  recent regulatory changes.

MWT

bristolleedsfan said:

Moving "up to" £30 per year from unit rate to SC  from April 1st was regressive
https://uk.search.yahoo.com/search?fr=mcafee&type=E210GB691G0&p=regressive+meaning
"taking a proportionally greater amount from those on lower incomes"

To be more accurate though, higher standing charges take a proportionately higher amount from those who consume less energy.

These are not necessarily those on lower incomes including as it does, 2nd homes, holiday lets, those invested in large solar arrays etc.... while the elderly on fixed incomes are likely to be using disproportionately more energy for heating despite their lower incomes and could ill-afford to have more of the current static costs shifted onto the kWh side of their bills...

When you take any product that has a static and a variable component, any increase in the static component is axiomatically going to be regressive if you assume that low variable use = low earnings...

Also as others have pointed out, regarding incentives to cut energy use, the impact on the 'typical' user really doesn't reach a level where the standing charge exceeds about 20% of the annual total energy bill, so there remains a huge opportunity to save from that remaining 80%... ... for those already well below the typical use level there really isn't a whole lot more they can do to reduce use, so the benefit of energy saving remains well focused on those with the largest opportunity to reduce...

pochase

If you look at this Ofgem block from 25th of May, they are not reviewing the whole standing charge, but just the SOLR portion of it,

https://www.ofgem.gov.uk/news-and-views/blog/how-ofgem-responding-energy-crisis

Ofgem Chief Executive Jonathan Brearley set out how we are working to make the retail energy market more resilient at the BEIS select committee yesterday (24th May 2022)

If we find evidence of suppliers not treating consumers fairly or complying with our rules, we will take swift action and make full use of our enforcement powers. Equally, we have heard concerns from consumer groups around charges. Therefore, we will review the allocation of the SOLR levy between standing and volumetric charges to ensure they are fair for all consumers, and will be coming forward with our thinking very soon.

So how could that work. Will they add x P to every KWh electricity until the SOLR cost is paid off? 

At the moment it is still at the status they are reviewing it, not that they will really change something. I am interested to learn what they believe is fair for all consumers. 

GingerTim

pochase said:

If you look at this Ofgem block from 25th of May, they are not reviewing the whole standing charge, but just the SOLR portion of it,

https://www.ofgem.gov.uk/news-and-views/blog/how-ofgem-responding-energy-crisis

Ofgem Chief Executive Jonathan Brearley set out how we are working to make the retail energy market more resilient at the BEIS select committee yesterday (24th May 2022)

If we find evidence of suppliers not treating consumers fairly or complying with our rules, we will take swift action and make full use of our enforcement powers. Equally, we have heard concerns from consumer groups around charges. Therefore, we will review the allocation of the SOLR levy between standing and volumetric charges to ensure they are fair for all consumers, and will be coming forward with our thinking very soon.

So how could that work. Will they add x P to every KWh electricity until the SOLR cost is paid off? 

At the moment it is still at the status they are reviewing it, not that they will really change something. I am interested to learn what they believe is fair for all consumers. 

I'm not convinced that shifting the SOLR cost onto 45p+/kwh unit rates would be any more popular!

pochase

It will be popular with ultra low energy users @GingerTim

It is a question who defines what is fair. Is it fair if somebody who has a holiday property pays a lower standing charge, while a family with a disabled child pays for his savings through the higher unit rates. Or is it fair if a low user pays more in standing charges than for the real energy. What fair will Ofgem decide is fair.

Not every user who uses not much energy is poor, and not every high energy user has money to burn.

GingerTim

Very true, @pochase - completely understand the problems of ensuring any changes are fair. 

I tend to think that, however imperfect the application of the SOLR levy is upon the standing charge, it's probably the fairest, or perhaps least worst, way of doing it. (Said as a pretty low user).

Astria

GingerTim said:

pochase said:

If you look at this Ofgem block from 25th of May, they are not reviewing the whole standing charge, but just the SOLR portion of it,

https://www.ofgem.gov.uk/news-and-views/blog/how-ofgem-responding-energy-crisis

Ofgem Chief Executive Jonathan Brearley set out how we are working to make the retail energy market more resilient at the BEIS select committee yesterday (24th May 2022)

If we find evidence of suppliers not treating consumers fairly or complying with our rules, we will take swift action and make full use of our enforcement powers. Equally, we have heard concerns from consumer groups around charges. Therefore, we will review the allocation of the SOLR levy between standing and volumetric charges to ensure they are fair for all consumers, and will be coming forward with our thinking very soon.

So how could that work. Will they add x P to every KWh electricity until the SOLR cost is paid off? 

At the moment it is still at the status they are reviewing it, not that they will really change something. I am interested to learn what they believe is fair for all consumers. 

I'm not convinced that shifting the SOLR cost onto 45p+/kwh unit rates would be any more popular!

It sounds like they may come up with a plan that vulnerable customers will be supported more and possibly pay less, compensated for by government and thus funded by the people who don't qualify as being vulnerable. Whether this is funded through energy bills or other taxes we don't yet know. Maybe we'll start seeing tariffs for vulnerable/low income people only?

Sea_Shell

Astria said:

GingerTim said:

pochase said:

If you look at this Ofgem block from 25th of May, they are not reviewing the whole standing charge, but just the SOLR portion of it,

https://www.ofgem.gov.uk/news-and-views/blog/how-ofgem-responding-energy-crisis

Ofgem Chief Executive Jonathan Brearley set out how we are working to make the retail energy market more resilient at the BEIS select committee yesterday (24th May 2022)

If we find evidence of suppliers not treating consumers fairly or complying with our rules, we will take swift action and make full use of our enforcement powers. Equally, we have heard concerns from consumer groups around charges. Therefore, we will review the allocation of the SOLR levy between standing and volumetric charges to ensure they are fair for all consumers, and will be coming forward with our thinking very soon.

So how could that work. Will they add x P to every KWh electricity until the SOLR cost is paid off? 

At the moment it is still at the status they are reviewing it, not that they will really change something. I am interested to learn what they believe is fair for all consumers. 

I'm not convinced that shifting the SOLR cost onto 45p+/kwh unit rates would be any more popular!

It sounds like they may come up with a plan that vulnerable customers will be supported more and possibly pay less, compensated for by government and thus funded by the people who don't qualify as being vulnerable. Whether this is funded through energy bills or other taxes we don't yet know. Maybe we'll start seeing tariffs for vulnerable/low income people only?

Then they need to come up with an answer to the pre-pay meter cost disparity first, as it's mostly (AIUI) low income households that are most likely to be on pre-pay....paying more.


Which could trigger a flood of people wanting to move to pre-pay meters to benefit from these new tariffs.   So some sifting of "need" would be required... who'd do that?  Who'd pay for the extra admin of implementing that?

Would they have to be state funded "social" tariffs?