Campaign to ban Standing Charges

ariarnia

wittynamegoeshere said:

Deleted_User said:

wittynamegoeshere said:

Well that was a very informative answer.

They use the power lines, which require upkeep, perhaps you have some secret industry terminology.

What's the actual point you're trying to make?

Closest analogy elsewhere is probably the transportation (particularly road) network, where there is a cost for the fuel and a cost for the infrastructure, each paid to a different industry participant.  It just happens that in that case, the infrastructure cost is paid from general taxation (apart from toll roads) and you don't see it in the same way, whereas in the case of energy your supplier collects everyone's part on their behalf before passing it on.

Let's run with your roads analogy.  If you own a car you're an operator on the roads network - you are paying road tax (fixed) and fuel (variable).  Agreed.

But a business running on that road network charges its customers a simple fee.  A taxi charges a fare, which is one simple price.  They don't charge an annual membership fee.  I, as their customer, don't need to know or care how much they pay for road tax, tyres or the local car wash.

All businesses have fixed overheads, there's absolutely nothing unusual about the energy industry in this respect.  What is unusual is that they can pass this directly to their customers, regardless of how much of their product they buy.

if you own a car you are a USER of the road networks. you buy your fuel from a supplier (who includes in the cost all the relevant taxes for the government) and the price varies depending on how much you drive. you also pay a separate fee for the maintenance of the roads you use that is a flat rate even if you dont use the roads every day or drive very far. 

your taxi example is more like the people we see who are in managed apartment blocks or who have sub-meters. they dont drive on the road themselves. they use someone else's car. 

[Deleted User]

wittynamegoeshere said:

Deleted_User said:

wittynamegoeshere said:

Well that was a very informative answer.

They use the power lines, which require upkeep, perhaps you have some secret industry terminology.

What's the actual point you're trying to make?

Closest analogy elsewhere is probably the transportation (particularly road) network, where there is a cost for the fuel and a cost for the infrastructure, each paid to a different industry participant.  It just happens that in that case, the infrastructure cost is paid from general taxation (apart from toll roads) and you don't see it in the same way, whereas in the case of energy your supplier collects everyone's part on their behalf before passing it on.

Let's run with your roads analogy.  If you own a car you're an operator on the roads network - you are paying road tax (fixed) and fuel (variable).  Agreed.

But a business running on that road network charges its customers a simple fee.  A taxi charges a fare, which is one simple price.  They don't charge an annual membership fee.  I, as their customer, don't need to know or care how much they pay for road tax, tyres or the local car wash.

All businesses have fixed overheads, there's absolutely nothing unusual about the energy industry in this respect.  What is unusual is that they can pass this directly to their customers, regardless of how much of their product they buy.

However if I travel for work, and use a toll road, my client will be billed for fuel plus the fixed expense of the toll (as that is the actual expense which I have incurred).

A fixed cost, directly attributable to a customer, can be charged to that customer.  This is a normal business practice.

There is a difference between general fixed overheads and the directly attributable costs.  The way the relevant components that make up the standing charge are calculated makes them much more similar to the latter.

A business could choose to socialise these costs, rolling them up into the general overheads that then get spread in the normal price - and some suppliers did before the cap calculation conditions stopped them from doing so.  I would expect that when the licence conditions change, some suppliers will resume that practice.  It doesn't mean that it's 'wrong' if they don't though.

tizerbelle

Can we also remember that being "poor" and a "low energy user" are not one and the same. 

Many poorer members of society live in less insulated, less energy efficient properties, often with older and potentially less efficient appliances and frequently as tenants so no access to grants to improve the insulation, heating efficiency etc.  Increased unit charges would hit these families the hardest.  

matelodave

In the good old days, you usually paid a higher ratee for the first 2-3 units a day and then a lower amount for anything else you used - it was a standing charge by another name but for some reason was discontinued as it confused people.

However it did have the advantage that if you didn't use any you didn't pay a standing charge

As said above ,a low user isn't necessarily poor and a high user may be poor, have health issues or have an old or expensive to run heating system which they cant do anything about. How do you define a low user?

What about tthose who've got lots of kids at home, or pensioners who are at home all day who use more energy than a couple who are out all day - should they be paying more for their energy through no fault of their own so the whingers and selfish can avoid paying a standing charge..

I've always postulated that the best way id to charge those who live further away from the generation source than those who live closer, that's much fairer as they use more of the infrastructure to get energy to their houses which obviously costs more to implement and maintain.

You could also implemet a system whereby you had to pay a fee if there was a power cut or line fault.

 I guess all those up in the North would have been highly delighted to end up with a ginormous bill after the destruction due to high winds earlier this year whilst the rest of us down south enjoyed lower or zero standing charges.

wittynamegoeshere

This is one of those internet debates that's a bit pointless really.  Anyone can point out any issue with anything if they choose to.

There are pros and cons to either approach, winners and losers, deserving or not.  There are definitely lots of losers with the current system, but that proves nothing.

The judgement is in deciding how many winners or losers there are with each approach and making a decision on what's the best method on balance, and I'm pretty sure that none of us have access to the data that would define how many of each there would be, plus I'm certain that none of us has the authority to decide how it should be done so none of it matters really.

Analogies can be unhelpful at times, it's quite easy to stray so far away from the actual subject that you lose track of the point.

I stand by my original point that the vast majority of businesses do not pass their fixed overheads directly to customers, they absorb these costs and charge a competitive price that covers their costs, while competing against their competitors.

Obviously there are exceptions, but this is not how competitive markets generally work.  The standing charge is effectively a membership fee - if you don't pay it you can't have any energy at all, ever, not just this week.  This sort of approach to customers is highly unusual, as I say Costco is the only similar example I can think of off the top of my head.

Astria

wittynamegoeshere said:

pochase said:

You mean the poor users with their second  or third homes?

Petrol is charged per litre.  I don't need to pay any of the fixed costs of the retailer I'm buying it from.

Most petrol stations have both a minimum delivery and a minimum charge, so technically you are. Once everyone has smart meters there's nothing stopping energy companies doing the same - £1/kWh with minimum of 4 kWh per day.

[Deleted User]

It's especially pointless when you insist on ignoring anything anyone says and misunderstanding the situation by comparing incomparable concepts.  There are hundreds of examples of pass-through direct costs, or of requiring a fixed cost to access a service or function beyond membership fees.  You are choosing to ignore all of these with your quite bizarre insistence that only one way of business is permissible despite any evidence to the contrary.

The original topic was "campaign to ban standing charges".  Banning a legitimate way of pricing doesn't seem like "how competitive markets generally work" to me.  Letting suppliers choose if they want to pass on the attributable costs directly as standing charges or if they wish to roll them into unit costs seems much more like correct and competitive market behaviour.

Spoonie_Turtle

tizerbelle said:

Can we also remember that being "poor" and a "low energy user" are not one and the same. 

Many poorer members of society live in less insulated, less energy efficient properties, often with older and potentially less efficient appliances and frequently as tenants so no access to grants to improve the insulation, heating efficiency etc.  Increased unit charges would hit these families the hardest.  

This is a very important point that frequently gets forgotten/lost in discussions on this topic, along with the points arinaria and dunstonh made about wealthier people being able to afford more energy efficiency measures including solar.


Incidentally Octopus don't like the high standing charges and are actually campaigning against them.  I don't know what they envisage replacing them with, though.   I for one would be extremely miffed if unit rates went up even more because of it - it would feel like being penalised for living in this energy-expensive Housing Association house that we didn't choose (it was the only option anywhere near suitable and we couldn't stay in the previous one) and for being all-electric which again was not our choice because we didn't choose the property.  And there are MANY more like us.

wittynamegoeshere

So, given that standing charges are justifiable, then is it fair that in my massive house in the middle of the countryside I pay the same as someone in a terraced house in a town?  There are as many metres of cable feeding just our house as there are in some streets.  Surely those poor townies are subsidising this rich person?

My point, in case it's too subtle for some, is that there isn't any correlation between the standing charge and that household's fixed costs anyway, and it definitely isn't fair.

The_Green_Hornet

Standing charges should remain but I would like to see them revert back to their original intended use of paying for the cost of delivering energy to the household with all the social and environmental charges shifted to general taxation.