Campaign to ban Standing Charges

pochase

QrizB said:

pochase said:

That is the reason that they should be removed in April.
If you check the Auxilione forecasts they remove them also in April.

I'm sure Ofgem said we'd be paying for last year's failures for two years, not one. So don't go expecting a big reduction in standing charges in April 2023, no matter what Auxilione might forecast.

I cannot find any statement from Ofgem that talks about 2 years for the recovery. I also remember that I have heard of the two years, but I don't remember that there was a source given for this.

I can only find information that the cost for the bailout is £94 per household (excluding Bulb) including the credit balances of the former customers (June 2022)

The cost of moving customers to new suppliers from 28 failed suppliers since September 2021, including new suppliers having to buy extra gas at short notice while prices were at record highs and replacing lost customer credit balances and green levy/renewables payments, was £94 per household.

https://www.ofgem.gov.uk/publications/ofgem-announces-tough-new-financial-measures-ensure-energy-suppliers-can-withstand-future-shocks-including-protection-customers-credit-balances

So we require an increase in the standing charge for one year of 25.7534p (£94 / 365 days).

That is a bit more than the average increase of 20p in April 2022, so April 2023 seems to be to early for a reduction of standing charges.

If we calculate with 15 months (365+92=457days) and 20p we get to a recovery amount of £91.4 which is almost the cost of £94 Ofgem say it needs to be recovered.

In theory Ofgem has recovered £73 of the £94 by end of March 2023 leaving £21 to be recovered per household. 

I have no idea how they could go about recovering this. In theory they could reduce the 20p SOLR component to 6p for the next year (£21/365=5.7534) reducing the standing charge by average 14p.

Or they could continue with the 20p for another 3 months and recover the remaining £2.60 later.

Or most likely we will start paying for the Bulb bailout in April next year, for at least another 1.5 years.

wittynamegoeshere

There's a lot of straw man arguments being lobbed about here, as well as statements of the obvious.  Obviously it costs money to maintain an infrastructure, clearly someone has to pay for it.  Let's stop having silly arguments against things that nobody's actually saying, that's just insulting and proves nothing.

My point is that the model of fixed+variable cost, which is fairly unique to energy, makes price comparison completely opaque.

I pay a standing charge for the broadband/phone, but don't actually pay any call costs, probably in common with most who use mobiles only these days.  Those who do want to make calls usually get a fixed calls package.  What this means is that, when selecting a supplier, most people can directly compare the fixed fees, including a calls package if they want it, and ignore the per minute call costs that they're not going to pay.  You don't need uswitch to find out whether TalkTalk charges more or less per month than BT, it's obvious to anyone.

I can't think of any other market in which you need a computer to find the best buy, it should be obvious right in front of your eyes.  If it was  then we would get genuine competition, lower prices and consumers not getting shafted by companies that deliberately make their prices as complicated as possible.

Obviously a fixed fee per household as per broadband is not going to work for energy, that would be crazy.  So the alternative would be to make the fixed part of the bill either zero, OR a standard fixed regulated amount across ALL suppliers.  Either way would be fine, then the unit cost would be the only variable and everyone would know which supplier offered the best deal.  Perhaps you could even end up with suppliers printing their prices in massive numbers on billboards, as broadband suppliers do.

The system is designed to stifle competition and ultimately make people pay more.  The entire concept of an energy "market" is contrived anyway, the whole thing is a stageshow with a million rules, price limits and subsidies so another element of regulation wouldn't make any difference, it's not like it's already some kind of model of capitalist economics.

pochase

wittynamegoeshere said:

The system is designed to stifle competition and ultimately make people pay more.  The entire concept of an energy "market" is contrived anyway, the whole thing is a stageshow with a million rules, price limits and subsidies so another element of regulation wouldn't make any difference, it's not like it's already some kind of model of capitalist economics.

Why does the current system make "people" pay more? Are "people" only those with a low energy use? What are high energy users?

The standing charges are set to collect a fixed amount of money that is required for infrastructure, SOLR recovery etc. The only change to the amount collected is if the number of households changes, which is a very low number.

How would you collect a fixed required amount through unit rates? A mild winter would mean not enough money is collect, a harsh winter that to much money is collected. 

Only possibility would be to calculate a surcharge at the end of a period.

Anyway, Ofgem has reviewed standing charges (at least the SOLR part) this year and has made the decision that it is the fairest way to collect the money for the infrastructure etc.

QrizB

pochase said:

QrizB said:

pochase said:

That is the reason that they should be removed in April.
If you check the Auxilione forecasts they remove them also in April.

I'm sure Ofgem said we'd be paying for last year's failures for two years, not one. So don't go expecting a big reduction in standing charges in April 2023, no matter what Auxilione might forecast.

I cannot find any statement from Ofgem that talks about 2 years for the recovery. I also remember that I have heard of the two years, but I don't remember that there was a source given for this.

OK, found it.

Here is the Ofgem proposal:
https://www.ofgem.gov.uk/publications/letter-suppliers-supplier-last-resort-levy-claims

And here is the decision:
https://www.ofgem.gov.uk/publications/decision-letter-supplier-last-resort-levy-claims

In brief, under the normal SoLR timeline suppliers wouldn't have been reinbursed for their costs until the 2023-24 financial year. Ofgem recognised that this would cause cashflow problems and so allowed suppliers to make an initial claim principally for wholesale costs early, so it could be paid in 2022-23 (starting with the April 2022 standing charges). Suppliers will be making an additional claim for all the other costs (and, I would imagine, any unclaimed wholesale costs) for payment in 2023-24.

Table from the Ofgem decision letter:

pochase

Thanks @QrizB

From the above information the whole initial claim should have been collected between April 2022 and March 2023.

The £94 is unlikely to include the second claim from the supplier in June 2022.

So for me that would mean that in April we would have about £21 per household left from the first claim, plus whatever is in the second claim.

It will be interesting to see how Ofgem will adjust the standing charges, if at all.

[Deleted User]

wittynamegoeshere said:

There's a lot of straw man arguments being lobbed about here, as well as statements of the obvious.  Obviously it costs money to maintain an infrastructure, clearly someone has to pay for it.  Let's stop having silly arguments against things that nobody's actually saying, that's just insulting and proves nothing.

My point is that the model of fixed+variable cost, which is fairly unique to energy, makes price comparison completely opaque.

I pay a standing charge for the broadband/phone, but don't actually pay any call costs, probably in common with most who use mobiles only these days.  Those who do want to make calls usually get a fixed calls package.  What this means is that, when selecting a supplier, most people can directly compare the fixed fees, including a calls package if they want it, and ignore the per minute call costs that they're not going to pay.  You don't need uswitch to find out whether TalkTalk charges more or less per month than BT, it's obvious to anyone.

I can't think of any other market in which you need a computer to find the best buy, it should be obvious right in front of your eyes.  If it was  then we would get genuine competition, lower prices and consumers not getting shafted by companies that deliberately make their prices as complicated as possible.

Obviously a fixed fee per household as per broadband is not going to work for energy, that would be crazy.  So the alternative would be to make the fixed part of the bill either zero, OR a standard fixed regulated amount across ALL suppliers.  Either way would be fine, then the unit cost would be the only variable and everyone would know which supplier offered the best deal.  Perhaps you could even end up with suppliers printing their prices in massive numbers on billboards, as broadband suppliers do.

The system is designed to stifle competition and ultimately make people pay more.  The entire concept of an energy "market" is contrived anyway, the whole thing is a stageshow with a million rules, price limits and subsidies so another element of regulation wouldn't make any difference, it's not like it's already some kind of model of capitalist economics.

So what you want, to ensure a competitive market, is "a standard fixed regulated amount across ALL suppliers"?

I think you have misunderstood the concept of competition.

ariarnia

wittynamegoeshere said:

There's a lot of straw man arguments being lobbed about here, as well as statements of the obvious.  Obviously it costs money to maintain an infrastructure, clearly someone has to pay for it.  Let's stop having silly arguments against things that nobody's actually saying, that's just insulting and proves nothing.

My point is that the model of fixed+variable cost, which is fairly unique to energy, makes price comparison completely opaque.

I pay a standing charge for the broadband/phone, but don't actually pay any call costs, probably in common with most who use mobiles only these days.  Those who do want to make calls usually get a fixed calls package.  What this means is that, when selecting a supplier, most people can directly compare the fixed fees, including a calls package if they want it, and ignore the per minute call costs that they're not going to pay.  You don't need uswitch to find out whether TalkTalk charges more or less per month than BT, it's obvious to anyone.

I can't think of any other market in which you need a computer to find the best buy, it should be obvious right in front of your eyes.  If it was  then we would get genuine competition, lower prices and consumers not getting shafted by companies that deliberately make their prices as complicated as possible.

Obviously a fixed fee per household as per broadband is not going to work for energy, that would be crazy.  So the alternative would be to make the fixed part of the bill either zero, OR a standard fixed regulated amount across ALL suppliers.  Either way would be fine, then the unit cost would be the only variable and everyone would know which supplier offered the best deal.  Perhaps you could even end up with suppliers printing their prices in massive numbers on billboards, as broadband suppliers do.

The system is designed to stifle competition and ultimately make people pay more.  The entire concept of an energy "market" is contrived anyway, the whole thing is a stageshow with a million rules, price limits and subsidies so another element of regulation wouldn't make any difference, it's not like it's already some kind of model of capitalist economics.

i really wish you would stop insulting the people who disagree with you. the thread op is saying martin should campaign for scrapping the standing charge. so its not in anyway a straw man to say that there are existing fee free tariffs available if anyone wants them (meaning that there is genuine competition in normal times) and that removing the standing charge would make the price go up which would mean a lot of people would have to pay more. including the poorest and most vulnerable who are often by curcimstance higher users. 

its not that people dont understand what your saying. its that it doesn't seem a good idea to remove customer choice because its not the same as other services that you want to compare it to, a small number of low users would be better off and you dont want to have to search for the best deal for your usage. dumbing things down because some customers can't be bothered to do a search on a comparison site for cheap tariffs is what led to us having the cap int he first place. 

Spoonie_Turtle

[Deleted User] said:

wittynamegoeshere said:

There's a lot of straw man arguments being lobbed about here, as well as statements of the obvious.  Obviously it costs money to maintain an infrastructure, clearly someone has to pay for it.  Let's stop having silly arguments against things that nobody's actually saying, that's just insulting and proves nothing.

My point is that the model of fixed+variable cost, which is fairly unique to energy, makes price comparison completely opaque.

I pay a standing charge for the broadband/phone, but don't actually pay any call costs, probably in common with most who use mobiles only these days.  Those who do want to make calls usually get a fixed calls package.  What this means is that, when selecting a supplier, most people can directly compare the fixed fees, including a calls package if they want it, and ignore the per minute call costs that they're not going to pay.  You don't need uswitch to find out whether TalkTalk charges more or less per month than BT, it's obvious to anyone.

I can't think of any other market in which you need a computer to find the best buy, it should be obvious right in front of your eyes.  If it was  then we would get genuine competition, lower prices and consumers not getting shafted by companies that deliberately make their prices as complicated as possible.

Obviously a fixed fee per household as per broadband is not going to work for energy, that would be crazy.  So the alternative would be to make the fixed part of the bill either zero, OR a standard fixed regulated amount across ALL suppliers.  Either way would be fine, then the unit cost would be the only variable and everyone would know which supplier offered the best deal.  Perhaps you could even end up with suppliers printing their prices in massive numbers on billboards, as broadband suppliers do.

The system is designed to stifle competition and ultimately make people pay more.  The entire concept of an energy "market" is contrived anyway, the whole thing is a stageshow with a million rules, price limits and subsidies so another element of regulation wouldn't make any difference, it's not like it's already some kind of model of capitalist economics.

So what you want, to ensure a competitive market, is "a standard fixed regulated amount across ALL suppliers"?

I think you have misunderstood the concept of competition.

Isn't that virtually what we have now anyway?  Apart from more specialist tariffs (and E7).

[Deleted User]

Spoonie_Turtle said:

[Deleted User] said:

wittynamegoeshere said:

There's a lot of straw man arguments being lobbed about here, as well as statements of the obvious.  Obviously it costs money to maintain an infrastructure, clearly someone has to pay for it.  Let's stop having silly arguments against things that nobody's actually saying, that's just insulting and proves nothing.

My point is that the model of fixed+variable cost, which is fairly unique to energy, makes price comparison completely opaque.

I pay a standing charge for the broadband/phone, but don't actually pay any call costs, probably in common with most who use mobiles only these days.  Those who do want to make calls usually get a fixed calls package.  What this means is that, when selecting a supplier, most people can directly compare the fixed fees, including a calls package if they want it, and ignore the per minute call costs that they're not going to pay.  You don't need uswitch to find out whether TalkTalk charges more or less per month than BT, it's obvious to anyone.

I can't think of any other market in which you need a computer to find the best buy, it should be obvious right in front of your eyes.  If it was  then we would get genuine competition, lower prices and consumers not getting shafted by companies that deliberately make their prices as complicated as possible.

Obviously a fixed fee per household as per broadband is not going to work for energy, that would be crazy.  So the alternative would be to make the fixed part of the bill either zero, OR a standard fixed regulated amount across ALL suppliers.  Either way would be fine, then the unit cost would be the only variable and everyone would know which supplier offered the best deal.  Perhaps you could even end up with suppliers printing their prices in massive numbers on billboards, as broadband suppliers do.

The system is designed to stifle competition and ultimately make people pay more.  The entire concept of an energy "market" is contrived anyway, the whole thing is a stageshow with a million rules, price limits and subsidies so another element of regulation wouldn't make any difference, it's not like it's already some kind of model of capitalist economics.

So what you want, to ensure a competitive market, is "a standard fixed regulated amount across ALL suppliers"?

I think you have misunderstood the concept of competition.

Isn't that virtually what we have now anyway?  Apart from more specialist tariffs (and E7).

Yep.  At the moment there is very little competition in the market.  Particularly as the way the cap is implemented has removed the possibility for zero standing charge tariffs.

Neither banning nor permanently fixing standing charges is a way to improve the competitive market.

markin

Lets just double it and let NG bill it and have call centres and debt collectors just like the tv licence.