Being "disconnected" as a prepayment customer

km1500

"Are you saying you would be happy paying 46p/kWh instead of 34p/kWh so the SC could be rolled into the unit cost?"

 It's not what I think - I can well afford to pay whatever they charge but if you ask someone who is on the breadline if they would rather have their electricity cut off completely and still incur a daily standing charge which they have to clear before they can even start again,  or being asked to pay a bit more per kilowatt hr in order that they can have the lights on than I know what they would say.

Joyful

People seem to forget there used to be no standing charges. Instead the first few units used were at a higher rate, then it dropped. People complained about this so it was changed.

[Deleted User]

Joyful said:

People seem to forget there used to be no standing charges. Instead the first few units used were at a higher rate, then it dropped. People complained about this so it was changed.

And there used to be many options of tariffs with zero standing charge but a slightly higher unit cost - these unfortunately do not work with the way the price cap is calculated so have vanished.  They could always return after April though.

Ectophile

[Deleted User] said:

Joyful said:

People seem to forget there used to be no standing charges. Instead the first few units used were at a higher rate, then it dropped. People complained about this so it was changed.

And there used to be many options of tariffs with zero standing charge but a slightly higher unit cost - these unfortunately do not work with the way the price cap is calculated so have vanished.  They could always return after April though.

From the supplier's point-of-view no-standing-charges tarriffs are a bit of a dud.  You attract all the customers who use very little energy.  What business wants to attract only the customers who spend the least?

[Deleted User]

Ectophile said:

Deleted_User said:

Joyful said:

People seem to forget there used to be no standing charges. Instead the first few units used were at a higher rate, then it dropped. People complained about this so it was changed.

And there used to be many options of tariffs with zero standing charge but a slightly higher unit cost - these unfortunately do not work with the way the price cap is calculated so have vanished.  They could always return after April though.

From the supplier's point-of-view no-standing-charges tarriffs are a bit of a dud.  You attract all the customers who use very little energy.  What business wants to attract only the customers who spend the least?

You attract people who think they use (or are going to use) very little energy, and then who don't notice the inflated unit rate actually costing them more.

And the people who don't believe in the principle of a standing charge and as such are willing to pay more just because they've beaten the system.

Not a massive market, but when it's competitive again it wouldn't surprise me if some return.

Qyburn

I think at the moment it couldn't be done because suppliers aren't allowed to charge higher than the EPG unit price.  They can discount the standing charge, but can't increase the unit price to compensate.

[Deleted User]

Qyburn said:

I think at the moment it couldn't be done because suppliers aren't allowed to charge higher than the EPG unit price.  They can discount the standing charge, but can't increase the unit price to compensate.

That's correct - it's a result of the calculation specified in the licence condition by which the cap is applied.  Not just the EPG cap though, it was the old cap too, although a couple of suppliers were testing the interpretation (OFTM for one was discussed here at length).

MattMattMattUK

km1500 said:

Hi mancan - thanks for the explanation but why can't those costs be factored into the unit price rather than having a standing charge

They could, but why should they? It is of no benefit to them as it brings in an uncertainty at the amount of revenue, do not forget that the majority of the standing charge is handed straight over to the external companies, the government etc.

km1500 said:

I am sure Shell factor salary, business rates etc into their per-litre cost. They don't charge you £1.50 a litre and 60p a day forecourt pass !

The Shell forecourt is not connected directly to your home, the national grid and gas networks need maintaining, ongoing upgrades, the cost of SoLR etc. are nominally covered by the Standing Charge. The energy providers are also regulated on what they can charge you per kWh, they are allowed to make a maximum of 2% profit. Petrol retailers are not regulated and can build in a wider margin, they also cross-subsidise with sales from the on site shops to maintain viable businesses. 

At the moment the principle is that the standing charge covers the cost of the network, everyone who is connected pays, so that is deemed fair. Energy is charged based on consumption, so that is deemed fair. If the standing charge were increased above cost then low users would be subsidising middle and higher users, if the standing charge was abolished then average and high users would be subsidising low users, both of which are "unfair" scenarios. 

km1500

True, but the same could be said of high usage payg customers subdidising lower usage payg customers. Or small supermarket shopers being subsidised by larger shoppers.

 Yet no one has ever suggested that the person who buys a loaf of bread and a pint of milk from a supermarket or somehow acting unfairly because they are nowhere near covering the cost of the infrastructure

Businesses should cost set the cost of their product by the amount you buy - so for example you buy one litre of fuel you pay for 1 litre or you use one unit of electricity and you pay for 1 unit of electricity

[Deleted User]

Almost every situation is "someone subsidising someone else", the only difference is how directly the subsidy is explained.

Even between the two standing charges, there is a difference in subsidy arrangement.  Neither is 'better', they are just different ways of doing it.

In electricity, people in a licence area are pooled and charged the same SC.  This means that people whose connection is more expensive to maintain (rural, remote, or cable connected for example) are subsidised by others in the same region whose connections are cheaper to maintain (high pop density for example).  But more expensive regions are not subsidised by cheaper ones - hence London having a lower SC than other areas.

For gas, the SC is the same in every region and, therefore, regions cross-subsidise.

You could argue that the SC for 'road use' (to take the forecourt example often cited) is just baked into general taxation - and therefore high taxpayers are subsidising low taxpayers.  Just another way of approaching the same concept.