Energy prices held but standing charge up

sevenhills

I believe it is band A, £150k value. We have had zero standing charge tariffs before.
It makes no sense to have different standing charge depending on area

matt_drummer

sevenhills said:

I believe it is band A, £150k value. We have had zero standing charge tariffs before.
It makes no sense to have different standing charge depending on area

So, in your scheme, band A would pay the least or nothing?

Standing charges reflect the costs of supply in that area, makes perfect sense.

Houses cost more in London because of the area they are in.

matt_drummer

sevenhills said:

I believe it is band A, £150k value. We have had zero standing charge tariffs before.
It makes no sense to have different standing charge depending on area

There is a zero standing charge tariff available, there's a thread on it.

It will cost about 60p a day extra for the first two units consumed.

About the same as the daily standing charge, but at least you won't be paying a standing charge.

All you need to do is use less than 2kwh per day and you're laughing.

There's no such thing as zero standing charge, it's just presented differently with an inflated charge for the first part of the daily consumption.

The supplier still has to pay the standing charge on your behalf even though they don't call it that on your bill.

Honestly, I would just forget about it, it is what it is and there is nothing you can do about it.

The only way to avoid it is to use no electricity or gas.

ariarnia

sevenhills said:

I believe it is band A, £150k value. We have had zero standing charge tariffs before.
It makes no sense to have different standing charge depending on area

if your house is worth £150k and band a. around here a house worth £150k is band e (band a is £40k ish). 

under your idea why should someone in this area in a house that cost the same as yours pay standing charge for electric when you dont?

logically your area is richer than here (or at least the houses cost more) so maybe your area should pay more council tax and other costs so poorer parts of the country with less expensive houses dont have to?

only fair right?

Spoonie_Turtle

ariarnia said:

sevenhills said:

I believe it is band A, £150k value. We have had zero standing charge tariffs before.
It makes no sense to have different standing charge depending on area

if your house is worth £150k and band a. around here a house worth £150k is band e (band a is £40k ish). 

You might be confusing the 1991 values with today's values.

Edit: nope, completely misunderstood the post, sorry.  I see what you meant, now.

dealyboy

Referring to the OFGEM explainer there are six cost areas for suppliers, four of which are funded from the Standing Charge::

Social and Environmental Obligations

Of the half a dozen or so Environmental and Social Schemes that a supplier may be required to fund from the Standing Charge. My view on whether a particular scheme should be funded by the Standing Charge varies:

There are grants such as the Boiler Upgrade Scheme and the Energy Company Obligation 4 Scheme (for those on low incomes / fuel poverty / vulnerable households) and subsidies such as the Warm Home Discount scheme.
- I think these should not be funded by the Standing Charge as it currently stands, as they are as a result of social policies they should be funded by general taxation.

Schemes to subsidise the supply of 'green' energy such as The Green Gas Levy and The Renewables Obligation.
- These existing schemes should be funded by the Standing Charge in my view, but whether they should exist is another topic.

Network Costs

The cost of supply and of UK energy distribution by the Network Operators at a rate regulated by OFGEM.
- I think it is fair to have this as a flat rate charge as we are all users indirectly.

Direct Costs

For meter installation and maintenance for example.
- Should be in the Standing Charge

Failed Supplier Administration

The costs involved of managing the support and takeover of a failed supplier.
- There is an argument that what we have seen is a failure in regulation by OFGEM. Should this cost be born by the Standing Charge, so we all pay the same? I suppose it is the fairest way, but I say this through gritted teeth, I would like to see some accountability.

Section62

matt_drummer said:

...
For the average consumer the wires and cables are the same, it costs the same.

Do you think Rishi Sunak should now pay no standing charge as he has paid for his own supply?

It's ridiculous, there has to be some standing charge, the difference between what anyone might consider reasonable and what is considered a rip off is peanuts.

Again, the costs of "wires and cables" for two consumers can vary widely, even for neighbours.  The concept of "average consumer" here makes no sense.  There are good reasons for having a standardised standing charge, but this isn't one of them.

Rishi Sunak hasn't "paid for his own supply".  If the rumours are true he will have paid a charge for part of the local distribution network to be upgraded.  If you follow the "it costs the same" argument then he should have got this upgrade for free. This example demonstrates how network costs can vary between consumers and that the standing charge doesn't really cover it.  The best of British tabloid jounalism has linked this work to his swimming pool, but as far as I can see it isn't clear whether this is a pure capacity upgrade, or one needed for resilience. And we will probably never know.

There doesn't "have" to be a standing charge.  It is simply the case that the government and regulators have decided that splitting the costs between a standing charge and unit prices is the fairest way of charging for electicity (and gas) use.  It is an artificial construct.  It is also helpful for politicians to be able to 'hide' the costs of their policy decisions within, with plenty of people willing to believe that the standing charge is there to pay for "wires and cables".

Discussions like this one typically come down to a basic fact.  People who use a lot of energy have slightly lower bills because some of the costs are shifted onto people who use less energy. People who use less energy have slightly higher bills because the standing charge disproportionately allocates costs to them. Unsurprisingly, in general terms people in the two camps will argue either for or against standing charges.  Essentially it is the same as most discussions about taxes and charges - most of us want to pay less, and would support a method which is to our personal advantage.

matt_drummer said:

Please explain to us all how no standing charge would work, who would pay the fixed costs that you understand exist?

It has already been said that the fixed costs could just be allocated into the unit rate, as happened before Ofgem decided that a separate standing charge would make bills easier to understand.

My question to you is how should the fixed costs of my heating oil and coke supplier be paid for?  Do you think I should have to pay them a standing charge to have a supply of oil and coke?  And no, they don't have "wires and cables", but they do have fixed costs.  Why are their fixed costs treated differently?

The answer to that is it is simply a policy decision by government and the regulators.

MattMattMattUK

Section62 said:

My question to you is how should the fixed costs of my heating oil and coke supplier be paid for?  Do you think I should have to pay them a standing charge to have a supply of oil and coke?  And no, they don't have "wires and cables", but they do have fixed costs.  Why are their fixed costs treated differently?

Do your heating oil and coke supplier have to maintain a direct connection to your property regardless of how much you buy from them?

Section62 said:

The answer to that is it is simply a policy decision by government and the regulators.

Everything is a policy decision, but that does not change the position that there are two components to energy supply, fixed network costs and consumption costs, they could be combined, they could be split. Splitting them generally leads to cost being applied proportionally regardless of one's usage, combining then into one unit cost leads to average and higher users subsidising low users. The policy decision was that people should pay for a relatively close approximation of their cost, standing charge to cover the fixe costs and unit rates to cover the cost of consumption, that would seem to be a rational and fair approach, rather than one where one group are asked to subsidise another via energy bills based on consumption. 

matt_drummer

Section62 said:

My question to you is how should the fixed costs of my heating oil and coke supplier be paid for?  Do you think I should have to pay them a standing charge to have a supply of oil and coke?  And no, they don't have "wires and cables", but they do have fixed costs.  Why are their fixed costs treated differently?

Do they drive to you every day and ask if you need any oil or coke today?

There are no fixed costs in supplying your oil and coke, there are fixed costs of running their business.

If you buy no oil or coke they have no costs of supplying you.

The only costs they have are when they deliver to you, and therefore, those costs are variable as they vary between nothing and something depending on whether you buy or not.

matt_drummer

Section62 said:

It has already been said that the fixed costs could just be allocated into the unit rate, as happened before Ofgem decided that a separate standing charge would make bills easier to understand.

I buy almost no electricity each year, if the standing charge is in the unit cost it means I will pay nothing towards the fixed costs of supply even though I am connected to that network and make use of it every day. I am relatively well off.

My neighbours are on low incomes and have two disabled children. They heat their home with electricity, their home is less well insulated than mine and they need to keep their home warm 24 hours a day and run specialist medical equipment. Now that the standing charge has been incorporated into the unit cost (let's say based on average usage) and they use five times the average, they will be paying the standing charge five times!

So my standing charge has reduced to zero and theirs has increased by 500%.

How has that helped a low income family?

All it has done is penalise them and benefit a well off person like me!