Energy prices held but standing charge up

matt_drummer

Section62 said:

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.

People who consume a lot of electricity have much higher bills than people who consume very little, there is not a `slight' difference!

If I use 1,000 Kwh a month more than you my bill will be around £350 a month more than yours.

If I use 5,000 Kwh more than you heating my hot tub and swimming pool my bill will be around £1,750 a month more than yours.

If you use more you will pay more, if you use less you will pay less.

It is also fairly likely that someone using electricity at that level will be paying it from income that they have paid 45% or more tax on.



Maybe I have this wrong but it sounds like you want the standing charge removed so that you don't have to pay it but you are quite happy for wealthier people to pay?

sevenhills

ariarnia said:

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?

The one thing that we need to get away from, is different area paying different rates, that is unfair.
Two very similar houses that have different postcodes or are in different counties would pay different standing charges.
The rating system needs a overhaul, I didn't realise that there were houses in the UK with such a low value.
My area is relatively poor.

Section62

matt_drummer said:

Section62 said:

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.

I'm not sure you understand how the business of supplying coke and heating oil works.

The "fixed costs of running their business" are the fixed costs in supplying oil and coke.  In the same way there are fixed costs in running an electricity (or gas) supply business. The principal difference is one uses vehicles to move the product, the other wires and pipes.  (and supplying via wires and pipes is cheaper than doing so by vehicles (which is one reason why LPG is usually more expensive than mains gas))

They all have fixed costs whether they supply or not.  The distinction between the fixed costs of oil/coke supply, and the fixed costs of electricity/mains gas supply, is largely artificial.

Moreover, the costs of the "wires and cables" to a specific property are only a small part of the overall costs which are included in the standing charge.

matt_drummer said:

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!

Earlier in the thread you said -

matt_drummer said:

If we keep charging those with more money more for stuff to subsidise those with less money, then those that started out with more money with have less than those who started out with less.

It has to stop somewhere.

You can't keep taking money from the better off people until they have nothing left just to support those less well off.

- so it isn't clear which of the opposing arguments you are really supporting here.

My own view is that people on low incomes, or those who have additional needs, should be supported transparently through general taxation, not through an opaque system of "standing charges".  But given that isn't likely to happen in reality, I think the second best is for the system to be made less opaque. Such that consumers understand that their bill is a bit higher to subsidise other consumers, rather than having people insist that the standing charge pays for "wires and cables" on the basis of some kind of equality.

dunstonh

The one thing that we need to get away from, is different area paying different rates, that is unfair.

Regional pricing means those living or working in that region pay the costs towards the network in their region.  They are not paying towards those in other regions.

Council tax is priced differently in different areas.  Shops retail goods at different prices in different areas.  Oil, petrol, services etc all different across the regions.

In London and some of the South East, salaries are higher as they get a London increase.    But the cost of living is higher in London.   So, you prefer that those living in areas with lower incomes should pay more to pay for the more expensive regions?

Two very similar houses that have different postcodes or are in different counties would pay different standing charges.

But getting the supply to those similar houses will not be similar.    

Section62

matt_drummer said:

Section62 said:

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.

People who consume a lot of electricity have much higher bills than people who consume very little, there is not a `slight' difference!

If I use 1,000 Kwh a month more than you my bill will be around £350 a month more than yours.

If I use 5,000 Kwh more than you heating my hot tub and swimming pool my bill will be around £1,750 a month more than yours.

If you use more you will pay more, if you use less you will pay less.

It is also fairly likely that someone using electricity at that level will be paying it from income that they have paid 45% or more tax on.

You haven't understood what I said.  The effect of the standardised standing charge is what makes a slight difference to people's bills, either up or down.  If we assume the fixed costs currently included in the standing charge don't change significantly, then a readjustment in how those are recovered (i.e. either standing charge or rolled into the unit charge) won't make a vast difference to people's bills.

That was part of the point I was making - that the endless arguments for/against standing charges are all a little pointless as the effect of standing charges is (other than in edge cases) only a marginal cost, and to a degree can be avoided by changing to a supplier whose charging structure better fits with the consumer's needs.

Nobody (outside of edge cases) is likely to have to pay an extra £1400 per month if standing charges were scrapped.

matt_drummer said:

Maybe I have this wrong but it sounds like you want the standing charge removed so that you don't have to pay it but you are quite happy for wealthier people to pay?

You have it wrong.

I made it quite clear earlier in the thread that I believe there are good reasons for having a standardised standing charge.

I've also made it clear that from a policy perspective, standing charges can act as a disincentive to the objective of reducing overall energy consumption.

The main concern I have is people - on a forum which is supposed to be where other people can get good advice - posting stuff which is misleading or wrong.  It is wrong to make people think that the costs of supplying different consumers are the same, and it is wrong to suggest or imply that standing charges are [just] about "wires and cables".

matt_drummer

Section62 said:

I'm not sure you understand how the business of supplying coke and heating oil works.

The "fixed costs of running their business" are the fixed costs in supplying oil and coke.  In the same way there are fixed costs in running an electricity (or gas) supply business. The principal difference is one uses vehicles to move the product, the other wires and pipes.  (and supplying via wires and pipes is cheaper than doing so by vehicles (which is one reason why LPG is usually more expensive than mains gas))

They all have fixed costs whether they supply or not.  The distinction between the fixed costs of oil/coke supply, and the fixed costs of electricity/mains gas supply, is largely artificial.

Moreover, the costs of the "wires and cables" to a specific property are only a small part of the overall costs which are included in the standing charge.

I understand perfectly how business works, I am a qualified accountant and I work for a timber importer after having been an auditor in private practice before that.

The business has fixed costs and if they wanted to they could try and charge you a periodic fee for being a customer, some other businesses do this for various products and services.

But, the cost of actually getting into the truck and delivering to you is a variable cost that would not be there if you did not have a delivery.

Their fixed costs are things like property costs, staff costs and capital cost of equipment.

The variable cost is the diesel used by the truck to make your delivery.

The key to your example is that the oil and coke company is your supplier of the oil and coke and also incurring the fixed overheads.

The energy supplier has fixed costs and those are covered by the unit cost of energy supplied and part of their capped 2% profits.

The network costs are provided by other companies.

Your oil and coke supplier uses the public highways to deliver to you, therefore you do indirectly pay a standing charge for your deliveries as it is incorporated in to your general taxation, local taxation and vehicle taxation.

matt_drummer

Section62 said:

matt_drummer said:

Section62 said:

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.

People who consume a lot of electricity have much higher bills than people who consume very little, there is not a `slight' difference!

If I use 1,000 Kwh a month more than you my bill will be around £350 a month more than yours.

If I use 5,000 Kwh more than you heating my hot tub and swimming pool my bill will be around £1,750 a month more than yours.

If you use more you will pay more, if you use less you will pay less.

It is also fairly likely that someone using electricity at that level will be paying it from income that they have paid 45% or more tax on.

You haven't understood what I said.  The effect of the standardised standing charge is what makes a slight difference to people's bills, either up or down.  If we assume the fixed costs currently included in the standing charge don't change significantly, then a readjustment in how those are recovered (i.e. either standing charge or rolled into the unit charge) won't make a vast difference to people's bills.

That was part of the point I was making - that the endless arguments for/against standing charges are all a little pointless as the effect of standing charges is (other than in edge cases) only a marginal cost, and to a degree can be avoided by changing to a supplier whose charging structure better fits with the consumer's needs.

Nobody (outside of edge cases) is likely to have to pay an extra £1400 per month if standing charges were scrapped.

matt_drummer said:

Maybe I have this wrong but it sounds like you want the standing charge removed so that you don't have to pay it but you are quite happy for wealthier people to pay?

You have it wrong.

I made it quite clear earlier in the thread that I believe there are good reasons for having a standardised standing charge.

I've also made it clear that from a policy perspective, standing charges can act as a disincentive to the objective of reducing overall energy consumption.

The main concern I have is people - on a forum which is supposed to be where other people can get good advice - posting stuff which is misleading or wrong.  It is wrong to make people think that the costs of supplying different consumers are the same, and it is wrong to suggest or imply that standing charges are [just] about "wires and cables".

Wires and cables is a simple term, you can't expect somebody to list out every element of the standing charge every time it is mentioned.

I know it doesn't cost the same exact amount to supply each property, but for a standard supply to a standard home the costs are just apportioned evenly between the number of customers in an area. We are not really going to charge people more based on how far there electricity and gas travels in each street are we?

The cost of supply that we actually pay to our suppliers is the same to all of us, it varies a little by region but how much is that, £30 to £40 a year? 

I still cannot see how the standing charge is disincentive to cutting down on your energy use, surely if you need to save money then using less electricity will cost you less and save you money?


You said this

`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'


If that is not misleading then I don't know what is!

You are saying the bills of high users are being subsidised by lower users.

That isn't true.

What you really mean is that the standing charge makes up a lower proportion of the total bill the more you use. If you use a lot the standing charge is a small proportion of your bill if you use little it's a large proportion of your bill. The standing charge is 100% of my bill.

Section62

matt_drummer said:

Section62 said:

I'm not sure you understand how the business of supplying coke and heating oil works.

The "fixed costs of running their business" are the fixed costs in supplying oil and coke.  In the same way there are fixed costs in running an electricity (or gas) supply business. The principal difference is one uses vehicles to move the product, the other wires and pipes.  (and supplying via wires and pipes is cheaper than doing so by vehicles (which is one reason why LPG is usually more expensive than mains gas))

They all have fixed costs whether they supply or not.  The distinction between the fixed costs of oil/coke supply, and the fixed costs of electricity/mains gas supply, is largely artificial.

Moreover, the costs of the "wires and cables" to a specific property are only a small part of the overall costs which are included in the standing charge.

I understand perfectly how business works, I am a qualified accountant and I work for a timber importer after having been an auditor in private practice before that.

The business has fixed costs and if they wanted to they could try and charge you a periodic fee for being a customer, some other businesses do this for various products and services.

But, the cost of actually getting into the truck and delivering to you is a variable cost that would not be there if you did not have a delivery.

Their fixed costs are things like property costs, staff costs and capital cost of equipment.

The variable cost is the diesel used by the truck to make your delivery.

The key to your example is that the oil and coke company is your supplier of the oil and coke and also incurring the fixed overheads.

The energy supplier has fixed costs and those are covered by the unit cost of energy supplied and part of their capped 2% profits.

Again, the distinction being made here is an artificial one.  Both types of businesses have fixed and variable costs.

The difference is one is operating in a regulated environment in which the regulator has decided that some costs must be recovered from the consumer in the form of a 'standing charge'.

The coal/oil companies could indeed follow the same operating model and charge a subscription, but apparently they don't because the market is so competitive that if they demanded a 'standing charge' (aka 'periodic fee') they would lose customers to those who simply charge by the tonne.

matt_drummer said:

The network costs are provided by other companies.

Your oil and coke supplier uses the public highways to deliver to you, therefore you do indirectly pay a standing charge for your deliveries as it is incorporated in to your general taxation, local taxation and vehicle taxation.

The amount electricity suppliers pass on to the DNO for network provision is analogous to what the coke and oil suppliers pay in VED (+operators fees) and business rates.

You could argue, as you have, that the consumer is separately and indirectly paying this as a quasi-standing charge, but more simply it can be identified as a direct cost the supplier has to pay as part of running their business.

Charges for using the road ≈ Charges for using cables (or pipes).

matt_drummer

Section62 said:

- so it isn't clear which of the opposing arguments you are really supporting here.

My position is the same.

I am in favor of the standing charge as it is now.

Adding it to the unit cost is bad for high users, many of which are on lower incomes.

But those on the lowest incomes already receive assistance, removing the standing charge from those customers and passing them on to the `wealthy' is not right either.

I think it should be left alone.

matt_drummer

Section62 said:

The difference is one is operating in a regulated environment in which the regulator has decided that some costs must be recovered from the consumer in the form of a 'standing charge'.

Where I live UK Power Networks are the operator.

If we, in this area, don't pay a standing charge to our energy supplier that they then pass on to UK Power Networks, where will UK Power Networks get their income from in order to provide the service we expect them to?