Standing charge on energy bills

matt_drummer

Chrysalis said:

On the flip side you have British Gas a traditional supplier who made 72 million.

How many customers do they have?

What is the profit per customer?

How much would the average bill reduce by if they gave up the profit and just broke even?

MattMattMattUK

Chrysalis said:

MattMattMattUK said:

Chrysalis said:

sandyides said:

Anyone else like me appalled by the escalation of the daily standing charges being applied to energy bills? So even if you don't use any energy at all, you'll still have an increasing bill.
There was a time, not so long ago, when there were no standing charges. Can we revert to that please?
Is it worth a petition?

Already is one with almost 400k signatures, here you go, shame its not on the gov website though, with this many signatures.

https://www.change.org/p/petition-to-reduce-profit-headroom-and-tax-percentages-from-ofgem-price-cap-formula-jacob-rees-mogg-ofgem-jeremy-hunt-adjustpricecap-ofgem

That is an awful petition that is economically illiterate, it would mean capping supplier profit at 0.4%, as a business, with risk factored in, it is not worth running a business at that level, one could get ten times the return on the FTSE 100 which is very low ris, five times that amount by just buying gilts which have zero risk. 

low margins if it really is 0.4%, but in a business where you supplying an essential.  I think the suppliers that are left will be considered too big to fail now, and even the ones that went bust I think the owners did well out of them, 

For all businesses, the investment of capital etc. there is a risk/reward equation, at 0.4% it is not worth the risk investing the money in the energy supply business because the margin is not guaranteed, one could receive 2.5-4% by buying gilts with zero risk, so why place capital at risk for 0.4%.

Chrysalis said:
one of them was sending money to a consultancy firm with the same shareholders (one way round the profit cap rules).

That was not a way to get around profit caps because allowable costs are stipulated under the Ofgem regulations, a supplier could not spend more than the permitted amount without it coming out of profits, the same as if they exceed the allotted amounts for marketing, staff costs etc.

Chrysalis said:

Bear in mind these companies overall are not on the low margins as they have wealthy parent companies which I know you keep shrugging off as not relevant.

The parent company is irrelevant, if the subsidiary is not profitable it will be closed. I have four Ltds, if any one of them was not going to maintain long term profitability I would not keep operating it at a loss regardless of how much the other three made in profit, the same is true for all businesses. 

Chrysalis said:

yet these companies continue to be ran, Octopus even purchased Bulb customers, which according to the government was a loss making venture.

They did, because the foresaw a return to profit, both on the capped 2% on the SVT and once the market returned to being competitive higher margins on fixed tariffs, however the petition you linked to proposed capping their maximum profit at 0.4% / fixed maximum per customer. At 0.4% the recovery rate for losses is five times lower than at 2%, potentially with market volatility it could easily push it to zero or negative, hence why no businesses operate at 0.4% long term, profit can be made at lower risk and higher rates. Business finds a balance between risk and reward, but when the reward becomes zero and the risks higher then that business is no longer viable.

Chrysalis said:

Although Octopus are seemingly choosing to lose money on various things right now, they not a typical company.

Short term cost for long term gain, they hope, perfectly normal for a business, even with a low margin sector, when they know the potential rewards in the medium to long term. 

matt_drummer

Xbigman said:

On the flip side you have British Gas a traditional supplier who made 72 million.

BG has about 4 million customers. 72,000,000 divided by 4,000,000 is a profit of about £18 per customer. That looks a pretty !!!!!! poor profit margin to me.


Darren

You answered for me, thank you.

Some people see a big number and assume that it could be used to reduce their bills by a massive amount, it's just not true.

powerful_Rogue

Chrysalis said:

powerful_Rogue said:

I don't shoplift, so should my groceries be cheaper as I shouldn't have to pay for those that do and the additional security shops have to employ.

I think the SC is a small price to pay to be connected to the grid. Average of £14 per month. A telephone landline costs around £20+ per month.

Are you in a time capsule?

SVR SC for gas+electric is now going to be close to £30 a month for some people.

Average of £25 nationally according to BG.

For a lot of people thats not insignificant for just been connected to the grid.

For reference I pay £15 for my mobile phone, but I get unlimited calls, and a lot of inclusive data for that, I dont pay for every second of usage on top of that, so not sure what you was trying to say there.

Not as far as i'm aware. My SC for electric is 45.47p per day. If I combine with the gas SC then it's £22 per month. I think that's a reasonable amount to have a gas and electric connection to my property and not far off the cost of a landline.

bristolleedsfan

powerful_Rogue said:

Chrysalis said:

powerful_Rogue said:

I don't shoplift, so should my groceries be cheaper as I shouldn't have to pay for those that do and the additional security shops have to employ.

I think the SC is a small price to pay to be connected to the grid. Average of £14 per month. A telephone landline costs around £20+ per month.

Are you in a time capsule?

SVR SC for gas+electric is now going to be close to £30 a month for some people.

Average of £25 nationally according to BG.

For a lot of people thats not insignificant for just been connected to the grid.

For reference I pay £15 for my mobile phone, but I get unlimited calls, and a lot of inclusive data for that, I dont pay for every second of usage on top of that, so not sure what you was trying to say there.

Not as far as i'm aware. My SC for electric is 45.47p per day. If I combine with the gas SC then it's £22 per month. I think that's a reasonable amount to have a gas and electric connection to my property and not far off the cost of a landline.

Comparing energy standing charge with phone landline, consumers who have Internet with landline get a discount on Internet service, for example even after this years near 14% increase my BT landline and Fibre 1 costs me £25.18, per month I have saved a further £19.99 per year paying landline charge up front for 12 months.

dealyboy

This topic has been discussed recently in a few parallel threads and people agreed at the time that arguments were becoming circular. It is difficult to discuss the standing charge in itself when it means different things to different people, and is in fact a collection of charges ...

I for example don't agree with the green levy or investments in renewables, I want my energy to come from private self funding companies extracting oil and gas from under the sea and from onland shale, and coal from mines. This has great benefits for the economy, jobs and security. However I would be happy for the charge to subsidise and control the development of new nuclear reactors

I don't want the standing charge to include a charge to subsidise the Warm Home Discount or social tariffs. This should be offloaded on to a reformed Council Tax and local government infrastructure stripping out the wasteful self interest.

I am happy to pay the supplier the costs of distribution and indirectly the long haul distribution from the grid, even at a flat rate.

I don't want the standing charge to fund the SoLR scheme, there is no incentive for the regulator to regulate effectively if neither they nor the failed supplier pays. Liability should be shifted to the insurance market, premiums being payable by each supplier, the higher the business risk the higher the premium so that some 'dodgy' suppliers might not be able to obtain the cover that a regulator would demand.

... so we see a mixed bag ... some will agree with some points and most will disagree with most points, I think.

[Deleted User]

I don't want the standing charge to fund the SoLR scheme, there is no incentive for the regulator to regulate effectively if neither they nor the failed supplier pays. Liability should be shifted to the insurance market, premiums being payable by each supplier, the higher the business risk the higher the premium so that some 'dodgy' suppliers might not be able to obtain the cover that a regulator would demand.

That would work; however, suppliers would quite rightly expect the cost of this insurance to be treated as a cost of doing business, and they would want to recover this additional cost from consumers.

matt_drummer

[Deleted User] said:

I don't want the standing charge to fund the SoLR scheme, there is no incentive for the regulator to regulate effectively if neither they nor the failed supplier pays. Liability should be shifted to the insurance market, premiums being payable by each supplier, the higher the business risk the higher the premium so that some 'dodgy' suppliers might not be able to obtain the cover that a regulator would demand.

That would work; however, suppliers would quite rightly expect the cost of this insurance to be treated as a cost of doing business, and they would want to recover this additional cost from consumers.

And the insurers would need to make a profit, so the insurance premiums that we would all pay would have to be more than the insurers would pay out, so we would end up paying more over time.

Or perhaps, it would only be the rich that pay, or just those that pay income tax, or maybe just those who use the most etc etc?????

casuarina

The days of every household having a fire for cooking, heating and hot water are long gone.
VERY FEW PEOPLE HAVE THE OPTION OF NOT USING ENERGY COMPANIES.
I believe we in the UK have a right to access to water, heat and electricity.
Energy companies are businesses. They make profits. These profits should be used for their overheads. THEN, and only then distributed to shareholders.
I am happy to pay for the water, gas and electricity that I use. Currently, the standing charge on my gas bill is £1 less than the actual gas bill. SEEMS THEY ARE COLLECTING  THEIR OWN PRIVATE TAX.
(While on the subject of tax, why do we pay VAT on something that is necessary for life?)
I don't know how to campaign. I really hope somebody does.

QrizB

casuarina said:

The days of every household having a fire for cooking, heating and hot water are long gone.
VERY FEW PEOPLE HAVE THE OPTION OF NOT USING ENERGY COMPANIES.

On the contrary, most households have the option of not using energy companies. It's just that the vast majority (but not all, HertsLad I'm thinking of you here) have decided that the utility of having a connection outweighs the costs associated with it.

I used to live in a rural property. My neightbours were initially completely off-grid but eventually took a mains water connection. They continue to generate their own electricity to this day (at one time they were quoted £20k for a grid connection).

casuarina said:

Energy companies are businesses. They make profits. These profits should be used for their overheads. THEN, and only then distributed to shareholders.

That is how all businesses work. Paying your shareholders before your suppliers results in bankruptcy.

casuarina said:

I am happy to pay for the water, gas and electricity that I use.

And for your connection to the network? Or would you rather collect your gas in bottles, and your electricity from a charging point (like an electric car)?

casuarina said:

 Currently, the standing charge on my gas bill is £1 less than the actual gas bill.

It is summer. You are unlikely to be using very much gas for heat. you will have more need for your gas connectino in the winter.

Alternatively, you can have your gas disconnected. Once your meter is removed you will no longer be liable for a standing charge. You will need to find an alternative source of heat.

On my last gas bill, the standing charge was 21p less than the energy charge.

On my last-but-one electricity bill, the standing charge was almost £7 more than the energy charge.

casuarina said:

While on the subject of tax, why do we pay VAT on something that is necessary for life?

Because the government needs to be funded, and VAT is relatively hard to avoid.

We pay 20% VAT on biscuits. I'm not sure which I'd rather live without.

See https://www.gov.uk/guidance/rates-of-vat-on-different-goods-and-services for a list of VAT rates on various goods and services.