Martin Lewis: Why are energy standing charges so high? What can be done

bereavementfather

Privatisation of the energy market is simply not working. Switching appears to be a thing of the past, and "good" deals have disappeared.

I'm pretty sure that the combined profit for the energy companies in 2022 was more than £20b... Them covering 10% for customers doesn't seem like a big dent...

QrizB

bereavementfather said:

Privatisation of the energy market is simply not working. Switching appears to be a thing of the past, and "good" deals have disappeared.

Three years ago everyone was raving about how great the insurgent suppliers were, and how the Big Six were dinosaurs. You can't really claim market failure based two years with on a ground war in Europe.

bereavementfather said:

I'm pretty sure that the combined profit for the energy companies in 2022 was more than £20b... Them covering 10% for customers doesn't seem like a big dent...

Citation required, please, for UK domestic electricity supply companies having made £20b in 2022.

And no, you don't get to include primary extraction businesses in this.

bereavementfather

I'm not sure I was raving about how good the insurgent suppliers where!

At the time the energy market penalised you for not moving. For people who wanted to move that was fine, but for others it completely failed them.

Now we are starting to get even more complex tariffs... You tell me if you are better off on Octopus Agile, Octopus Cosy, E7, E10, Ovo Charge Anytime etc, etc...

Ok, so it's more like 7bn over a period of 5 years for retail. However, you cannot simply discount the other arms of the businesses, the reason they've created them is to avoid tax!

bereavementfather

Underlying, the profits don't go back in to the system. 

Probably wouldn't need a standing charge at all if any of the profits where re-invested...

JSHarris

bereavementfather said:

At the time the energy market penalised you for not moving. For people who wanted to move that was fine, but for others it completely failed them.

I switch supplier pretty regularly, sometimes more than once a year.  The problem is that few seem to be able, or perhaps willing, to regularly switch suppliers to get a better deal, so they end up paying over the odds.  I can understand this to some extent, if your living a busy life finding spare time to sort out a new supplier may be challenging, so easy to put off.

The switching system itself is pretty painless now, the biggest single issue is the amount of time I have to spend seeking out the true tariffs from suppliers and comparing them using our true usage figures.  The price comparison sites all fail when it comes to this, never been able to work out why, although for some it's because they don't allow accurate usage data to be used.

I'm about to switch again, last switch was in May.  The reason is simple, our present supplier has upped the price I'll pay by about 22.5%, so it's time to move.  It has taken me at least a couple of hours so far to try and pin down accurate prices, though.  That may be time that some just don't have spare.

QrizB

bereavementfather said:

Underlying, the profits don't go back in to the system.
Probably wouldn't need a standing charge at all if any of the profits where re-invested...

Energy suppliers supply energy. They're not responsible for generation or infrastructure, and (if they are parts of larger groups like SP or EDF) are prohibited from cross-subsidising other parts of their groups.

Spoonie_Turtle

JSHarris said:

bereavementfather said:

At the time the energy market penalised you for not moving. For people who wanted to move that was fine, but for others it completely failed them.

I switch supplier pretty regularly, sometimes more than once a year.  The problem is that few seem to be able, or perhaps willing, to regularly switch suppliers to get a better deal, so they end up paying over the odds.  I can understand this to some extent, if your living a busy life finding spare time to sort out a new supplier may be challenging, so easy to put off.

… It has taken me at least a couple of hours so far to try and pin down accurate prices, though.  That may be time that some just don't have spare.

And as well as time, you're able to do that because of having the mental capacity to.  A lot of people would be capable but just don't have anything spare to take on the task of learning about their energy usage and how it all works - the prerequisite for then doing the manual comparison between each supplier and their various offerings.

I think 'everyone's at the cap now' is a lazy cop-out for comparison sites.  They should still have functioned for Economy 7 even during the worst of the prices, and they've had plenty of time to start developing smarter tariff comparisons. 

Okay Tracker and Agile could never be on there because they cannot predict the prices, and people unable to weigh up the risk themselves should not be persuaded to switch based on what would inherently be a flawed prediction, but other comparisons like for EV tariffs or some of Octopus' other smart tariffs.  Wouldn't be perfect, because people can consider changing their usage patterns to make use of multi-rate tariffs, but it would be a good start, to at least help people get better deals based on their current usage patterns.

MattMattMattUK

bereavementfather said:

Ok, so it's more like 7bn over a period of 5 years for retail. 

So you went from claiming £20 billion profit in one year, to now £7 billion over five years, that pretty much discredits your figures straight off the mark.

bereavementfather said:

However, you cannot simply discount the other arms of the businesses, the reason they've created them is to avoid tax!

One can discount them. Legally they are separate businesses, they are not allowed to cross subsidise their businesses, most suppliers do not have any generation capacity, profits on fossil fuels extracted globally cannot be attributed to profit from UK domestic energy supply. Octopus as an example make more from software licensing than they do from energy, Shell were making so little money on domestic energy they exited the market, British Gas as a group make more than 99.9% of their profit outside the UK. They have not "created them to avoid tax", they are entirely different businesses.

bereavementfather said:

Now we are starting to get even more complex tariffs... You tell me if you are better off on Octopus Agile, Octopus Cosy, E7, E10, Ovo Charge Anytime etc, etc...

I am better off on Octopus Tracker, I will be better off on Octopus Intelligent/Go when I get an EV, it is not rocket science.

bereavementfather said:

Underlying, the profits don't go back in to the system. 

How are you defining "underlying the profits"? Like all businesses energy suppliers invest back into their operations, like all businesses they also pay out some profit as dividend.

bereavementfather said:

Probably wouldn't need a standing charge at all if any of the profits where re-invested...

Profit across the energy suppliers is less than two percent, some of the smallest of any sector. If the entire sector was operated on a not for profit basis we would still need the standing charge, it pays for network maintenance and upgrades, social policy etc.

JSHarris

MattMattMattUK said:

I am better off on Octopus Tracker, I will be better off on Octopus Intelligent/Go when I get an EV, it is not rocket science.

I beg to differ with your last phrase, really an echo of the excellent point made by @Spoonie_Turtle when he referred to mental capacity and time.  People that can optimise their use of complex tariffs are very definitely in the minority, and even those that can right now (and I count myself partly in that category) may well lose the ability to continue doing this as they age.

It takes a fair bit of time and effort to get to grips with many of the complex tariffs offered by suppliers like Octopus, especially when it comes to determining whether any of them really do offer a better deal for any particular use case.

I'm one of the small group of unfortunates unable to take advantage of smart tariffs, for reasons wholly outwith my control, but what I've learned, by force of circumstance, is that there are some very definite upsides to having to accept a relatively simple tariff.  It annoys me that I can't get a better deal, but having to make the best of a bad job has taught me that simple tariffs are very easy to manage, and require no effort at all on my part, other than to ensure that time switches are set correctly.

As we have managed to heat our 1400square foot home, have adequate hot water, cook our meals, stay entertained and run our electric car for a total cost of about £750 this year I don't feel that I've done too badly with our simple tariff.  I don't feel that we've had too much adverse impact on the environment, either, as looking at the carbon intensity of the grid at the times when we use power it seems to be about as low as it ever gets.

Whilst complex tariffs, that offer very good opportunities for some to make good use of them, have their place, I do feel that there are, at least for now, some major issues when it comes to getting the majority of consumers to understand how they work and have the time (and willingness) to take best advantage of them.  Perhaps technology will catch up and become massively more reliable than it is right now, in which case some of my concerns may become moot.  However, given that some, perhaps most, of the technology bottlenecks are down to the laws of physics I'm not that confident that the issues will all be resolved.

QrizB

JSHarris said:

MattMattMattUK said:

I am better off on Octopus Tracker, I will be better off on Octopus Intelligent/Go when I get an EV, it is not rocket science.

I beg to differ with your last phrase, really an echo of the excellent point made by @Spoonie_Turtle when he referred to mental capacity and time.  People that can optimise their use of complex tariffs are very definitely in the minority, and even those that can right now (and I count myself partly in that category) may well lose the ability to continue doing this as they age.

If @Dolor was still around, he'd now point out that there was an Ofgem project a few years back looking at using people's 30-minute smart meter data to allow automated comparison of smart tariffs.

I don't know where that project has gone, but if/when it's rolled out comparing smart tariffs will be no more difficult than comparing dumb ones used to be. Go to a comparison site, give your address details and click the button.