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

MattMattMattUK

Sceptical123 said:

To fairly eliminate standing charges and incorporate their cost into the unit rates for the first 10% of energy use, the proposal redistributes the annual standing charges for gas and electricity across the first 10% of average usage. Here's a detailed summary and accurate calculations:

Proposal Summary:

• Objective: Incorporate the standing charges into the unit cost of gas and electricity for the first 10% of annual usage, thereby eliminating separate standing charges.
• Method: Calculate the additional cost per kWh for the first 10% of average annual gas and electricity usage by dividing the respective standing charges by the first 10% volume of consumption. Add this additional cost to the existing unit rates for only the first 10% of usage, leaving the rates for the remaining 90% of usage unchanged.

Detailed Calculations:

Gas:

• Average Annual Use: 11,500 kWh
• First 10%: 1,150 kWh
• Standing Charge: £120 per year
• Additional Cost for First 10%: £120 / 1,150 kWh = 1.043 pence per kWh
• Adjusted Unit Rate for First 10%: 7.5 pence/kWh (existing) + 1.043 pence/kWh (additional) = 8.543 pence/kWh

Electricity:

• Average Annual Use: 2,700 kWh
• First 10%: 270 kWh
• Standing Charge: £170 per year
• Additional Cost for First 10%: £170 / 270 kWh = 62.96 pence per kWh
• Adjusted Unit Rate for First 10%: 30.11 pence/kWh (existing) + 62.96 pence/kWh (additional) = 93.07 pence/kWh

Conclusion:

The proposal effectively redistributes the standing charges over the first 10% of gas and electricity consumption, significantly increasing the unit rate for this initial portion of usage. For gas, the first 1,150 kWh would be charged at 8.543 pence per kWh, incorporating the standing charge into the rate. For electricity, the first 270 kWh would be charged at an adjusted rate of 93.07 pence per kWh. This approach eliminates the need for a separate standing charge, making the first portion of energy use more expensive but simplifying the overall billing structure.

Tiered rates are an awful idea and I see zero benefits overall from your proposal, although they would offer a benefit those with solar and battery who could manage to not import any energy on many days. I fail to see how that is either "fair" or rational. 

Spoonie_Turtle

Smells like ChatGPT.

oliver1951

if he’s spread the cost over the first 10%, then the unit price would drop for subsequent units. My preferred solution would be to spread the cost over 80% of consumption, thus keeping unit price steady, giving a benefit to the lower users and applying a slightly higher charge to the high users. It’s 80% to give a flex. In the following year if that resulted in an over recovery that would be applied to reduce the next years ‘ standing charge’ recovery. 

I did also say to ofgem in my response to their questions on standing charges, that I also felt that if there was lower pricing in the middle of the night that should be offered to everyone and not just those with EV’s. There are a lot of people that could benefit from heating their immersion heaters on a cheap rate, not available to them at present which seems to be very inequitable.

QrizB

oliver1951 said:

... I also felt that if there was lower pricing in the middle of the night that should be offered to everyone and not just those with EV’s.

Like Economy 7, you mean? Or Octopus Agile?

oliver1951

I mean specifically the tariff for EV’s that isn’t available to other people. The special rate tariff applicable to EV’s . it’s just a lower rate offered to a specific group of people, those who have EV’s. Whereas many other people would like to have the opportunity to have a lower rate, which doesn’t impact their peak time rates. Electricity is offered at that time at lower rates because there is often a surplus at that time but it could be offered to everyone. You can see in Martin’s blogs about all these rates that mostly you have to have an EV to qualify. But once qualified you aren’t restricted to using it for charging your ev.

QrizB

oliver1951 said:

I mean specifically the tariff for EV’s that isn’t available to other people.

There are also tariffs for heat pumps that aren't available to people without heat pumps, tariffs for people with (certain) storage heaters that aren't available to people without them, and tariffs for people with (certain) batteries that aren't available to people without those.

Why specifically EV tariffs?

oliver1951 said:

Electricity is offered at that time at lower rates because there is often a surplus at that time but it could be offered to everyone.

Octopus Agile provides cheap, even free or paid-to-use, electricity when there's a surplus. And that's available to anyone with a functional smart meter.

oliver1951 said:

... mostly you have to have an EV to qualify. But once qualified you aren’t restricted to using it for charging your ev.

Some of the tariffs do in fact restrict the discount to electricity used to charge your EV. See for example this post and following:

https://forums.moneysavingexpert.com/discussion/comment/80577600/#Comment_80577600

Spoonie_Turtle

oliver1951 said:

I mean specifically the tariff for EV’s that isn’t available to other people. The special rate tariff applicable to EV’s . it’s just a lower rate offered to a specific group of people, those who have EV’s. Whereas many other people would like to have the opportunity to have a lower rate, which doesn’t impact their peak time rates. Electricity is offered at that time at lower rates because there is often a surplus at that time but it could be offered to everyone. You can see in Martin’s blogs about all these rates that mostly you have to have an EV to qualify. But once qualified you aren’t restricted to using it for charging your ev.

Which EV tariffs offer standard daytime pricing, with no premium to offset the bargain off-peak periods?

MeteredOut

Spoonie_Turtle said:

oliver1951 said:

I mean specifically the tariff for EV’s that isn’t available to other people. The special rate tariff applicable to EV’s . it’s just a lower rate offered to a specific group of people, those who have EV’s. Whereas many other people would like to have the opportunity to have a lower rate, which doesn’t impact their peak time rates. Electricity is offered at that time at lower rates because there is often a surplus at that time but it could be offered to everyone. You can see in Martin’s blogs about all these rates that mostly you have to have an EV to qualify. But once qualified you aren’t restricted to using it for charging your ev.

Which EV tariffs offer standard daytime pricing, with no premium to offset the bargain off-peak periods?

I believe OVO Charge Anytime is the only one that (currently) offers this. 7p for EV charging (only) at OVO's time of choosing (similar to Octopus Intelligent Go), SVT for everything else. Although its applied as a bill credit, rather than an actual 7p/kWh tariff.

https://www.ovoenergy.com/electric-cars/charge-anytime

"Unlike others, we let you smart charge your EV at a lower rate of 7p per kWh, any time you like, day or night. The clue’s in the name.

If you need your car in a hurry, you can override your smart charging schedule with the Charge Now function. You'll be charged at your standard home electricity rate when you're not smart charging.

JCollins63

I have a choice of 4 tariffs with British Gas. Why does the standing charge vary on each tariff as well as the unit charge? Is this just to confuse the consumer?

Sailbad

You are correct.