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

CSI_Yorkshire

boatman said:

Are you trying to tell us those costs have suddenly doubled?? I very much doubt it..

So that means it's shear profiteering..

Well, many costs have nearly doubled, but that's not the reason here.

Out of the approximately £185 average electricity standing charge, £66 is operating cost, £103 is "policy costs" added by the government - things like the green levy, cost of smart meters, home insulation schemes etc.

In 2020, the average electricity standing charge was £85.  Almost exactly £100 less.  Of that, £58 was operating costs.  Not a lot of increase seems due to the actual companies then.  The "policy costs" part in 2020 was £18.  Spot where the £100 increase has come from?

I suggest you review your suggestion of profiteering.

MattMattMattUK

MSE_Eesha said:

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Read Martin's Martin Lewis: Why are energy standing charges so high? What can be done Blog.

The premise that standing charges are too high and that they need to be lowered is a false one.

CSI_Yorkshire

MattMattMattUK said:

MSE_Eesha said:

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Read Martin's Martin Lewis: Why are energy standing charges so high? What can be done Blog.

The premise that standing charges are too high and that they need to be lowered is a false one.

And weirdly, the 'OFGEM chart' that breaks down the standing charge doesn't agree in magnitude, split or proportion with the price cap calculation spreadsheets.

t1redmonkey

I was on a no standing charge tariff between December and June of this year with a provider called E Energy, but it really wasn't particularly good.  It operated the same way as the tariff described in the article by Utilita where you got charged a super high rate for the first 2kwH of both electricity and gas used per day.  I switched to Octopus a few weeks ago and my bills are already lower as a result, just on a standard flexible tariff they do.  As the article says, these sort of tariffs may work out better for people leaving their house totally unused for x number of days a month, but not for someone who's in it every day.

Spoonie_Turtle

Question: the pie chart in the blog shows 1.8% for profit (which on the standing charge especially is not very much, but still) - I was of the understanding that suppliers don't profit from it at all?

CSI_Yorkshire

Spoonie_Turtle said:

Question: the pie chart in the blog shows 1.8% for profit (which on the standing charge especially is not very much, but still) - I was of the understanding that suppliers don't profit from it at all?

"EBIT" and "Headroom" make up about £5 of the £185 elecSC and £3.50 of the £102 gasSC on the latest OFGEM cap spreadsheets (the 'other' payment mechanism tabs).

Teeceor

It maybe an idea to create a petition for the standing/ daily charges to be reduced based on MSE findings
I'm sure it would get a lot of support 

wrf12345

Before people panic, moving s/c into the unit cost will not affect anyone paying less than the average cost, high users will quite rightly pay more as a contribution to the terrible damage they are doing to the environment. 

The other point, solar pv users are hammered by s/c's and the fact that they only get a fraction of the unit cost back.

Ofgem are responsible for the s/c's but they only respond to ministerial pressure so if everyone complains to their MPs there might be some action, or not.

MattMattMattUK

Teeceor said:

It maybe an idea to create a petition for the standing/ daily charges to be reduced based on MSE findings
I'm sure it would get a lot of support 

There are already several already. The "findings" are not really such, the information of what constitutes the standing charge is published by Ofgem every time it is revised. People will of course support what they perceive as them having to pay less and others having to pay more, that does not mean it is sensible or rational. 

MattMattMattUK

wrf12345 said:

Before people panic,

The only people panicking are those who seem to be obsessed with lowering/abolishing the standing charge. 

wrf12345 said:

moving s/c into the unit cost will not affect anyone paying less than the average cost

Entirely incorrect, it would entirely depend on how those costs were apportioned to unit rates, you can make an assumption, but until the figures were worked out properly there would be no accurate prediction of where the balance would sit. 

wrf12345 said:

high users will quite rightly pay more as a contribution to the terrible damage they are doing to the environment. 

The standing charge is there to cover the network costs, therefore it is correct that everyone with a connection pays it. Those who use more energy already pay more and make a greater contribution towards other costs. Note that I am not against those who use more paying more, I would think an environmental levy of a few pence per kWh would be perfectly reasonable, what would be unreasonable would be one group of users subsidising another group on a arbitrary basis of energy usage. 

wrf12345 said:

The other point, solar pv users are hammered by s/c's and the fact that they only get a fraction of the unit cost back.

They are not "hammered" by standing charges, no one is "hammered" by the standing charges, total hyperbole. The cost per kWh that people pay for electricity is made up of multiple components, only one of those is the price of the electricity itself. Those who export to the grid get roughly comparable prices regardless of them being domestic users generating small amounts, or large generators producing significant proportions of the grid's supply.

wrf12345 said:

Ofgem are responsible for the s/c's but they only respond to ministerial pressure so if everyone complains to their MPs there might be some action, or not.

The standing charge exists for several reasons, all of them rational and logical. Of course if you mean that you want the standing charge lowered/abolished because as you have said before it would personally benefit you, then that lays wide open the real reason you are against it and demonstrates why the more rational people involved in the process deem the standing charge necessary.