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

MattMattMattUK

Chrysalis said:

Dont want to get involved on the politics again just one question, have Ofgem made a decision yet based on the most recent consultation they carried out?

The call for input deadline was 19/01 and I read somewhere that they thought the review would take 6-12 months, but that they would like to complete the change before the November price cap change.

The potential spanner in the works is that anything beyond very minor changes would require ministerial direction to be changed for some parts and Statutory Instruments to be amended or issued for others (things such as the WHD costs are governed by a statutory instrument). With the current estimates of election schedules we may either be in a pre-election build up, under purdah on in the early days of a new government, so I suspect that in reality it will be unlikely that we would see any substantial changes until Q1 2025 at the earliest and probably later. 

mels74

Had my latest monthly gas bill today. First time ever, that the standing charges are more than the actual gas used! It's disgusting. Us lower users are getting ripped right off. Please Martin continue your quest to get these lowered. I remember when I was on tariffs with no standing charges whatsoever, for gas or electricity. Why or how has it changed so drastically?

MattMattMattUK

mels74 said:

Had my latest monthly gas bill today. First time ever, that the standing charges are more than the actual gas used! It's disgusting. Us lower users are getting ripped right off. Please Martin continue your quest to get these lowered.

The standing charge pays for network maintance, the connection that gives you on demand energy direct to your home, why do you feel you should not pay for the network?

mels74 said:

I remember when I was on tariffs with no standing charges whatsoever, for gas or electricity. Why or how has it changed so drastically?

Some tariffs had a higher cost for the first 1-5 units of energy, essentially a standing charge by another name, others spread the fixed costs over the rate which means that average and higher users subsidied lower users. 

Abolishing the standing charge would primarily benefit low users who are generally those with solar, batteries, heat pumps and well insulated homes, whilst penalising higher users who are usually the less well off in poorly insulated homes and the elderly snd disabled who are more sensitive to low temperatures and are generally at home more.

prowla

Energy companies: 

1. Whoopeee - energy crisis means we can raise prices.

2. Oh, looks like energy prices are falling, boooo.

3. Here's an idea: let's raise the standing charge so that we keep our revenue up as prices fall!

Regulator:

Sure, that's ok.

JoshinLeeds

mels74 said:

Had my latest monthly gas bill today. First time ever, that the standing charges are more than the actual gas used! It's disgusting. Us lower users are getting ripped right off. Please Martin continue your quest to get these lowered. I remember when I was on tariffs with no standing charges whatsoever, for gas or electricity. Why or how has it changed so drastically?

There are some lower standing tariffs that aren't bad now. The BG Lighter tariff I switched to is 14.265p a day.

Chris_b2z

mels74 said:

Had my latest monthly gas bill today. First time ever, that the standing charges are more than the actual gas used! It's disgusting. Us lower users are getting ripped right off. Please Martin continue your quest to get these lowered. I remember when I was on tariffs with no standing charges whatsoever, for gas or electricity. Why or how has it changed so drastically?

Martin and 95% of the population agree with you on that.

JoshinLeeds said:

There are some lower standing tariffs that aren't bad now. The BG Lighter tariff I switched to is 14.265p a day.

BG should be given credit for recognising that low energy users are fed up at being forced to pay a disproportionate amount of standing charge within Ofgem's SVT price cap. This tariff is definitely a step in the right direction and hopefully other suppliers will follow.

Get a friend to refer you from their BG account and you'll both earn £75 each. If energy prices drop later in the year then you can switch to a different BG tariff without paying exit fees. You also benefit from half price electricity on Sunday afternoons. It sounds like a no-brainer for anyone currently paying more in standing charges than usage.

MattMattMattUK

prowla said:

Energy companies: 

1. Whoopeee - energy crisis means we can raise prices.

Energy crisis happens because Russia invades Ukraine, global energy prices rise, Ofgem forces suppliers to sell below cost, many go bust, those that do not lose hundreds of millions, or billions of pounds. When they are allowed to make a profit again it is capped below 2% for a year, then capped below 3% after that. Government uses taxpayer funds to subsise energy at point of supply and many consumers remain unaware of the real global cost of energy. 

prowla said:

2. Oh, looks like energy prices are falling, boooo.

Global energy prices fall, government reduces subsidy so many people fail to understand why domestic energy prices have not fallen as much as wholesale costs. UK experiences high inflation, pushing up costs of supply not directly related to the energy itself.

prowla said:

3. Here's an idea: let's raise the standing charge so that we keep our revenue up as prices fall!

Regulator raises the standing charge in response to both the increase in fixed costs due to inflation, as well as the government requiring bills to carry a social subsidy. Nothing to to do with energy companies trying to maintain revenues.

prowla said:

Regulator:

Sure, that's ok.

He regulator sets the SVT, the regulator forced suppliers to sell below cost making many go bust. The regulator capped profits at such a low level that companies such as Shell exited the market. The regulator destroyed competition in the market by forcing incredibly low margins on the industry.

MattMattMattUK

Chris_b2z said:

mels74 said:

Had my latest monthly gas bill today. First time ever, that the standing charges are more than the actual gas used! It's disgusting. Us lower users are getting ripped right off. Please Martin continue your quest to get these lowered. I remember when I was on tariffs with no standing charges whatsoever, for gas or electricity. Why or how has it changed so drastically?

Martin and 95% of the population agree with you on that.

Martin jumped on a publicity bandwagon and the majority of the population have little to no understanding of standing charges or energy supply in general and are happy to lap up the rubbish fed to them by certain elements of the media.

Chris_b2z said:

BG should be given credit for recognising that low energy users are fed up at being forced to pay a disproportionate amount of standing charge within Ofgem's SVT price cap. 

They are not paying a disproportionate amount, they are paying exactly the same as everyone else, a fixed daily amount for the fixed costs of the network, which is maintained to give them an on demand supply delivered directly to their home. The variable costs of supply are attached to the unit rate. That way everyone pays proportionally both for their grid connection and for their usage. Cutting standing charges would result in average and higher users subsidising lower users, which, if one wants to argue about "fairness" would be unfair.

bristolleedsfan

MattMattMattUK said:

 Cutting standing charges would result in average and higher users subsidising lower users, which, if one wants to argue about "fairness" would be unfair.

Posts you  have replied to refer to British Gas offering a choice of 12 month fixed rate tariffs something some consumers have been asking for some time, M.L has said he is lobbying Ofgem to mandate energy suppliers to provide consumers with a choice of lower standing charge combined with higher unit rate

Screenshots -  quote from my region show up to average user 2700 E - 11500 G would not lose out by choosing that level of lower SC combined with that level of higher unit rate.

wrf12345

Ebico used to have no standing charge and just a flat unit rate, the same for all payment types, but were basically put out of business by the then energy secretary who decided that every company had to put customers on a std variable rate tariff as default thus ruining their business model. A huge chunk of the s/c has nothing to do with maintaining the network, btw, and needs to be recovered from the energy companies, perhaps by a turnover tax. 

I would prefer to see National Grid selling direct to customers who have functioning smart meters and/or the s/c removed from prepayment meters with a small increase in the unit rate, thus getting relief to the poorest customers rather than the absurd situation of them subsidising high users. This would force retail energy to be much more competitive than the cartel-like structure at the moment that means wholesale energy rates are multiplied by three to four times and Ofgem allowing huge rises in s/c's.