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

BarelySentientAI

Baldeagle095 said:

My DD has gone from £146 per month to £84 - saving £750 per annum approx.
Basically the standing charge has reduced dramatically while unit costs have marginally increased.

How long before we get a "why have BG hiked my DD?" post?

Change in direct debit =/= annual saving.

Standing charge on SVT (dual fuel) is around £350 per year - so even if there was no standing charge at all, that would only be £350 saving.  Add the effect of the higher unit rate, and the saving will be less than that.

I can't see any sensible maths that comes out with a £750pa saving. 

wrf12345

I wonder if BG have some info on s/c's going down in the next review? The energy minister has declared that they should be as low as possible, which can be seen as encouraging or meaningless political jabbering. Ofgem has done a recent consultation with the public but has no history of listening to public concerns rather than pandering to retail energy. It's election year so politicians are on edge. Personally, I would simplify the industry in England, averaging out all the regional rates for kw/hour and get rid of the s/c's completely so that rather than the meaningless and often misleading average use, companies would be forced to publish their headline rate per kw/hour, making comparison between companies easy. I mean car companies don't promote their cars by telling you the average cost of running then rather than the mpg so why should energy co's.

BarelySentientAI

wrf12345 said:

companies would be forced to publish their headline rate per kw/hour

Isn't every tariff in the country published as Xp per kWh?

wrf12345 said:

 averaging out all the regional rates for kw/hour and get rid of the s/c's completely

So you want to socialise the costs but then not socialise the costs?

I'd back the first part - locational charging has its place on the generation side, but that shouldn't be the customer's concern.

I wouldn't agree with high consumption households subsidising the more well off like your second point would do though.

bristolleedsfan

wrf12345 said:

I wonder if BG have some info on s/c's going down in the next review? The energy minister has declared that they should be as low as possible, which can be seen as encouraging or meaningless political jabbering. Ofgem has done a recent consultation with the public but has no history of listening to public concerns rather than pandering to retail energy. It's election year so politicians are on edge. Personally, I would simplify the industry in England, averaging out all the regional rates for kw/hour and get rid of the s/c's completely so that rather than the meaningless and often misleading average use, companies would be forced to publish their headline rate per kw/hour, making comparison between companies easy. I mean car companies don't promote their cars by telling you the average cost of running then rather than the mpg so why should energy co's.

M.Lewis has been lobbying Ofgem to mandate energy suppliers to offer lower standing charge/higher unit rate tariff which British Gas are now doing.

Suppliers keep blaming Ofgem for high standing charges.

wrf12345

"I wouldn't agree with high consumption households subsidising the more well off like your second point would do though."

Happens with owners of small IC cars and electric cars who pay no or little road tax, they get a break for doing less damage to the environment in the same way as low energy users do less damage to the environment and cause less wear on the grid.

I would go even further, though, no s/c's and a lower kw/hour rate for the first few kw used every day (probably only with smart meters), the money recovered from the higher consumers. This would really encourage low use, if there was a massive jump, say from 5p kw/hour to  30p kw/hour.

BarelySentientAI

wrf12345 said:

"I wouldn't agree with high consumption households subsidising the more well off like your second point would do though."

Happens with owners of small IC cars and electric cars who pay no or little road tax, they get a break for doing less damage to the environment in the same way as low energy users do less damage to the environment and cause less wear on the grid.

I would go even further, though, no s/c's and a lower kw/hour rate for the first few kw used every day (probably only with smart meters), the money recovered from the higher consumers. This would really encourage low use, if there was a massive jump, say from 5p kw/hour to  30p kw/hour.

Super - lets get all the people who can afford solar and battery systems to be subsidised by the pensioners using storage heaters in under-insulated bungalows. </sarcasm>

Blunt instruments often produce undesirable results.  Unfortunately, they also produce clickbait headlines and attractive bandwagons.

Baldeagle095

On reflection (& calculation) my saving is only just over £180 per annum!
The figures I quoted are merely the difference between my current DD & my new DD. Basically the difference in those totalled £764. 
This in itself would suggest that everybody should check their bills and compare to their usage.
The underlying message remains that low usage users should consider moving to tariffs that are appropriate for themselves. 
In fact, my view is that Standing Charges are too high and these costs should be transferred to Tariffs.
 

BarelySentientAI

Baldeagle095 said:

In fact, my view is that Standing Charges are too high and these costs should be transferred to Tariffs.
 

Why?

You have one connection to the grid, the same as almost everyone else.  The size of that connection is the same as everyone else's.

What you are saying is "I think someone else should be paying some of my bill".  Most people would probably say something similar, but without some logical justification it's not much of an argument.

There are many logical arguments for modifications to the overall tariff/standing charge structure, but which ones are you thinking of for this argument?

Remember - high usage does not mean rich.

Some modifications that would make logical engineering sense:

Higher standing charge for non-smart meter customers - as they cost more for system balancing.
Lower standing charge for people with a smaller cutout fuse size - as they have a mathematically smaller potential impact on the system re: reinforcement, planning, emergency switching.
Removing the regional differences in standing charge - because if we are choosing to socialise maintenance through a standing charge rather than attempt to directly calculate proportions for every customer, we should just go the whole way.
Lower standing charge for people willing to take an interruptible supply (some commercial customers already have this) - as they have a defined lower standard of service.

As for low-income households etc, why not have social tariffs, better organised winter fuel payments.... rather than using SC as a very poorly correlating tool?

wrf12345

"As for low-income households etc, why not have social tariffs, better organised winter fuel payments.... rather than using SC as a very poorly correlating tool?"

Because you are making people plead/beg to councils/energy companies in a way that poor pensioners, for instance, would not countenance and welfare has all but bankrupted the country post-Brown govn. This is a case of the govn/ofgem putting the energy companies before the people who actually pay their salaries, and rather unacceptable. It is a deliberate complication of a simple solution (get rid of s/c) so that more people are employed to police yet another state system and energy companies get yet another helping of gov money for free.

An interesting point about fuse size, though, as many countries offer two meter options with exactly that intention (pre smart meter so I guess can be done automatically?), and the smaller rated consumer unit comes with both lower s/c and unit rate or just simple unit rate. The only complication with this would be charging electric cars, not sure what amps the fast chargers use, but I guess the intention is that anyone who can afford an electric car can afford to pay top whack for electricity.

It is a pity that Octopus have not offered a version of Agile with zero standing charges and much higher peak rates than the current ones which would be even more effective at avoiding grid overload and or burn out, the lack of s/c a nice reward to people who take up the challenge of energy-time shifting. I am sure a lot of people who saved on the s/c would then buy a battery/inverter to stock up on power when it was very cheap, further helping out the grid.

Spoonie_Turtle

wrf12345 said:

"As for low-income households etc, why not have social tariffs, better organised winter fuel payments.... rather than using SC as a very poorly correlating tool?"

Because you are making people plead/beg to councils/energy companies in a way that poor pensioners, for instance, would not countenance and welfare has all but bankrupted the country post-Brown govn. This is a case of the govn/ofgem putting the energy companies before the people who actually pay their salaries, and rather unacceptable. It is a deliberate complication of a simple solution (get rid of s/c) so that more people are employed to police yet another state system and energy companies get yet another helping of gov money for free.

…

It is a pity that Octopus have not offered a version of Agile with zero standing charges and much higher peak rates than the current ones which would be even more effective at avoiding grid overload and or burn out, the lack of s/c a nice reward to people who take up the challenge of energy-time shifting. I am sure a lot of people who saved on the s/c would then buy a battery/inverter to stock up on power when it was very cheap, further helping out the grid.

Blimey, how cheap do you think home batteries are??

(As for 'poor pensioners', granted there are some genuinely struggling - usually due to a lack of social care or a refusal to claim financial assistance to which they are entitled - but the most basic minimum income level when assessing pensiom age means-tested benefits is literally double that of working age benefits.  Very few pensioners are forced to be poor.)