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

MattMattMattUK

justwantedtosay said:

For those against doing away with standing charges because they will pay more and why should they subsidise low users; many low users are the poorest members of society and are low users because they can't afford not to be.

The vast majority of low users are those with solar, pensioners and unemployed tend to use more by the nature of being at home more even if they do attempt to keep costs down. 

justwantedtosay said:

Putting the costs onto unit charges would make an enormous positive difference to them and their health and wellbeing

It may, or may not, but suggesting that a small change of potentially 10-40p per day would do that is a stretch, especially considering the various subsidy schemes, COL payments, uprating in benefits etc. that add up to a not insignificant amount.

justwantedtosay said:

while the average user would see no or very little change in their bill and a high user would only see a relatively small increase.

Without knowing how the change would be applied and how many pence per kWh it added you cannot be sure on where the divided would sit. Also, why should higher users, often pensioners and the disabled, subsidise low users, almost always those with expensive solar panels?

justwantedtosay said:

I actually paid more for my gas and water standing charges last year than the gas or water itself - that can't be right! (Not because I have an alternative energy source, gas did all my heating and hot water.)

Why cannot it be right? The standing charge is there to cover the cost of the network and infrastructure to deliver the energy to the premises, as you have a connection you need to pay for that, just the same as everyone else. You then pay per kWh on the basis of how much you use. That is the rational and logical way to apportion the costs.

MattMattMattUK

Briskly said:

I always wonder how the UK standing charges compare to those in other countries.

It varies significantly by country, some have no standing charges, others have comparable charges, others have much higher charges.

Briskly said:

When I last checked I found that in most states in the US there is no standing charge at all. How can they do this?

They add the network costs to the energy costs, with high users subsidising low users.

Briskly said:

Their unit rates are also very much lower - presumably because of the cheap gas. 

Cheap shale gas generates around 35%, 30% from coal which is dirty and polluting, but cheap. 20% from nuclear which when accounting for sunk costs is very cheap in generation. They are also a net exporter of energy, where as we are a net importer.

Briskly said:

In California it seems there is no standing charge and a 3 tiered unit rate for electricity, low for low users and increasing for high users. It all sounds very progressive, encouraging low use and helping the poorest. 

It does not help the poorest, it helps low users. As an example and somewhat generalising the lowest users are those with solar, usually wealthy people. Higher users tend to be pensioners and the disabled, because they are at home for a greater amount of time, usually less well off. The correlation between low usage and low income and high usage and high income is very weak, so much so that it is not relevant to the discussion apart from in extreme cases (no money to pay for energy/large swimming pools and vast heated/air conditioned mansions).

CSI_Yorkshire

justwantedtosay said:

For those against doing away with standing charges because they will pay more and why should they subsidise low users

Would you please like to point out the places on this thread where people are arguing that?

justwantedtosay said:

many low users are the poorest members of society and are low users because they can't afford not to be. 

Some.  Statistics actually say it isn't 'many' at all.  But hey, if you're arguing to give free money to people who can afford massive solar arrays in their garden and who actually make money selling it back to the grid, what can I say?

justwantedtosay said:

Putting the costs onto unit charges would make an enormous positive difference to them and their health and wellbeing, 

Minor tinkering with energy bills is not the appropriate method for solving health and wellbeing issues of "the poorest members of society"

Briskly said:

I always wonder how the UK standing charges compare to those in other countries. 

About in the middle of 'advanced nations'.  Same with the unit prices.

Briskly said:

When I last checked I found that in most states in the US there is no standing charge at all. How can they do this? 

Because they are the US and we are not?  They also don't pay national insurance - did this also come as a great surprise?  Different countries can set up their economies and regulations differently.

Briskly said:

In California it seems there is no standing charge and a 3 tiered unit rate for electricity, low for low users and increasing for high users. It all sounds very progressive, encouraging low use and helping the poorest. 

It was discussed in the industry several times, and discovered to be amongst the worst options considered.  It rewarded people who could afford complicated technologies like solar and home batteries, and those who could outsource services (think pay someone to take your laundry away etc); and penalised people with storage heating, people who stayed at home a lot (the unemployed, the elderly, families with children, and people who used medical equipment.

I would suggest that if asked to describe "helping the poorest", you would not consider that amongst the viable options.

Energy is more complicated than "rich man bad, he use lots" and "poor man good, he use little".  Simplistic approaches do not work, whether it's the first or the hundredth time they are suggested.

Chessica22

The Standing Charge is too high and hits low income people like myself very badly as I can’t make my usage any lower but if it was totally removed then richer people with second homes would pay nothing even though the infrastructure must be maintained for them. 

CSI_Yorkshire

Chessica22 said:

The Standing Charge is too high and hits low income people like myself very badly as I can’t make my usage any lower but if it was totally removed then richer people with second homes would pay nothing even though the infrastructure must be maintained for them. 

And so, like many here who actually consider the issue argue, the solution isn't to remove it but to better support the people who need the support (like you).

Briskly

Thanks for your replies guys. Lots to think about here. Supporting those the standing charge hits the most sounds good but I wonder how some of my friends could get support. They fall into the trap of being working poor so don't get any support at all. Some can't afford to use the heating at all now. I would like to know how many fall into this category

Alan_C_C

I am a low gas user, normal electric user and oil central heating.
I used to have a gas tariff with £0.00 standing charge and a higher usage rate to compensate for this, my annual bill was ~ £15.
The government then started changing the energy market.
1) Reduced the number of tariffs each company could offer to 3.
This meant that the supply company's stopped offering £0.00 standing charge tariffs.
Only one supplier was left, EBICO (non for profit), offering this product on the market.
2) Was transferred to Scottish Gas on same contract to end of term.
At end of contract the £0.00 tariff was withdrawn, with no notice.
My bill would have gone up to £125.
I was seriously considering disconnecting my gas supply.
Used MSE Cheap Energy Club and managed to get a dual fuel deal for the same outlay.
The gas standing charge had now gone up to 25% of the normal standing charge.
3) Regulators, price cap and effect of war in Ukraine. 

Would like to get back to a "fair" standing charge & tariff and a competitive market.

CSI_Yorkshire

Alan_C_C said:

Would like to get back to a "fair" standing charge 

And by "fair", you just mean "smaller".

Nothing to do with "fair" at all.

MattMattMattUK

Briskly said:

Thanks for your replies guys. Lots to think about here. Supporting those the standing charge hits the most sounds good but

The standing charge does not actually hit anyone, it is just a cost, overall cost of living exceeding income is what impacts people. Specific targeted subsidy makes little sense, is expensive to implement, distorts the market and does not really help.

Briskly said:

I wonder how some of my friends could get support. They fall into the trap of being working poor so don't get any support at all. Some can't afford to use the heating at all now. I would like to know how many fall into this category

It is a difficult one because a huge amount of it can comes down to lifestyle choices, do people choose to smoke, drink, buy pre-packaged/processed food, take holidays, buy clothes they do not need etc. and instead plead poverty because they are unable to heat their home. 

There are some on or below the actual poverty line, they are unable to afford housing, food, energy etc. regardless of what they do, they are usually disabled and unable to work, yet the benefits do not provide them with the support they need to live. There are those who could balance their budget, but choose not to, largely down to lifestyle choices mentioned above and there are those who plead poverty because they have to turn the heating down a bit, whilst still having new cars on finance, a wardrobe of designer clothes and taking several foreign holidays every year. The issue with the category of "working poor" is that it often includes people who work the minimum of 16 hours a week, rather than 40 hours and that very much skews the data and the reporting. 

I believe that we should all be paying more tax, yes that includes me, not just those who earn more than me. The proportion of that extra tax revenue that is directed to social benefits/welfare should be primarily targeted at disabled people, ultimately in work benefits should be phased out entirely, a single person working full time, or a couple both working close to full time should be able to more than adequately support themselves, but not if 16 hours is the threshold. 

justwantedtosay

MattMattMattUK said:

justwantedtosay said:

For those against doing away with standing charges because they will pay more and why should they subsidise low users; many low users are the poorest members of society and are low users because they can't afford not to be.

The vast majority of low users are those with solar, pensioners and unemployed tend to use more by the nature of being at home more even if they do attempt to keep costs down. 

justwantedtosay said:

Putting the costs onto unit charges would make an enormous positive difference to them and their health and wellbeing

It may, or may not, but suggesting that a small change of potentially 10-40p per day would do that is a stretch, especially considering the various subsidy schemes, COL payments, uprating in benefits etc. that add up to a not insignificant amount.

justwantedtosay said:

while the average user would see no or very little change in their bill and a high user would only see a relatively small increase.

Without knowing how the change would be applied and how many pence per kWh it added you cannot be sure on where the divided would sit. Also, why should higher users, often pensioners and the disabled, subsidise low users, almost always those with expensive solar panels?

justwantedtosay said:

I actually paid more for my gas and water standing charges last year than the gas or water itself - that can't be right! (Not because I have an alternative energy source, gas did all my heating and hot water.)

Why cannot it be right? The standing charge is there to cover the cost of the network and infrastructure to deliver the energy to the premises, as you have a connection you need to pay for that, just the same as everyone else. You then pay per kWh on the basis of how much you use. That is the rational and logical way to apportion the costs.

I'm guessing you think you'd pay more without the standing charge!

MattMattMattUK said:
The vast majority of low users are those with solar, pensioners and unemployed tend to use more by the nature of being at home more even if they do attempt to keep costs down. 

So why should they be penalised. And what about all the people working from home now? A lot of people are low users because they can't afford not to be.

MattMattMattUK said:
...a small change of potentially 10-40p per day would do that is a stretch

Up to £330 a year is not 'small' to a lot of people. 

MattMattMattUK said:
Without knowing how the change would be applied and how many pence per kWh it added you cannot be sure on where the divided would sit. Also, why should higher users, often pensioners and the disabled, subsidise low users, almost always those with expensive solar panels?

The average user would almost certainly not see much difference as low users would pay less and high users would pay more. It's the poorer pensioners I'm concerned for and they are the low users. Not all pensioners are as wealthy as you seem to think. The disabled, as you put it, would, as the article says, receive help if they needed to use a lot of energy. And why do you think so many low users have solar panels? I don't.

MattMattMattUK said:
That is the rational and logical way to apportion the costs.

So the rational way for a supermarket to charge for food is to charge a fixed entry fee to cover their massive overheads and reduce the price of the goods they sell so, as with energy, the poor subsidise the rich?