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

justwantedtosay

CSI_Yorkshire said:

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?

I assumed that was the message behind this early post;
"Unfair to low users? So when its included in the unit rate, it will be unfair to family's. Family's will subsidise low use households"

MattMattMattUK

justwantedtosay said:

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!

I am a low user, I would likely break even or be a slight net beneficiary. 

justwantedtosay said:

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.

They would not be penalised, they would be paying for the grid connection that they benefit from, the same as everyone else.

justwantedtosay said:

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. 

Or £3,300 over a decade, or £33k over a centaury, you can multiply numbers over time to make them bigger, but that does not change the underlying figure.

justwantedtosay said:

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 panel? I don't.

You can make assumptions as to what would happen to the average user, but that does not reflect what could actually be implemented. I did not say that all pensioners are wealthy, but in general they are higher energy users, they will often choose to forgo other things and prioritise warmth. The reason I think that many low users have solar is that the data shows that many of the low users have solar. At the moment roughly 1.2 million homes in the UK with solar will be exporting significantly more than they import, negative net consumption, they end up being low users over the whole of the year. Just because you do not and I do not, despite being low users, does not mean that those 1.2 million homes with solar do not exist. 

justwantedtosay said:

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 there massive overheads and reduce the price of the goods they sell so, as with energy,

No, but you are attempting to make the classic straw man argument that many of those against standing charges do. Most importantly a supermarket does not have to maintain a direct link to your home, they operate in vastly different markets, with different supply chains and different systems, the same would apply to petrol stations before you try and bring that one up as well. 

justwantedtosay said:
the poor subsidise the rich?

The poor are subsidised by the rich on a huge scale in the UK. More than half of households receive more in cash benefits than they pay in tax, the top 1% of earners pay a third of all income tax, less than 20% of adults make a net contribution in any one year, only around 3% make a net lifetime contribution. 

bob2302

MattMattMattUK said:

The standing charge is there to cover the network costs, therefore it is correct that everyone with a connection pays it. 

Yes, but clearly these costs depend on the amount of power being transmitted. Minimizing cross subsidy would involve splitting the network costs between standing charge and unit rate. Perhaps this already happens - I don't know.

Scot_39

People unhappy with the current standing charges aren't going to like the latest CI forecast.  July 3rd inc now Q2 2024 - so for Apr 1st 2024.

https://www.cornwall-insight.com/predictions-and-insights-into-the-default-tariff-cap/

Electric SC up from their current 50p (why only 50p when regional average currently over 52p according to mse another Q )  to 57p.

But with a predicted 2.31p/ kWh fall in unit rate.

Means most I guess will still save.

7/2.3 = 3.03 kWh use per day to break even.

BarkingToolong

I'm sorry if this has already been suggested, but could a solution be to limit the percentage of the energy bill taken by the standing charge to something like 20 percent of the energy charged for.
IE if someone uses £50 of energy in the charging period, they could only have a standing charge of £10 added to the bill. 
If, for example, the standing charge is £1.00 per day, a user would have to use £5.00 of energy (per day) before they pay the full standing charge. If they used £2.50, they could only be charged 50p.
This would be averaged over the charging period.
The percentage could be set by someone (or thing) with a better grasp of maths than me.
The idea would be to encourage people to use less energy and to make it fairer for low energy users. 

DE_612183

BarkingToolong said:

I'm sorry if this has already been suggested, but could a solution be to limit the percentage of the energy bill taken by the standing charge to something like 20 percent of the energy charged for.
IE if someone uses £50 of energy in the charging period, they could only have a standing charge of £10 added to the bill. 
If, for example, the standing charge is £1.00 per day, a user would have to use £5.00 of energy (per day) before they pay the full standing charge. If they used £2.50, they could only be charged 50p.
This would be averaged over the charging period.
The percentage could be set by someone (or thing) with a better grasp of maths than me.
The idea would be to encourage people to use less energy and to make it fairer for low energy users. 

The problem with this is that the TOTAL costs that need to be recovered by standing charges are more or less fixed - If we have a flexible rate based on consumption - what happens at the end of the year when they is a deficit of say £10m? Does that just then get added onto the next year so the 20% then becomes 30%?

Using less energy across the board would not decrease the costs the standing charges need to recover.

BarkingToolong

DE_612183 said:

BarkingToolong said:

I'm sorry if this has already been suggested, but could a solution be to limit the percentage of the energy bill taken by the standing charge to something like 20 percent of the energy charged for.
IE if someone uses £50 of energy in the charging period, they could only have a standing charge of £10 added to the bill. 
If, for example, the standing charge is £1.00 per day, a user would have to use £5.00 of energy (per day) before they pay the full standing charge. If they used £2.50, they could only be charged 50p.
This would be averaged over the charging period.
The percentage could be set by someone (or thing) with a better grasp of maths than me.
The idea would be to encourage people to use less energy and to make it fairer for low energy users. 

The problem with this is that the TOTAL costs that need to be recovered by standing charges are more or less fixed - If we have a flexible rate based on consumption - what happens at the end of the year when they is a deficit of say £10m? Does that just then get added onto the next year so the 20% then becomes 30%?

Using less energy across the board would not decrease the costs the standing charges need to recover.

Well they could either increase the standing charge or add to the unit price of energy if they wanted to go down that route. The percentage wouldn't necessarily have to change.

MrChef1_

Martins PIE chart shows operating costs and smart metering at 50.2 % of standing charges.
Why are customers paying for these 2 costs as they are just for the benefit of the energy companies ??

Spoonie_Turtle

MrChef1_ said:

Martins PIE chart shows operating costs and smart metering at 50.2 % of standing charges.
Why are customers paying for these 2 costs as they are just for the benefit of the energy companies ??

If the companies can't operate without going bust then we won't have any power …

Also smart meters do benefit customers as they enable access to tariffs that can be cheaper.  Unless you reckon everyone should have to pay an upfront charge to have a smart meter installed, which would exclude people who don't have that money to spare.  This way the cost is shared amongst everyone over a long timeframe.

jaceyboy

I try my best to be energy efficient, my hot water hasnt been on in a couple of months, my solar pv runs my solar hot water in the day and I use little in the evening, but I still have to pay £0.75 odd per day to the energy boards, I call that profiteering when someone is trying to live off the grid..