MSE News: Energy bills to fall by 7% as new Price Cap is announced

dealyboy

I generally agree with @justwantedtosay and am informed by @QrizB as always (although I don't really understand the chart ... actually I've just had another look and I think I do now with Qriz's examples).

I am a pensioner on a low income (just full state pension) and have a small park home with the only heating from a portable electric radiator. As a Forumite I cut costs if I can and the last two winters I have had what I now believe to have been chilblains for several months (GP has confirmed Beau's lines).

I believe there are a large number of poorer people who do not qualify for the assistance provided by the state and by definition do not have property wealth. These will include independent older people, people with a disability and the working poor renting. Generally this category will be low users

Some of those on credits and benefits are able are able to have a 'reasonable' lifestyle based on the support and subsidies, some of which come from the standing charge. Generally this category will not be low users.

The misuse of the standing charge by the government is now from what I read of analysts widely accepted. Firstly I think there needs to be transparency of the SC uses in terms that the general public can appreciate, so full disclosure of social levies, renewables development subsidies as well as the original purpose of covering the distribution costs. By the way I read today that subsidies for 'ECO friendly' smart meters are also to come from the standing charge.

I am not in the SC vs. unit price war, I just think that social policies and investments are the responsibility of the Government and should be paid from general taxation.

matt_drummer

justwantedtosay said:

There's no need to save money or deliver energy at a lower cost. The problem with standing charges is that they hit the poor so hard. They should be scrapped and the unit prices increased so the providers still had the income they need to provide a service but it's being paid in proportion to the customer's usage and not just for the privilege of having a supply. I'm not thinking of those lucky enough to have solar panels but the very many who simply can't afford to stay warm in winter and whose standing charges can be more than the cost of the energy itself. 

A social tariff is not the answer as there would inevitably be a cliff edge cut off as to who gets it - probably those on benefits, many of whom are very much better off than a single OAP just above the pension credit cut off. I know people who are approaching retirement and are making sure they won't qualify for a full state pension so they will get pension credits and all the £1,000s in other benefits that will open the door to.

We keep hearing this idea of removing standing charges and adding the cost to the unit price.

It feels like the people suggesting this are the ones who have trimmed their usage to the bone in order to save as much money as possible but are upset that if they half their usage they don't half their bill.

I can't remember anybody suggesting how much should be added to the unit price to replace the standing charges.

Do any of the supporters of this idea have a suggestion of what the price per kWh of electricity should be increased by to replace the standing charge?

If the electricity standing charge is £182.50 a year and the average use if 2,900 kWh a year then this gives me a figure of 6.3p per kWh to add to the unit cost.

It would be interesting to see what the impact of this would be on various groups.

The first group that would be adversely affected would be those who heat their homes purely with electricity. Their bills would increase disproportionately compare to those who used other forms of heating?

Basically if you used more than 8kWh a day of electricity you would be worse off.

With standing charges at around 50p a day and electricity at 27p per kWh what sort of person gets through each day with the cost of the standing charge exceeding their usage charge? You would have to be using less than 2kWh a day, less than 80 watts an hour on average. That cannot be true for many people?

Somebody using 2kWh of electricity a day would save 37p a day, £135 a year under this system, how many people use 2kWh a day of electricity on average? This would only benefit a tiny number of people.

I could go on with lots of examples but I think we can all see the problems that would come with this idea.

Many of the highest users of electricity are the least well off, they would all pay more under this method of paying the standing costs of supply.

What groups of consumers would benefit from a system like this?

I can't think of many, just those who use as little energy as possible to save money and those with lots of generation from solar panels.

I can't help feeling that moving the standing charges to the unit costs would only benefit a minority of selfish people who begrudge paying their share of the fixed costs.

justwantedtosay

matt_drummer said:

I can't help feeling that moving the standing charges to the unit costs would only benefit a minority of selfish people who begrudge paying their share of the fixed costs.

Why do you think Martin is campaigning to lower standing charges then?
And why, when every business has fixed costs, are utilities the only ones that charge separately to cover them? As has been said before, it's as daft as a shop charging you to go in regardless of what you're buying.
You should replace "selfish" with "poor", and don't you reckon most of those who are against the idea are likely to be amongst high users fearing they'd pay more?

matt_drummer

justwantedtosay said:

matt_drummer said:

I can't help feeling that moving the standing charges to the unit costs would only benefit a minority of selfish people who begrudge paying their share of the fixed costs.

Why do you think Martin is campaigning to lower standing charges then?
And why, when every business has fixed costs, are utilities the only ones that charge separately to cover them? As has been said before, it's as daft as a shop charging you to go in regardless of what you're buying.
You should replace "selfish" with "poor".

I would guess that Marin Lewis is campaigning as he thinks it will help people.

Who does he think should pay the costs?

So how much should be added to the unit cost of electricity to replace the standing charge?

Please tell us.

And what affect do you think it will have on various groups?

Do you think this idea would benefit all poor people, most poor people, some poor people or just a minority of poor people?

I think the majority of poor people would pay more under this idea, I don't think it would help many people at all.

justwantedtosay

matt_drummer said:

I would guess that Marin Lewis is campaigning as he thinks it will help people.

I don't think it would help many people at all.

Hmmm, I wonder who has the most information to base their opinion on?

matt_drummer

justwantedtosay said:

And why, when every business has fixed costs, are utilities the only ones that charge separately to cover them? As has been said before, it's as daft as a shop charging you to go in regardless of what you're buying.

Other businesses you refer to do not operate like an energy company. They are free to profit or loss as they desire and nobody cares if they go bust or not as there is always another shop.

Energy companies have to survive, their profits are capped and the standing charges don't go to them in any case, they just collect them and pass them on.

The companies that provide the infrastructure have to be funded and it is a fixed amount, it has to be paid for by the people who use it.

These businesses are not like any others so your comparison is of no use.

QrizB

justwantedtosay said:

If, and I admit it's a guess, you imagine there's a straight line and that the five consumption quintiles for the lowest income quintile are 29, 24.5, 20, 15.5 and 11% then 53.5% of the lowest two consumption quintiles are in the bottom 40% of the income range.

Which would mean that 46.5% of those households aren't low-income? I would suggest that a "benefit" where almost half of it goes to households that don't need it, is misguided.

justwantedtosay said:

If 11% of the poorest are in the high user bracket then there's a good chance it's because they have extra needs which they could easily be compensated for - as they are already.

So you're going to need a system to identify the high-use, low-income households and support them.
Why not just use this system to identify all the households who need support, regardless of use?

Which brings us back around to some sort of universal means-tested benefits, which already exist as Universal Credit and Pension Credit.

matt_drummer

QrizB said:

justwantedtosay said:

If, and I admit it's a guess, you imagine there's a straight line and that the five consumption quintiles for the lowest income quintile are 29, 24.5, 20, 15.5 and 11% then 53.5% of the lowest two consumption quintiles are in the bottom 40% of the income range.

Which would mean that 46.5% of those households aren't low-income? I would suggest that a "benefit" where almost half of it goes to households that don't need it, is misguided.

justwantedtosay said:

If 11% of the poorest are in the high user bracket then there's a good chance it's because they have extra needs which they could easily be compensated for - as they are already.

So you're going to need a system to identify the high-use, low-income households and support them.
Why not just use this system to identify all the households who need support, regardless of use?

Which brings us back around to some sort of universal means-tested benefits, which already exist as Universal Credit and Pension Credit.

Exactly, the cost of living is factored into the support payments, they may not be enough for lots of people and that is where the problem lies.

It is not the standing charges that are the problem here, it's a lack of a high enough income for many people.

mmmmikey

justwantedtosay said:

matt_drummer said:

I would guess that Marin Lewis is campaigning as he thinks it will help people.

I don't think it would help many people at all.

Hmmm, I wonder who has the most information to base their opinion on?

Probably Citizens Advice and they are against the idea of lowering standing charges and increasing costs for vulnerable customers, which is one of the reasons that Martin Lewis has cited for having difficulty getting traction. I'm a big ML fan but he doesn't have a monopoly in being concerned about the vulnerable groups in society and I think he's got this one wrong.

mmmmikey

superkoopauk said:

Thanks.  So standing charges going up again - that will annoy plenty of people

I think it would be fair to say you were right :-)