standing charge

Scot_39

maxiemaxie said:

Standing charges are only one way of recouping infrastructure costs. It's convenient for supply industries because it allows them to compare the cost of maintenance, modernisation and expansion against a set sum per customer, even more so in the dim and distant when we had geographic monopolies.

But it's far from the only charging model there is. For instance, there is no standing charge on new cars despite the high costs of manufacturing infrastructure, plant, tooling... you pay for the car, the manufacturer sets the price to cover their costs. Ignoring financing of course.

If, as they once did, the electricity industry could offer no standing charge tariffs alongside those with standing charge. And make a profit on both, then so could any supply industry.

In the case of energy you might almost believe that the regulator and their bosses have made the market anti competetive.

There is iirc only one company that offers no standing charges - but it does so by setting a higher initial per unit price for the first 2 kWh - and iirc the few rates posted here - a slightly higher than Ofgem cap per kWh unit rate.

(About 5-6 years ago there were more - 5 in one article from 2018 just fonud - including a couple of larger start-ups who failed during the latest crisis)

Why the higher rates - because it too has to recoup at least the external components of the fixed costs - payments to grid and social levies alike - and the internal - as it has employees, buildings, computer equipement etc to pay for.

Pre tariff simplification - you could get banded tariffs that saught to distribute the costs - in a different fashion - some of which suited higher users more than others.

But the complexity of the market was felt to be too much for too many - by our WM lords and masters - making comparison difficult for instance (despite the growing prevalence of switching site services).

And as per Ofgem announcment at the time (c2014 - but another revision happened c2016)  - despite the legislation needing a flat unit rate for single rate electric - zero standing charges were specifically explicitly permitted.

https://www.ofgem.gov.uk/press-release/simpler-energy-tariffs

or in more detail

https://www.ofgem.gov.uk/press-release/finding-better-deal-your-energy-getting-easier-today

(Although did read something about a new 1 yr fix contingent on installing solar etc the other day - yes found it - EDF Empower - see

https://www.edfenergy.com/media-centre/edf-launches-britains-first-solar-tariff-no-standing-charge

)

And as to the car analogy - do the manufacturers pay for the ongoing maintenance - tyres, exhausts / mots / servicing for the life of your car.  If you are not one of the fortunate whos companies lease their vehicles for them - do they pay your financing costs and losses - e.g. depreciation etc

Because the grid is not only "new" pipes, pylons and wires - and similarly the long term financing thereof - but the replacement of the old.

One of the problems at the moment though - is that the increasingly maddening rush to renewables in locations far far from demand (think in extremes NE Scotland or offshore - vs cities in N England and Midlands or the South etc - some 100s of miles away) is significantly increasing that "new" capacity cost.

Grid curtailment fees for renewables becasue we cannot transmit (then it will turn to cannot use on a windy day when they are producing closer to capacity) - £750-800m by some estimates last year - forecast by ESO to rise to £3bn by 2030 - c£80-100+ per connection - paid by all of us - directly and via business costs on goods we buy. 

The truly frightening scale of the problem - again ESO - another £58bn in grid costs by 2035.

https://www.nationalgrideso.com/news/eso-publishes-beyond-2030-ps58bn-investment-plan-future-britains-energy-system

"In total there will be over 30 GW of offshore wind in Scottish waters compared to 6 GW of peak electricity demand in Scotland in 2035"

And the costs of any delays to current plans - for onstream 2029 - well by 2030 every year - on just 2 parts of the upgraded transmission capacity puzzle - the EGL1 and EGL2 HVDC links - ESO has estimated to be over £400m per year on top of current projections - thats half of 2023 total costs.  And note thats only 4GW of transmission - compared to the forecast far greater - 24 GW of theoretical over capaicty in Scottish waters in that ESO report.

Do you really want to be paying for that £58bn upfront so can have the transmission capacity needed (or pay perhaps the current £3bn peak in curtailment fees - or perhaps more because we have not financed it) - the same way as the car sticker price analogy - say £1500-2000 per supply.