Abolish standing charges

JSHarris

The issue is that my standing charges (and I suspect most people's) have doubled in the space of a couple of years.  The fixed costs of providing the infrastructure haven't doubled in that time, in fact they've barely increased by the rate of inflation.  Had the fixed network costs increased by that amount I'd have no grounds to have a moan, but as they haven't, and the standing charge has been increased largely for reasons wholly unconnected with the fixed cost element I feel that criticism is warranted.

Certainly I've worked damned hard over many years to try and reduce my cost burden in retirement, that was a deliberate decision I made in the mid-1990's, when I realised that energy costs were likely to be a big hit on my pension when I retired, so I had better do something about it.  What I didn't expect was for the standing charge to double, partly to pay for the incompetence and mismanagement of chancers that were encouraged to gamble with my money.

MeteredOut

I can't recall the exact % of the standing charge that isn't infrastructure related, but I think its still relatively small. I do suspect the increase in the infrastructure maintenance portion is down to the lack of investment historically (eg, to ensure the network can accommodate the expected increase in EVs) meaning that its having to be ramped up now. I'm hoping those closer to the industry might be able to confirm, or otherwise explain why the SCs have gone up by so much (other than the green/SOLR etc additions)

JSHarris

Just checked some numbers and the inflation element of the standing charge (i.e. the increase in the fixed costs of providing network infrastructure etc) is pretty small.  Simply because I have the numbers and because 2016 is the date I started paying the standing charge for this house, I've chosen to compare the change in the standing charge between then and now.

In 2016 my standing charge was 14.91p/day.  Inflation between then and now has been roughly 32%, so the standing charge should now be about 19.7p/day.  It's not, it's currently 49.98p/day.  Part of this is due to a decision Ofgem made to deliberately penalise low energy users (and they have been clear that this is why they made this change), by switching part of the new infrastructure development cost from the unit price to the standing charge.  Arguably this should have stayed with the unit price, as it's new, heavy, users that are partly driving the need for increased capacity (EV charging etc).  Far and away the largest element of the standing charge increase is the cost of bailing out the dozens of chancers that went bust, i.e. the costs associated with the SoLR.

The consequences of this are that there isn't now much incentive to continue reducing demand if all that's going to happen is that the standing charge keeps on rising at a meteoric rate.  When I started building this house I set out to economise on energy use as much as I possibly could, within a pretty limited budget.  If I were doing this again that arguably the balance between saving energy and the cost and work involved in doing that will have shifted - no point in going overboard with my two bedroom house if I'm paying the same standing charge as the ten bedroom mansion down the road with zero insulation.

wrf12345

It is a pure political opportunity for a party that can combine abolishing standing charges (punish the energy companies) and get rid of the dreadful council tax which is legalised theft (essential services would not disappear as most council money comes from central govn and councils would be forced to get rid of all the mini empires they like to build and loads of unnecessary overhead) - it would cost the government zero and brings in millions of voters for the next election. I would also add the TV licence but that is now quite easy to avoud if you use on-demand streaming (free except for internet data which for me is down from £20 to £10 a month).

PennineAcute

Let's make it fair.  Take all the added extras from the Unit Price and add it to the Standing Charge.  Then everyone pays, not just the few.

VAT is not fair.  People on a lower income pay a higher proportion of their income to the government compared to high income earners.

QrizB

JSHarris said:

The issue is that my standing charges (and I suspect most people's) have doubled in the space of a couple of years.

Ofgem capped electricity standing charges for Southern region (mine and yours), in pence per day:

• 2019: 25.3 / 26.2 / 26.3
• 2020: 23.1 / 23.1
• 2021: 24.1 / 24/1
• 2022: 43.4 / 44.4
• 2023: 44.4 / 49.6 / 49.6 / 50

Compared to April 2020, the electricity standing charge has increased by £98 a year.

(For reference, the gas standing charge has changed from 27.3p to 29.6p per day over the same period, an increase of £8 a year).

JSHarris said:

... the standing charge has been increased largely for reasons wholly unconnected with the fixed cost element I feel that criticism is warranted.

In April 2020, when the charge was at its lowest, the cap was broken down like this:

In October 2023, it's broken down like this:

Other than wholesale costs, the biggest increase is in network costs (up £108 a year). This is very close to the aggregate change in standing charges (£98+£8 = £106) over the same period.

It seems to me that the change in standing charge is appropriate.

MultiFuelBurner

My only standing charge is electricity and being with Octopus for now on what we can probably now call a legacy rate (Tracker Nov 2022 v1) of 37.3p per day so £136.15 a year or £11.35 a month. (Cheaper than a TV licence)

Not bad really and no complaints over that figure or the percentage it represent sif my bill which are irrelevant as this has to be paid and my energy use and costs are variable.

There are some that will crow on here about how cheap their energy bill is constantly over many threads but they are just happy with where they have got. How they achieve this is interesting told once and gives clues on how to become net zero given the money.

I am though glad we don't have to pay a gas standing charge as well as that money pays for a month of winter electricity usage.

QrizB

JSHarris said:

Far and away the largest element of the standing charge increase is the cost of bailing out the dozens of chancers that went bust, i.e. the costs associated with the SoLR.

You will see from the numbers quoted above that the SoLR costs are currently £18 a year. This can by no means be portrayed as "far and away the largest element of the standing charge increase".

JSHarris said:

When I started building this house I set out to economise on energy use as much as I possibly could, within a pretty limited budget.  If I were doing this again that arguably the balance between saving energy and the cost and work involved in doing that will have shifted - no point in going overboard with my two bedroom house if I'm paying the same standing charge as the ten bedroom mansion down the road with zero insulation.

I'm not sure how that's even relevant. No-one can know the future. We make the best decisions we can with the information we have.

JSHarris

There's definitely politics at work, for sure.  Ofgem seem to be very heavily influenced by government policy, even though they are supposed to be the even-handed industry regulator.  Decisions they have made have deliberately shifted costs away from investors and onto consumers.  No surprise there, given that many of the investors are giving back handers best mates with many government characters.

As we've seen with the massive level of investment in wind generation, there's no shortage of investment money around if the returns are high.  Same goes for storage, not far from me there have been two large battery storage farms built and one of those is about to double in size.  Government isn't paying for those directly, but Ofgem have shifted the balance of costs on the consumer so we all now pay for a lot of the infrastructure cost for these developments.  Means they get a free pass when it comes to some of the connectivity costs, unlike me building myself a home where I had to pay a completely OTT cost in order to get 20m of cable run to the house.  Over £3.5k if anyone's wondering, about £175/metre for a bit of cable that costs (retail) £6.24 (inc VAT) per metre.

JSHarris

QrizB said:

Other than wholesale costs, the biggest increase is in network costs (up £108 a year). This is very close to the aggregate change in standing charges (£98+£8 = £106) over the same period.

It seems to me that the change in standing charge is appropriate.

Worth looking at WHY the network costs increased.  It's not inflation or anything connected with that, it was the deliberate transfer of cost (by Ofgem) from the unit price to the standing charge in order to increase the proportion of network costs paid by low users.  This change was made in 2021 and resulted in a big chunk of the standing charge increase that year.

My point is that the justification for this change was at best dubious.  Ofgem took the view (and they have made this public) that consumers that were reducing their energy usage were paying less towards some infrastructure costs (the TNUoS and DUos).  This change came about following the TCR, and was a decision made before the step increase in unit costs that resulted from the Russian invasion of Ukraine (although it was implemented after it).  It's worth noting that Ofgem have pretty much been forced to review standing charges again in the light of the hostile reception the TCR increases received.  You have until 19th January 2024 to respond to Ofgem about this.