Energy standing Charges - OFGEM's inability to address unfair standing charges on consumers

matt_drummer

Baldeagle095 said:

Thank goodness Income Tax is not charged in the same way as standing charges.

Well, it is kind of.

Up to about £100,000 of income everybody gets £12,750 with no tax.

Look at it as a standing allowance rather than a charge.

MP1995

I will add to my comment that I posted where it can cost up to £365 for dual fuel customers just for the standing charge.

But then introduce you to something called Octoplus with Octopus energy for those with smart meters.

We only have electricity as we have a heat pump and so out standing charge for the year is fixed on agile and amounts to 42p a day.

The reason I mention Octopus and Octoplus is because they give me a free coffee in Nero each week and other perks and the coffee I get adds up to about £4. Or £208 a year.

I would get that coffee each week and more so it is a real benefit and remiss of me not to mention on a money saving site.

Scot_39

In the Ofgem response to the SC call for responses review - see links above - if had read it before posting - you would know that one of their proposals is in fact to give you exactly what you want - a choice of some potentially zero or at least far lower SC tariffs from suppliers.

The current status quo for many - one SC and one unit rate - was not always so.  But arguably a consequence of 2 fairly recent changes - by govt / ofgem. The tariff simplification exercise - c2012 - and the actual cap / default tariff level (c2019) - a simple linear cost vs consumption cap.

As well as suggesting potentially no SC plans - they produced tables for smaller shift - they produced tables based on £20-£100 shift (shift not savings) for dual fuel users - and the potential costs impacts that would have on a sample of domestic consumption levels.  

But at the £100 level - table A6 iirc - for DD it's a shift of £38 electric and £63 for gas - which is not at all intuitive given the relative levels for the cap per fuel - £38 in £220 about 1/6th  - but £63 in £115 nearer half.

And to save £50 - you would have to be a low user (half the 12000, 3100 balance points ?) on that £100 SC to unit shift - something already available (iirc is it on pledge fix - regardless of consumption - or you could just use a referral code every year). They aren't necessarily going to deliver a ground breaking overall cost saving even at that top level - but are potentially punishing heavy users by £116 in one case in table A7 - a heavy all electric user - based on just shifting £38.

But it also gives some useful context to where we are today. Fig 2.1

Where ave electric SC - £220 includes £121 in network costs

but ave gas SC - £115 - includes £0 in network costs - so presumably those are in unit rates.

Which on a quick scan of report - it appears to say is a result of their own 2019 TCR exercise - and a direct attempt to be fairer to high users - for the fixed component of network costs - but only on electric.

And again further begs the question - of treatment of electric versus gas.

A difference in treatment that also appied to SoLR - loaded on electric SC and gas unit iirc correctly.

Arguably Ofgem has gone too far - on loading electric SC - my electric has more than doubled since 2022 - so nearly £120 extra pa.

But they and industry - are contrained by politicians - who are driving the continued rush to wind - and in recent past - that's been largely offshore wind - and some of it pretty remote from consumers. 

But equally arguably that extra c£120 increase - would be less of an issue - if successive govts had not loaded energy bills with not only core energy costs (wholesale, network, supplier) but with policy costs (£188 - up £30, plus £28 debt (from Covid £11) and £10 levilisation in Apr so those 3 - £226 - up c£57 in Apr in cap of now £1568) and renewables (CfD £37, impact on energy network costs £xx?).

wrf12345

Just to add (again), the actual compromise that would generally reflect the income/use of consumers would be to take the s/c's off smart prepayment meters and add it to the unit cost (at a flat rate not per Utilia), giving some real choice to consumers and also reflecting the lack of debt that can be ramped up on smart prepayment meters.

Unless Ofgem actually mandates zero s/c options with recalculated max unit rates, they will largely be ignored by the industry, especially as new comers would also have to offer the std capped rates as default so you can't have Ebico-type simplification of a singular rate tariff.

It will be a test of Labour how they manage this - the last lot didn't give a toss about consumers and let Ofgem roll them over - especially now they have forced a large section of pensioners to permanently turn off their gas supply by taking away the winter fuel allowance.

Marvel1

Ildhund said:

If you want to make your opinion known to those responsible for setting standing charges, this isn't the right place. This is: Standing charges: domestic retail options | Ofgem

Thank you for this, I have submitted my thoughts.

BarelySentientAI

wrf12345 said:

Just to add (again), the actual compromise that would generally reflect the income/use of consumers would be to take the s/c's off smart prepayment meters and add it to the unit cost (at a flat rate not per Utilia), giving some real choice to consumers and also reflecting the lack of debt that can be ramped up on smart prepayment meters.

Just to add (again), that isn't a compromise, that's a specific modification to affect a small subset of users and doesn't address either what you seem to think is an issue or what anyone else sees as an issue.

Consumer choice doesn't mean "I want the system to be made cheaper for me at the expense of others".

bristolleedsfan

BarelySentientAI said:

OFGEM have run several consultancies (including one earlier this year whose initial results have been recently published) and the existing system has been found, every time, to be the fairest method of addressing the need.

https://consult.ofgem.gov.uk/energy-supply/standing-charges-domestic-retail-options/supporting_documents/standing_charges_domestic_retail_options.pdf#page=8

BarelySentientAI

bristolleedsfan said:

BarelySentientAI said:

OFGEM have run several consultancies (including one earlier this year whose initial results have been recently published) and the existing system has been found, every time, to be the fairest method of addressing the need.

https://consult.ofgem.gov.uk/energy-supply/standing-charges-domestic-retail-options/supporting_documents/standing_charges_domestic_retail_options.pdf#page=8

You do understand the difference between "customers who decided to contribute to the review claimed that it was unfair" and "the system is unfair"?  How many customers do you think would bother to contribute to say "all good, leave it alone"?

Note the wording:  "perception of inequality"  "seen as unfair" "not well understood".  Essentially saying people don't like it because they don't understand it.

Read the rest of the document.  Other sections of wording in there:

"We find that there are approximately 3.7 to 3.8 million low income households that would be classified as winners with an average bill reduction of -£4 to -£19 per household per year. There are approximately 2.3 to 2.4 million low-income households that would be classified as losers with an average bill increase of +£4 to +£18 per household per year"

"We are particularly concerned about the impacts these shifts may have on vulnerable households, especially those on low income with inflexible high demand. Lower income households do not necessarily have lower energy consumption, particularly when they are living in poorly insulated homes, or have medical needs that lead to increased energy use."

"we recognise that there will be a group of lower income customers who are negatively affected"

This doesn't mean that abolishing SC is somehow fairer.  Just means different people would win and different people would lose.

Those who would win from a change (or at least those that think they would win) want SC to be abolished.  Not because it's generally unfair, but because they think that they personally pay too much and that means it's somehow unfair.

Actual sensible proposals for change in the document include allowing (and perhaps promoting the offer of) lower SC contracts to allow people to choose those contracts if they want, shifting some of the costs that could be interpreted (at least in part) as 'per unit' into unit rates, and seeing if there is some other mechanism to recover some of the fixed costs to allow a general reduction in SC.

powerful_Rogue

I would benefit greatly if they abolished SC as I have Solar PV & batteries. However i'm in favour of them. We need to pay for the infrastructure and to have gas/electric at the flick of the switch 24/7  - I think it's a pretty fair price to pay.

Adding the SC to the cost of the units will simply make the worst off in society poorer.

Qyburn

I believe in an earlier discussion on poster here said the network costs, or a proportion of them, we're passed to suppliers in proportion to their total volume of energy supplied. That would suggest that element could quite reasonably be paid from unit rate, suppliers' cost and income both varying in proportion to quantity supplied.

On the other hand the Ofgem document states that these are charged to suppliers on a per customer basis.