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

mmmmikey

coupleuk said:

Oh bless you.

Given that the whole thread is titled "energy-standing-charges-ofgems-inability-to-address-unfair-standing-charges-on-consumers" it is not unrealistic that the discussion includes the removal of standing charges.

But, as offered in my last post - if you have an alternatively researched argument then let's hear it

The reasoned and balanced arguments are presented in the Ofgem report - both those arguments that support lowering the standing charge by increasing unit costs and those that support leaving things as they are.

Sadly Ofgem do not have a packet of magic money tree seeds to plant so the discussion by necessity isn't about reducing the cost of providing energy overall, but whether that cost should be distributed differently.

The proposal that pensioners who stay at home most of the day and are high users because of the need to stay warm, those with medical conditions in the same situation, those who are forced to live in poor quality housing without good insulation because of the dire state of the rented housing market and those with families should pay more so others can pay less is not one I, or many others on this forum, will ever accept.

If you have a suggestion that helps solve the real issue of energy costs that some are struggling with that doesn't just move the problem somewhere else than by all means make it. All you have done is pick some different figures and presented them in a way that allows you to pretend the issue of fuel poverty doesn't exist.

Complaining about how unfair it all is does nothing to help solve the probelm. Passing the cost on to another vulnerable group would be equally unfair. I think everyone here wishes energy costs were lower and everyone here feels for the folks are genuinely struggling. There is no argument against lowering standing charges per se, the argument is against doing that by making a different set of vulnerable customers suffer instead.

Qyburn

Note in the Options Paper it finds that moving cost from S/C to unit rates is likely to impact supplier profitability. A naive view might be "who cares" but in the real world if that's the case the price cap would have to come up a little. Taking £100 off the S/C might require more than £100 added on to unit rates.

Scot_39

You aren't paying for the costs of the stores, staff, delivery to the store as an individual seperated item  - but you are paying for it regardless.  

Much better analogy is car ownership in my opinion. In very simplistic terms - you pay for the car  - or to lease it - inc VED insurance etc. Then you pay a mix of costs. Then you pay to use it including electricity or petrol etc on a per mile basis.

Only default tariffs are covered by the Ofgem cap - intoduced years later than simplification - 2019 for most (prepay safeguard c2017 ? for some).
Whilst suppliers must offer a compliant tariff  - all are free to offer other tariffs.

Most suppliers (who operate on a tightly capped profit allowance in built to cap for customers under it) only deviate significantly on fixes or on tied packages from it's costs.  If can resist cynicism - perhaps its not a bad reflection of actual costs - at least in the forward supply pricing environment arguably most of our tariffs operate under - if not spot trackers.

Those on low use naturally feel penalised by increases to standing charge. 

Those who feel so would do well to read section 2 at least of Ofgems response to understand why costs are where they are.


Of the total current Ofgem estimated network costs ( £363 ex vat in July cap) - to a potentially naive outside observer it looks like £121 of that is now included in the ave electric SC of £220 as above figure - as per figurec2.1 shown above - but.  Again repeating link.

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

But as figure 2.2 in the domestic retail option doc shows - that has risen sharply since before Apr 22 cap - an increase of £103 to £121 in 2 years.

Dwarfing the other rises in SC.

But that was based in some part if not all on careful reflection in their view of actual costs / numbers  -  TCR (2019)  - before crisis. OFGEM essentially decided low users were underpaying for the fixed component of infrastructure and high users were paying too much.

But with charities forecasting an increase - perhaps a significant increase - to over even last winters 6.5m households in fuel poverty.
Surely something more radical than tinkering with shifting £20-100 as one set of Ofgem costings in that report  (and that shown in Table a7 as really penalising 2 of their vulnerable all electric examples - upto £116 to shift just £38 on MR SC back to unit costs) is surely required.

Perhaps time to revisit the balance of cross subsidy via bills and suppliers debt aid - given prices remain easily 50% above pre crisis levels - to the long term role of govts and taxation / benefits / min wage policy.

Especially with scheduled "benefits" cuts on table (from past and present govts) ahead of this winter.

lookbook

I agree terribly unfair.

Qyburn

Scot_39 said:

But with charities forecasting an increase to over even last winters 6.5m households in fuel poverty this winter.

What's the underlying cause? I don't think energy prices are expected to be higher than last Winter, and certainly nowhere near 22/23.

coupleuk

mmmmikey said:

coupleuk said:

Oh bless you.

Given that the whole thread is titled "energy-standing-charges-ofgems-inability-to-address-unfair-standing-charges-on-consumers" it is not unrealistic that the discussion includes the removal of standing charges.

But, as offered in my last post - if you have an alternatively researched argument then let's hear it

The reasoned and balanced arguments are presented in the Ofgem report - both those arguments that support lowering the standing charge by increasing unit costs and those that support leaving things as they are.

Given the furore about excessive and inflated Standing Charges perhaps Ofgem should have chosen to publish their reasoning for "tinkering" with them as opposed to removing them altogether.


The figures I have quoted benefit low users and those restricted to electric-only supplies.

The average consumer (that Ofgem likes to use for reference) would be roughly the same as they are now.

Only those with high use would pay more - which would encourage them to look at fuel options, energy saving options or simply to cut down.

There are already systems in place for vulnerable users to help with their costs.

Removing the Standing Charge and relying on pure Unit Costs would be a far better way for the consumer to compare deals between suppliers - that would encourage competition and choice.

bristolleedsfan

coupleuk said:

mmmmikey said:

coupleuk said:

Oh bless you.

Given that the whole thread is titled "energy-standing-charges-ofgems-inability-to-address-unfair-standing-charges-on-consumers" it is not unrealistic that the discussion includes the removal of standing charges.

But, as offered in my last post - if you have an alternatively researched argument then let's hear it

The reasoned and balanced arguments are presented in the Ofgem report - both those arguments that support lowering the standing charge by increasing unit costs and those that support leaving things as they are.

Given the furore about excessive and inflated Standing Charges perhaps Ofgem should have chosen to publish their reasoning for "tinkering" with them as opposed to removing them altogether.

2.18 - .2.22 . https://consult.ofgem.gov.uk/energy-supply/standing-charges-domestic-retail-options/supporting_documents/standing_charges_domestic_retail_options.pdf#page=8

wrf12345

Interesting, both LBC and Talk Radio shows the idea of getting rid of WFA completely and matching it to abolishing standing charges (roughly the same amount of money for low users when you add on the increased unit charge - and poor pensioners are usually low users and when they are high users due to medical needs some expansion on their benefits might be needed) was suggested by both left and right wing politicians and it would be a way for Labour to save face over WFA and do something that would be popular, especially if they forced energy companies to absorb some of the cost by limiting the amount they could raise the unit rate. Good chance this could be a budget surprise in contrast to all the other bad news they will be coming out with.

MattMattMattUK

The issue with Standing Charges comes up and again and again and it largely splits into two camps.

First there are those who understand the system, that there are fixed costs maintaining a network and a connection to a dwelling and think that it is fair to apportion that to individual bills, so that people pay for their connection and the energy they use.

Then there is the second group, who think that "someone else" should pay for their grid connection. 

I am in the first group, because I am rational sensible and not selfish, as are many of the more learned members of this forum. Those who are reactionary and selfish normally fall into the second group, generally make a lot of noise and generally lack understanding. 

Qyburn

coupleuk said:

The figures I have quoted benefit low users and those restricted to electric-only supplies.

Not so, as you should expect because an electric only household would only benefit from one standing charge being reduced (or removed) but would have unit rate increase applied to all their consumption.

As shown on page 52.