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

Scot_39

Qyburn said:

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.

Potentially those losing WFP just above PC - NEA site highlights as one of the major drivers for their lower 5.6 to 6m estimate - so rise plus allowance cuts could push 400,000 over with Oct rise  - so that takes them to 6m.

They were at 6.5m estimated in Jan 24.

But other sites last Friday were still quoting the existing base at 6.5m - and fearing more - but not quantifying the increase - last week when cap announced.

Ildhund

We see lots of examples of those who suffer from high SC. How about one from the other side: the hedge-fund manager who travels from his Mayfair town house to his isolated cottage on the Cornish coast every August. He and his friends spend a couple of weeks there, enjoying the jacuzzi and sauna and consuming 250 kWh of electricity meanwhile. The infrastructure cost (current and historic) of his electricity supply is probably enormous, but currently he pays around £250 towards it. Abolish the SC and he pays nothing, while his 250 kWh might cost him £25 more than before. 

Fairness is relative.

Qyburn

Scot_39 said:

Qyburn said:

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.

Potentially those losing WFP just above PC - 

I don't dispute that they are worse off than they'd be if they received the WFP, but are they worse off overall given lower energy costs than 2022 and the last two years of benefit increases? If the answer is "yes because everything else has gone up in price" then that's not really a reason to specifically subsidise energy.

Scot_39

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.


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.

Re high use.

And then what benchmark do you use for high use ?

Read Table A7 in the Ofgem response actually show two all electric examples - losing dramatically from - for them - only a £38 shift from SC to unit rate.  As gas gets the £62 in those supposed £100 shifts.

There is no figures for electric only to save £100 - despite it being the higher charge - £220 vs £115 - and probably just as well as that would probably make £116 loss c£300  (100/38.51×116 = £301)


The 2 all electric are for Elderly couple and couple with child in a 2 bed flat - that one even has a fairly close dual fuel example to compare against.

First line example in Table A7 - with the highest loss - using just 12500 kWh , is the elderly couple losing £116 if went ahead with £100 dual fuel shift.
The next line for very high dual fuel is using 30,000 kWh gas + 3,000 electric - 33,000 kWh total and yet only paying £92 more - £24  less for over 2.5 the energy.

The other all electric example 10,000kWh - less than a third of that 33,000 kWh total energy use but still losing £85.
But the duel fuel couple with child - on bottom of table - using a total of 9,300kWh  - just 7% less energy - saves £40.

I know there wont be many here on all electric - and on conventional heating -  as it's maybe only 1 in 6 off gas grid - and some will have alternative heat source - but it hardly seems a balanced approach.

As to your last paragraph - arguably the very argument used for tariff simplification in late 2000s and early 2010s - ending with new simplified tariff rules. That and the linear 2 point default tariff level (cap) combined leave us largely where we are today - majority on 1 SC and 1 unit (or ave unit) rate per fuel. 
Less confusion then meant fewer choices, not more.

And if can't do the basic arithmetic yourself -  sc x 365 + unit cost x zz,zzz - on a calculator etc - to compare total costs -  there will likely be - as there were ironically many before simplification - switching sites to work out the total bills. 

Scot_39

Qyburn said:

Scot_39 said:

Qyburn said:

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.

Potentially those losing WFP just above PC - 

I don't dispute that they are worse off than they'd be if they received the WFP, but are they worse off overall given lower energy costs than 2022 and the last two years of benefit increases? If the answer is "yes because everything else has gone up in price" then that's not really a reason to specifically subsidise energy.

It depends on the benchmark I guess - in the past NEA we're using 3 years - 2020 to 2023 at 67%.

But as you say Oct 24 is still lower than Oct 23 - c£100 or so  e.g. £ 1834 Cs £1717 df dd. ?  Oct 22 was under EPG and EBSS for many so arguably £2100 over the year.

I've seen another site say still 65%.  If so that's 5-6 years even at 10% compounded 10, 21,33, 46, 61, 77 % etc..

But not only are many pensioners potentially losing the standard WFP.

Arent they all already scheduled to lose the extra £150-£300 the "Pensioner cost of living payment"  paid upto last winter.

So in reality -  where some households got £600 total last year - and now if above PC threshold - they might now in theory get £0.

That's why likes of Martin Lewis are talking about a £500 gap I guess -  -£600+£100 saving - and that's one year.

With iirc only a 8.5% rise in pensions in Apr24

Last years figure
https://www.gov.uk/guidance/cost-of-living-payment#pensioner-cost-of-living-payment

And I've just remembered the potential other factor many charities and some mp's raising - the council run Housing Support Fund - that was set up iirc as part of the compensation for end of the UC Covid £20 uplift.  Possibly another £1bn nationwide - not specifically energy related though - but take help away from one outgoing it spreads the pain.  And its currently set to end next month.

Qyburn

Scot_39 said:

I don't dispute that they are worse off than they'd be if they received the WFP, but are they worse off overall given lower energy costs than 2022 and the last two years of benefit increases? If the answer is "yes because everything else has gone up in price" then that's not really a reason to specifically subsidise energy.

...
But not only are many pensioners potentially losing the standard WFP.

Arent they all already scheduled to lose the extra £150-£300 the "Pensioner cost of living payment"  paid upto last winter.

That's exactly the point I was trying to make. Why does removing an unrelated benefit axiomatically mean energy should be subsidised? 

Basic State pension is 19.5% higher than Winter 22/23 and the headline price cap looks to be a bit lower even accounting for the £400 hand out.

born_again

wrf12345 said:

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.

Energy suppliers are already limited on the unit rates. Thanks to Ofgem price Cap 🤷‍♀️ They also do not pocket the standing charge.
They are also limited to the profit they can make. 2% I think. So not much margin of wiggle room. Or do we want another 2020/21 & round of failed energy co's which is now pretty much limited to the big players. There comes a time that the surviving players will not want to take anymore people on, as they simply can't service them.

the_lunatic_is_in_my_head

born_again said: They also do not pocket the standing charge.

To be fair around 46% of the SC is to go towards billing, meter reading, sales and other admin, there's 1.9% profit in it and 2% for unexpected costs, I wouldn't say they are "pocketing" that element of the SC but it isn't all going straight back out the door on infrastructure and green levies. 

As I've said before an element of the SC was to cover SOLR where the big companies still standing gained millions of customers, these same companies are now paying out referable bonuses to capture new customers, Octopus claims to have paid out £100 million for such over the last 5 years so whilst SOLR was no doubt a big headache it did give these companies lots of customer via a process "we" paid for via the SC. 

born_again said:

They are also limited to the profit they can make. 2% 

There was mention of it being raised to around 4%, the regulars will know if that went ahead but obviously 1.9% of a larger cap is more profit and that limit isn't dead set, if they can buy cheaper or cut costs then they can make more, the government did OK out of Bulb as they were able to purchase energy cheaper than what the cap was set at due to falling energy prices and sold energy to Octopus at a mark up bringing in around £1.2 billion (IIRC). Also the cap applies to the standard variable tariff, they are free to set prices on fixes, other types of tariffs plus business tariffs,  although of course limited by competition and market forces

The other aspect to the bigger picture is their core business allows them to profit via other avenues so for example British Gas being be an energy supplier means they are in a good position to install boilers and sell boiler cover which no doubt is more profitable than selling energy to consumers, it's a bit of an Amazon model, i.e make little to nothing on the core business but have something else which turns a profit.

Ultimately the whole issue is very complex and, in general, debates seem to go from "scrap the SC" to "stop complaining" with little focus on the various aspects, presumable because it's easier to pick a side and argue rather have a in-depth debate  

One other issue is the National Grid, apparently £28 billion paid out in dividends since privatisation, also some of the distribution network companies are paying out large sums to already rich shareholders, one article suggests bringing transmission and distribution into public ownership would save around £3.7 billion a year but of course that comes with the age old problem of governments not being able to run things the same way private companies do. 
 

BarelySentientAI

the_lunatic_is_in_my_head said:

One other issue is that the National Grid, apparently £28 billion paid out in dividends since privatisation, also some of the distribution network companies are paying out large sums to already rich shareholders, one article suggests bringing transmission and distribution into public ownership would save around £3.7 billion a year but of course that comes with the age old problem of governments not being able to run things the same way private companies do. 
 

Have just posted about this on another thread - network company profits are also capped like retail supply, for distribution networks this is officially at 5.23% with a bit of wiggle and a profit sharing agreement (up to 90% claw back) if they go over.

EssexHebridean

coupleuk said:

born_again said:

I suggest you follow the link this this post & contact them direct with the options.

https://forums.moneysavingexpert.com/discussion/comment/80953097/#Comment_80953097

As to the rest, this has been done to the death many times. Posting here will not help, only going direct to the horses mouth stands any chance.

Unfortunately, if you look at their proposals, they suggest lowering the Standing Charge and putting some of it onto the Unit Rates

They are trying to do it so nobody really benefits from lower usage and nobody really suffers either - so why bother to change it at all.

They also use the current (obscenely high) Standing Charge as their point of reference (POR) - when we know it has been set artificially high to recoup debt from failed suppliers. 

That debt wont be here forever so a REALISTIC Standing Charge should be used as their POR.

Using Ofgem Rates from October, the following Rates could be used;

Standing Charges = NIL 
Electric = 35p per Unit Charged
Gas = 5.9p per Unit Charged

Again using Ofgem Official Usage Figures it would show;

A Low User of Gas & Electricity = Better Off by £111.70 per Year

A Medium User = Worse Off by just £4.43 per Year

A High User = Worse Off by £184 per Year

An electric-only user in a 2-Bed on Economy 7 = Better Off by £67 per Year

The above would encourage High Users to cut back where possible.

It really isn't difficult to work out IF you actually want to change the current system - which (sadly) is not in Ofgems interests to do.

Could you supply the calculations that led to that conclusion for E7 users please? As a former E7 user who did the calculations a few years back around a hypothesised removal of standing charge/loading of costs to unit rates, my household at that time would have been very much worse off, in spite of firstly being relatively low electricity users within the E7 profile, and secondly, gaining quite dramatically from the hypothetical removal of the SC from our gas supply, in spite of higher unit costs!  Allowing that the majority of E7 users would not have that gain from the gas side of things and so at that time would have been even more adversely affected, it’s not easy to see why the picture would have changed so much in the past few years as to make your £67 saving likely now.