Standing charges Gas Electric

BattyV

I'm looking to fix my gas and electric but there have been reports that the standing charges may be capped. I know that Martin Lewis has been advocating for a reduction in the standing charge rates for some time as they are not capped. If I fix and the standing charges are subsequently capped  during my contract, will I be stuck on the higher rate standing charges?

BarelySentientAI

I don't know what you have been reading, but they are capped in exactly the same way as unit prices.

If you fix, no caps apply to you because you have already fixed.  You don't need a cap if your price can't change.

I guess you mean "what would happen if things got cheaper?", which is the same answer for unit rates and standing charges.  You would have to leave your fix and move onto another contract, so check for exit fees.

wrf12345

And if standing charges go down unit rates will go up, so depends how much gas and electric you use - in theory anything up to the average user should be better off but energy companies/Ofgem have a tendency to increase everything more than they should so unless their is an intelligent chap as energy minister et al, consumers may get done over yet again.

MattMattMattUK

wrf12345 said:

And if standing charges go down unit rates will go up, so depends how much gas and electric you use - in theory anything up to the average user should be better off 

That is not how things would work because of the way averages and usage distribution works. If the standing charge is lowered below cost or abolished then all but low users will be worse off because they will be subsidising lower users.

wrf12345 said:

but energy companies/Ofgem have a tendency to increase everything more than they should 

They do not, but again you are either unwilling or unable to understand. 

wrf12345 said:

so unless their is an intelligent chap as energy minister et al, consumers may get done over yet again.

An intelligent person would retain standing charges to cover the fixed costs and assign variable costs to the unit rate, as they currently are, rather than trying to pander to a noisy but uninformed group who continually have tantrums about standing charges.

Reed_Richards

BattyV said:

If I fix and the standing charges are subsequently capped  during my contract, will I be stuck on the higher rate standing charges?

I think the answer is yes, you will be stuck.  But I think we'll be lucky (and you'll be unlucky) to see a significant reduction in standing charges withing the next 12 months.

wrf12345

on excess increases

"That is not how things would work because of the way averages and usage distribution works"

"They do not, but again you are either unwilling or unable to understand. "

Just proved my case

MattMattMattUK

wrf12345 said:

on excess increases

"That is not how things would work because of the way averages and usage distribution works"

"They do not, but again you are either unwilling or unable to understand. "

Averages, there are different types, most people mean mean, but there are others. The mean user is not the media user. Usage is not a evenly distributed along a scale, there are a whole bunch of very low use properties, garages with intendent supplies, second homes, homes with solar and batteries (which for much of the year draw no power from the grid) etc. 

wrf12345 said:

Just proved my case

You have no case. 

Scot_39

MattMattMattUK said:

wrf12345 said:

And if standing charges go down unit rates will go up, so depends how much gas and electric you use - in theory anything up to the average user should be better off 

That is not how things would work because of the way averages and usage distribution works. If the standing charge is lowered below cost or abolished then all but low users will be worse off because they will be subsidising lower users.

 An intelligent person would retain standing charges to cover the fixed costs and assign variable costs to the unit rate, as they currently are, rather than trying to pander to anjoise but uninformed group who continually have tantrums about standing charges.

1) As what @wrf12345 said is exactly what Ofgem appeared to be one of the options they were proposing - I would say more warning of the potential unintended consequences in A7 table - I believe.

As again they say - if no money comes from anywhere else (read taxpayers - maybe a la recent EPG model to my mind) - there is a total cost of supplying energy. 

If one user doesn't meet their share - another user has too.

Their decision to shift £103 iirc - 28p per day - more of network charges to the electric SC only (why not gas ??) since Apr 22  - was to redress an existing cross subsidy.

It may appear to some to be regressive they admit - but energy suppliers are businesses and have a mix of costs. 

In their appendix 2 examples - they applied a simplistic shift between unit and standing charges.  In part on basis no external new funding available from govt to do so.

As in tables a2 to a6 and so built into the winners and losers examples in a7 used iirc default tariff level table consumptions - 3100, 12000 and 4200 for multirate - not the lower median figures used for current cap total price  (2700,11500,3900) - for the shifts of between £20 and £100.



And A7 is the problem with any single one size fits all breakpoint shift from sc to unit..

Anyone above pays more, anyone below pays less.

The reality is at some level the true cost exists for every user as a mix (fixed - everyone has a meter, a supply to the meter at street and pylon level, an energy account serviced by chosen supplier, etc ) - the argument is I hope how that is costed and then paid for)

So take Ofgems view, in a perfect idealised situation

My true cost = my fixed cost share via SC + my use x true unit rate.

Neither cost component is simple to work out.

The only way of everyone paying there true cost if Ofgem were therefore to make any simple £xx shift out of standing charges is built into unit rate at their use.

My new true cost =  fixed cost-XX + my use x (true unit + XX / my use) so cancels.

If use less units than any divider on that unit rate - but benefit from the SC savings regardless you save.

Use more you lose.

Ofgem have given a set of examples of doing that shift at just one balance point per fuel for svt cap tariff users.

So take A6 in their domestic options response to SC consultation - DD SR ex - within £100 total - moving 10.52p SC x 365 = saving just £38.40  - less than 1/5 regional average annual SC (but shifting £ 62 - over half current gas SC)

To save 1.24p / kWh - £38.40/1.24 = 3096 = c3100 default tariff table total price consumption.  Looks like It's possibly a balance under the svt pricing mechanism consumption.

And table a7 shows the winner and losers who are spread around them.

The e7 couple with kid on mr vs the duel fuel couple at similar overall annual energy use (in kWh) shows clearly the problem with the approach.
And arguably Ofgems profile class 2 TDCVs themselves.

Now the cross subsidy impact could be reduced if say rather than one balance point they allowed more.

OR they allowed retrospective billing -  but that's unlikely to please many - never knowing what you'll pay until after you've used it.

Some perhaps banded approach - in order to maintain a fixed pricing system for comparison - say banded by consumption for users - SC or no SC - but that equalisation banded.

Iirc EDF in France bill electric SC based on peak power bands in kVA - but fixed unit rates  - but thats perhaps understandable from a generators or transmission grid perspective - more power demand means building more generation plants, and/or more pylons in the limit.

Maybe start with Ofgems current three tdcv metrics - their low medium and high tdcv (quartiles) maybe - so rather than just the one 3100 as Ofgem ex, 1800,2900,4300 for SR electric.  Applied to those using  <2400, 2400-3500, >3500

But in reality if balancing ubder a my true fixed cost concept  - low users will inevitable end up with a higher unit rate (fixed /1800 is over double fixed /4300).

And moving the balance anywhere other than true average - or average in each band - could leave energy companies with a shortfall in revenue for fixed costs. So drag unit rates higher still.

So  I totally agree with the retention of SC as you say - fixed is fixed. 

Anything else is going to, Ofgem clearly state old network costs recovery was leading to cross-subsidy.

But - why just electric ? 

Well, maybe in part I believe on the growing expectation that such charges are going to continue to escalate.  So so would the cross subsidy.

Cross subsidy already exists in our bills - debt relief and insulation schemes etc.  It did arguably pre £103 shift (figure 2.2) exist for fixed network costs  - and so Ofgem acted. 


But I personally believe the bill should be the bill. 

We should all see it. 

During EPG my bills showed true costs at Ofgem unit rate cap - and govt subsidy via EPG per unit - and EBSS deductions.
Others did not.

And it should then be up to govts - via social policy -  benefits system - inc state pensions - and minimum wage to enable all people to cover realistic prices for realistic needs for all essentials.

That for energy shouldn't mean wearing tshirts and shorts in winter,  if rich want to do so fine - its their money not mine.
But nor should it mean those on benefits unable to avoid damp and mould, or the elderly suffering say hospitalisation for flu/pneumonia - or stroke or heart attacks etc  and costing nhs £1000s per week to treat or dying because cannot heat sufficiently (WFP argually should have just gone on flat rate pension evrn if madectaxable etc - another sticker plaster solution in hindsight ?).


The current overspill systems facing those struggling a mess - some water cos have social tariffs, some others and energy cos have discretionary debt relief funds, councils have discretionary funds like temporary but recently extended HSF. Some treating at home get nhs help with bills, others do not, in a regional patchwork.  Patchwork fixes that act as sticking plaster on a broken system that all too often no longer reflects true cost of living for poorest in many areas.

There is never going to be an easy solution.

And the worst impacted in Ofgem A7 - all electric users - have much to fear from such simplistic shift demands. (Not helped by to my mind unrealistic comparisons of energy needs in the TDCVs used.)

Ildhund

This discussion reminded me of a message I recently had from an acquaintance ‘over there’, who was bragging about getting a negative bill for electricity for the first time since installing a solar PV array last year. He has gas central heating. This is what he was so proud of:

  

COA = City of Austin, Texas

 

They use a sliding scale of unit rates, increasing with usage per month:

[From Residential Rates (austinenergy.com)]

 

So, all sorts of costs on top of the unit rate plus a standing charge ($14/month) equivalent to 37p/day. Apparently, the average household in Austin uses 10,200 kWh of electricity annually, most of it in the summer semester (to keep cool). He is paid the equivalent of 7.5p/kWh for his solar generation.

Apart from the surprise that this capital of the ultimate capitalist state has its utilities in socialist public ownership - which explains the charge for street lighting - I was struck by the complexity of the bill. OK, it's 'transparent', but can you work out what the average household’s annual bill would be? And is this the way some of us think energy bills should be going? 

BarelySentientAI

MattMattMattUK said:

wrf12345 said:

on excess increases

"That is not how things would work because of the way averages and usage distribution works"

"They do not, but again you are either unwilling or unable to understand. "

Averages, there are different types, most people mean mean, but there are others. The mean user is not the media user. 

OFGEM use median for their calculations to avoid being skewed by unusually high users or by second/holiday homes.

MattMattMattUK

BarelySentientAI said:

MattMattMattUK said:

wrf12345 said:

on excess increases

"That is not how things would work because of the way averages and usage distribution works"

"They do not, but again you are either unwilling or unable to understand. "

Averages, there are different types, most people mean mean, but there are others. The mean user is not the media user. 

OFGEM use median for their calculations to avoid being skewed by unusually high users or by second/holiday homes.

They also remove a chunk at the the top and bottom when calculating their averages, from memory thr highest and lowest 5-8% of users are removed before they even start the calculations for average users in different bands and categories. So even their median figure is only based on 84-90% of users rather than 100%.