Zero standing charge tariff proposal

Scot_39

username said:

https://consult.ofgem.gov.uk/energy-supply/introducing-zero-standing-charge-variant/consultation/subpage.2025-02-17.8601559178/

I don't understand why the government are obsessed with this TDCV metric. Why is this? How do they ensure it actually does represent what people "typically" use?

The TDCV - is just one metric.  Or rather the ones we see most - are just one metric.

Ofgem actually publish 3 TDCVs - the medium user the one we here most about in terms of the £xxxx caps - but in reality produces three TDCVs - for low, medium and high users - and three of each for single rate domestic meters, gas meters and profile class 2 electric meters (e7, e10, RTS etc).

They use a slightly filtered set - rejecting very low and I guess very high - actual consumption - someone here posted the thresholds a while back.

But iirc the low, medium and high were what statisticians call the quartiles from the data set.

Low if IIRC was lower quartile - 25% below 75% above, high iirc the upper quartile - 75% below, 25% above.

And the quoted TDCV we see most often for medium use - like on this reports graphs - 2700 / 11500 are the median - the amount 50% of meters record below - and 50% of meters record above.  

Note Ofgem also produce an average price on occasions - which iirc is based on lower than the median TDCV.

Its not real - I suspect you'll struggle to find a handful of homes that use exactly 2700 kWh and/or 11,500 kWh of gas.

The cap based on it in £xxxx - just an attempt to produce a nice simple number for people and media to track.

And then Ofgem go and spoil that traceability by lowering the TDCV - it used to be 2900 and 12,000 - and judging by the actual cap tables issued to supplier as ex vat absolutes in £s - 3100 and 12000 before that.

Yet for years - probably still now - there were those who thought the Ofgem cap based on median TDCV consumption quoted - was a cap on price not a cap on SC and rates.  

[The problem with trying to explain things in a simplistic fashion - is that ironically introduces complications - as people have to understand the basis for the simplification (how to get from 2 SC and 2 rates in most cases to one £xxxx figure).]

Alnat1

I wonder if Ofgem have considered people with solar and batteries, who might opt for zero SC tariff over summer then switch back to a TOU tariff for winter when the sun isn't shining so much.

Qyburn

username said:

I don't understand why the government are obsessed with this TDCV metric. Why is this? How do they ensure it actually does represent what people "typically" use?

If I'm wrong then no doubt someone will correct me, but I believe TDCV is supposed to be the median. In other words 50% use less and 50% use more.

Ildhund

Ofgem publish the way they calculate TDCVs, most recently (I think) in the 2023 decision that last changed them:

The established methodology derives the typical low, medium and high TDCVs for gas and electricity by calculating the lower quartile, median and upper quartile of household consumption for the two most recent years of available data, and then takes the average.

There is an explainer in a footnote:

Most consumers use relatively small amounts of energy, while few consume large amounts. The median or second quartile is more representative of the typical “medium” usage. We use the first and third quartiles to represent typical “low” and typical “high” usage respectively. The lower quartile reflects the annual consumption that only 25% of all consumers use less than. The higher quartile reflects the annual consumption that only 25% of all consumers use more than. 

The two years' data used were those for 2019 and 2021, because 2020's were presumed to be distorted by COVID lockdowns. 
 

Chrysalis

Not read the 6 pages, but as I understand it, this is only for SVR, all custom tariffs would remain a supplier decision to offer a zero SC option?

Scot_39

Alnat1 said:

I wonder if Ofgem have considered people with solar and batteries, who might opt for zero SC tariff over summer then switch back to a TOU tariff for winter when the sun isn't shining so much.

Yes they have - it's mentioned in the Feb 20 update - but only as the problem - no definitive answer on the solution

https://consult.ofgem.gov.uk/energy-supply/introducing-zero-standing-charge-variant/consultation/subpage.2025-02-14.8382517255/

under "Risks of Frequent Switching"

Altough it covers any such variations - so solar for electric, like lower gas when not heating too.  And I guess if ever introduced for multirate electric - electric heating too.

Qyburn

Chrysalis said:

Not read the 6 pages, but as I understand it, this is only for SVR, all custom tariffs would remain a supplier decision to offer a zero SC option?

That's correct, they're proposing that suppliers be obliged to offer a zero SC variable tariff alongside the existing. I suppose that effectively means two variants of the price cap.

MattMattMattUK

Qyburn said:

Chrysalis said:

Not read the 6 pages, but as I understand it, this is only for SVR, all custom tariffs would remain a supplier decision to offer a zero SC option?

That's correct, they're proposing that suppliers be obliged to offer a zero SC variable tariff alongside the existing. I suppose that effectively means two variants of the price cap.

They will both be calculated based on the headline price cap figure, using the mythical average use figures, it is going to be a car crash.

mmmmikey

MattMattMattUK said:

Qyburn said:

Chrysalis said:

Not read the 6 pages, but as I understand it, this is only for SVR, all custom tariffs would remain a supplier decision to offer a zero SC option?

That's correct, they're proposing that suppliers be obliged to offer a zero SC variable tariff alongside the existing. I suppose that effectively means two variants of the price cap.

They will both be calculated based on the headline price cap figure, using the mythical average use figures, it is going to be a car crash.

Yes, let's hope that common sense prevails and the focus from the pressure groups shifts to helping the existing vulnerable users without simply shifting the problem of high energy costs to a different group of vulnerable users. And let's hope that Ofgem and their political masters have the strength to do what they know is right rather than give in to ill informed (but probably well intended) public opinion.

Scot_39

Common sense unfortunately isn't driving our energy costs.

Net zero - and a pretty poor choice of unreliable (inconsistent)  and all too often remote generation - is.


Let's make it clear Ofgem explicitly state anything saved by someone they plan to charge less to then someone else on the zero SC tariffs in theory makes up for it.

The fundamental flaw being although can see potentially of millions jumping on to save £10s-£100s - are 100,000s or millions  going to willingly sign up to pay several times that or that each depending on ratio to balance.  I suspect the answer will be not.

So the lost recovery will you guessed it almost inevitable be passed to all in the end. 

They are currently shuffling deckchairs on the titanic with this one - an apt metaphor for those millions struggling and millions of them buried under personal debt - and suppliers (not generators) at risk of drowning under the disaster that is a cummulative c£3.7bn in bad debt - probably not the latest  figure.

With proposals that will potentially see paupers - pensioners just above pension credit - so 12k single / 18k a year couples or young families on UC or working benefits - subsidising millionaires with solar and wealthy suburbanites with wood burners to keep their grid demands low through even higher energy bills.

It's a definite no from me to these proposals that will help few  - too many who dont deserve or need our help -  but cost the rest of us - particularly vulnerable high users - even more dearly.

And a clear no being reported in media from many of the energy charities who wanted a real solution - real lower bills for the poor - regardless of consumption.