Martin Lewis: Standing charges update risks households paying more

Altior

Qyburn said:

wrf12345 said:

..  Huge margin between the price they pay for electric and the price they sell it for ..

Don't you realise that the wholesale cost is just the wholesale cost of electricity itself? It doesn't include transmission or distribution costs, administration, payroll etc etc. 

A bit like claiming a loaf of bread should match the wholesale price of flour.

I don't believe the retail cost of bread includes the vast bail out costs of failed bread companies, who walked away with multi £billions, after deploying a casino style risk business model with no accountability or sanction, due to rank incompetency and negligence of the bread regulator. But could be wrong. 

MattMattMattUK

Altior said:

Qyburn said:

wrf12345 said:

..  Huge margin between the price they pay for electric and the price they sell it for ..

Don't you realise that the wholesale cost is just the wholesale cost of electricity itself? It doesn't include transmission or distribution costs, administration, payroll etc etc. 

A bit like claiming a loaf of bread should match the wholesale price of flour.

I don't believe the retail cost of bread includes the vast bail out costs of failed bread companies, who walked away with multi £billions, after deploying a casino style risk business model with no accountability or sanction, due to rank incompetency and negligence of the bread regulator. But could be wrong. 

Neither do energy bills, no energy suppliers were bailed out. 

If you mean the cost of SoLR then that went to consumers, now I disagree with that, but it is a choice the government made. The SoLR costs are pretty much all paid now, the major group currently being bailed out are people who refuse to pay their energy bills, which adds 6-8% to the cost of energy for everyone else.

JKenH

Qyburn said:

wrf12345 said:

<snip>  It is obvious that the only way a zero s/c will work is by making it the default tariff with an increased unit rate that overall only effects above average users, with other tariffs available for high users that could have double or treble the s/c but much lower unit rates.

As long as there are other tariffs available then you have to assume the zero SC option will be chosen by people like you who benefit from it. So you get a saving which has to be subsidised by others.

As long as there is a choice of tariffs available, the better informed will exploit those to reduce their bill which in turn will load the amounts they save onto other users. I may be wrong but I suspect there are a large number of poor/vulnerable users (particularly elderly) who are not aware of tariffs which may benefit them or are misled by headline offers such as no standing charges. Knowledge is power when it comes to saving in electricity bills. 

There are a significant number of EV owners who are able to exploit EV tariffs to reduce their household bills either deploying V2G or domestic batteries. You need a few bob spare to buy batteries so these policies inevitably favour the more well off at the expense of the poor.

The only way to avoid penalising the poor and vulnerable is for everyone to pay the same for each unit of electricity they consume. There are four ways of doing this:

1. zero SC with a higher flat rate per unit.

2. a SC that reflects the cost of maintaining the supply infrastructure to the property and a lower flat unit rate.
3. zero SC with higher Time of Use (ToU) rates
4. a SC that reflects the cost of maintaining the supply infrastructure to the property and a lower ToU unit rate.

Everyone has to be on the same tariff for it to be fair, otherwise those with the knowledge/batteries will exploit it. I believe option 4 is the fairest as everyone (including those with solar panels and batteries) contributes to maintaining the grid and there is still the opportunity for the poor/vulnerable (many of whom don’t go out to work) to play their own part in reducing their energy costs.

Edit: the electricity supply companies like Octopus promote a wide range of tariffs to increase their market share. The more choice, the more likely a consumer will choose a tariff that they believe will save them money and switch. (This didn’t happen pre-privatisation.) For every winner there has to be a loser.

Qyburn

JKenH said:

.. For every winner there has to be a loser.

Understood but those clamouring for zero SC tariffs focus solely on the winners. They see it as a straight win, lower cost for themselves but ignoring the cost to others.

JKenH

MattMattMattUK said:

Altior said:

Qyburn said:

wrf12345 said:

..  Huge margin between the price they pay for electric and the price they sell it for ..

Don't you realise that the wholesale cost is just the wholesale cost of electricity itself? It doesn't include transmission or distribution costs, administration, payroll etc etc. 

A bit like claiming a loaf of bread should match the wholesale price of flour.

I don't believe the retail cost of bread includes the vast bail out costs of failed bread companies, who walked away with multi £billions, after deploying a casino style risk business model with no accountability or sanction, due to rank incompetency and negligence of the bread regulator. But could be wrong. 

Neither do energy bills, no energy suppliers were bailed out. 

If you mean the cost of SoLR then that went to consumers, now I disagree with that, but it is a choice the government made. The SoLR costs are pretty much all paid now, the major group currently being bailed out are people who refuse to pay their energy bills, which adds 6-8% to the cost of energy for everyone else.

Cut them off. I can’t see any reason why, with the level of benefits available, people can’t pay their electricity bills. My mum just had the basic state pension, didn’t claim any benefits, paid her council tax and still managed to put money aside. 

prowla

Any change is going to be angled in favour of the energy companies profits.

The problem with the standing charge is that setting it at a point when energy prices are high means that if/when they drop, the profits are protected.

JKenH

As an example (quote from another board) of how, if you have the money (EV, solar PV and batteries) you can utilise tariffs to maximise return and (for some) even have a negative electricity bill. Every winner needs a loser somewhere.

For 6 months of the year I am a net exporter. The fact that we can exploit the system suggests that in terms of fairness we should have much higher SCs to cover the infrastructure and unit rates based on wholesale costs.  I do pay a higher standing charge (65p/day) because I am on Octopus Agile import tariff but there is no standing charge applied separately to export. Without the infrastructure we would not be able to export. We are currently paid (at 15p/kWh) much more than the average wholesale cost and are even paid to export on days when import prices are negative. 

I, personally, don’t have a battery but benefit from having solar panels. Some people who do have solar panels are being paid over 79 70p/kWh generated and 15p or more/kwh on top of that for exporting. Someone somewhere is subsidising this. 

Edit: typo 79 should be 70 (p/kWh)

Ildhund

Qyburn said:
Is that charged solely to electricity, or split across both?

The policy bit of the standing charge is very close to being 'general taxation'. There are few households that are off the electricity grid, and also a few with no income-tax payer, but the overwhelming majority of households pay both one electricity standing charge and possibly several doses of income tax. I haven't gone to the trouble of splitting the current policy cost (£298) between social and environmental levies, nor between electricity and gas, so I can't say who the winners and losers would be if the WHD were financed by general taxation. Multiple swings and roundabouts ...

QrizB

JKenH said:

For every winner there has to be a loser.

This isn't entirely true if you look beyond standing charges (the subject of this thread) and include unit costs (which the thread has begun to include).

Someone on a flat rate tariff will be paying a weighed average price covering the entire period of the tariff (3 months for the SVT, 12 or more for a fix). Swapping to a ToU tariff will allow the householder to choose to use more electricity during cheaper periods and less during more expensive ones. This can save the householder money without creating a loss for the supplier that needs recovering from elsewhere. A "winner" without a corresponding "loser".

debitcardmayhem

Ildhund said:

Qyburn said:
Is that charged solely to electricity, or split across both?

The policy bit of the standing charge is very close to being 'general taxation'. There are few households that are off the electricity grid, and also a few with no income-tax payer, but the overwhelming majority of households pay both one electricity standing charge and possibly several doses of income tax. I haven't gone to the trouble of splitting the current policy cost (£298) between social and environmental levies, nor between electricity and gas, so I can't say who the winners and losers would be if the WHD were financed by general taxation. Multiple swings and roundabouts ...

If as I believe the WHD element is split equally between gas and electricity, then those with dual fuel pay it all, but those with no gas pay half.