Martin Lewis: Standing charges update risks households paying more

Scot_39

harz99 said:

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.

And conversely it can be argued that heavy users are being subsidised by very low or nil users as they both pay the same standing access charges for vastly different energy usage...the only fair way forward is to amalgamate the value of the SC into the unit rates so it effectively comes under the price cap, and to introduce a proper social tariff for those who really need it.

Either that or there should be at the very least, a cap system that ensured nobody pays standing charges which are higher than their actual energy usage cost.
 

Take the latest big driver of increaseses to SC - as SoLR cleared (from electric sc and gas unit rates) network costs. AND that despite just a third so not all network costs are built into the standing charges, but the majority into the unit rates.

And that Ofgem has reviewed the split, because low users were not contributing enough so increased the allocation to the electric SC.

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

As of July 2024 just £121 of the £363 (both ex vat) - (in the then lower £1568 duel fuel cap) so a third of total network costs were in the SC.

And at the time that £121 ex vat was in a total of £335 regional average df dd SC inc vat. 

And that despite an increase of £103 over the two years.  Essentially the Ofgem TCR showed low users being subsidised by higher users - as only paying £18 for their fixed common to all infrastructure and that £103 shifted to make the system fairer to all.

Why electric - well its seen as key for fairness as the net zero targets see £11-15 bn pa (*) spent on new electric grid connections and increased capacity on existing connection pathways for foreseeable future.  From NG, SSEN and SPEN business plan forecasts of £55bn- £77bn investment as of late 2024 for next 5 years.

And yes Ofgem admit SC will be an increasing share of our bills going forward - all our bills - as a result.

Either explicitly or if suppliers do offer zero or low SC options via far higher ( above default with Ofgem full SC) unit rates. 

The df dd cap based on 2700kWh, so 7.4 kWh / day the regional average electricity SC 51.37p/day.
The same as roughly 2kWh use at average regional uniy rate of 25.73p /kWh.
Which is where Utilita are at - with approx double unit rates on first 2 kWh per day to recover it by smoke and mirrors.
If set equalisation at the point of median tdcv that would be 7p extra on unit rates.
But as Ofgem Feb update showed, likely would have to set far lower.  If used lower quartile 1800kWh ovef 10p per kWh etc.


The costs have to be met, it's pointless arguing whether thats via your sc line or your unit rate x use line. 


As to social tariffs 

The WHD already exists and it is effectively the govts own direct guided contribution to help poorest - the £150 discount now effectively pays half the average dual fuel SC.

And informally others have done things during crisis, and before / since - including schemes like EOns 25% and 50% discounts for those in debt and debt writeoffs - in part covered by other lines in cap - remember tge old £27 extra debt allowance - thats now part of a new combined £50 total for others in debt / arrears cost charge in DF DD Cap the rest of us pay.

As to the SC less than usage on bill.

Annually the regional ave electric / gas SC would buy

51.37/25.73 x 365 = 729kWh of single rate electric
and
29.82/6.33 x 365 = 1719 kWh of gas

The median tdcv headline caps based on  are 2700 kWh and 11500 kWh.

The low (lower quartile) tdcv 1800 kWh and 7500 kWh.  So 75% of filtered data set - so normal homes - use more.

Apart from those with second homes and solar / battery arrays costs in £1000s if not £10,000s so pretty well off in  the first place - how many realistically are in fact paying more annually in SC than their use.

And as to those on gas who only use in winter - do they want tge pipes dug up and relaid every year at their cost in the £1000s, rather than paying the 30p per day.
Or to have their own calor tank in their gardens instead at their cost.

Its arguably deliberately misguided anger - you want lower utility bills, scrap net zero, scrap bills being used as social subsidy - policy costs (now £198 ex vat - up £40 in 2 years) and yes even part of tge £50 debt dictated by POLICY.

I'm a fairly low all electric user - sub 3500kWh in a 2 bed terrace - and the standing charges were mord than a quarter of my annual bill, and until recently falls (about 10p per day in last couple of caps) over half my summer bills. 
But I see that as me paying my fair share of the cost of delivery, the staff wages, the admin of my bills etc etc. And the unfair share of policy costs and net zero.

harz99

Spoonie_Turtle said:

harz99 said:

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.

And conversely it can be argued that heavy users are being subsidised by very low or nil users as they both pay the same standing access charges for vastly different energy usage...the only fair way forward is to amalgamate the value of the SC into the unit rates so it effectively comes under the price cap, and to introduce a proper social tariff for those who really need it.

Either that or there should be at the very least, a cap system that ensured nobody pays standing charges which are higher than their actual energy usage cost.
 

But many of those low users actually make more use of the grid as they export solar power, or import into their battery at off-peak times and export excess at peak times.  Do you expect them to have a higher SC, or maybe we should have an import SC and an export SC?

Or we could just spread the costs of maintaining the grid amongst everyone who uses it … 

It would hardly be difficult in this day and age to separate out genuine low energy consumption, from artificially low energy consumption where people are exporting power back to the grid!

"Or we could just spread the costs of maintaining the grid amongst everyone who uses it"...quite, by simply increasing the unit rate to incorporate the current standing charge, the heaviest users paying the most very much like road pricing, motor fuel tax and so on.

JKenH

QrizB said:

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".

I have moved my reply to a separate thread as this was going off topic.

MarzipanCrumble

My SC = exactly half of the pure KW electricity I use. I am a single user in a 4 bed house which is insulated.  Gas CH.  I am a higher rate tax payer so can afford.  BUT it is intrinsically unfair, IMO.  

The SC should be ratioed to amount of electricity used.  

What are the pros or cons to do this?  With sophisticated s/w such as Kracken (Octopus plus others - including water companies who have bought Kracken) - is this feasible?

(2nd Home owners would benefit but I am assuming that in their primary home then they would pay an appropriate SC.)  Maybe 2nd homes would be identifiable where SC would be increased, but not sure how this would be identified without joined up systems outside utility.

Also this thread is, to a certain extent, biased towards those who have EVs and/or heat pumps and/or solar panels.  I have neither, not for want of trying.  What in the real UK is the number of those with solar/EVs?

Edited for mistakes in spelling/grammer.

debitcardmayhem

@harz99 :said:

It would hardly be difficult in this day and age to separate out genuine low energy consumption, from artificially low energy consumption where people are exporting power back to the grid!

"Or we could just spread the costs of maintaining the grid amongst everyone who uses it"...quite, by simply increasing the unit rate to incorporate the current standing charge, the heaviest users paying the most very much like road pricing, motor fuel tax and so on.

Sadly that will penalise those who need energy for health reasons

Altior

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.

I'm not an industry insider, nor have I studied it in depth, but my understanding was that customers of failed suppliers where taken over by larger, existing suppliers, but they did not have to take on the liabilities of the business that they effectively took over. The losses were just written off and the gamblers walked off into the sunset with their profits. I probably wouldn't be surprised if some of the 'executives' are now sitting on the boards of existing suppliers (or working for ofgem!), instead of peering out of prison bars. 

According to Octopus, we (consumers) are still paying for it via the standing charges:

Why have standing charges gone up?

Recent increases to the electricity standing charge are driven by two changes. The first is the administrative cost of taking over the customers of the energy suppliers that went out of business during the energy crisis. The second is changes to how the industry charges customers for using the distribution network (the cables that deliver electricity to your home). These costs have been moved from your unit rate to your standing charge.

There's not much logic to this it seems to me, they claim it's the 'administrative cost', well that was a one off cost, and the new customers bring with them new profit. Along with economies of scale. This should really be neutral as a minimum, and I cannot see why it should still be impacting the standing charge several years later. 

Ildhund

Altior said:

According to Octopus, we (consumers) are still paying for it via the standing charges:

Why have standing charges gone up?

Recent increases to the electricity standing charge are driven by two changes. The first is the administrative cost of taking over the customers of the energy suppliers that went out of business during the energy crisis. ...

It's always a good idea to give the source of (disputed) statements like this. I'll do it for you: What is a standing charge? | Octopus Energy. This blog was Published on 13th October 2023 by Maddie Inglis and a lot has changed since then. Here is the current composition of the price cap:
  

[Summary of changes to energy price cap 1 July to 30 September 2025]

Scot_39

If you read the cap summary letters over last 3-4 years you will definitely see ref to the SoLR being added then reduced. If you use the figures it's virtually zero now.

It might  be a few £s but you'd have to dig into the multitude of spreadsheets to find it.

This time last year afaik july-sep 24 cap - last time Ofgem gave the partial breakdowns of both gas and electric SC  was during the zero SC consultation / initial proposals - see table 2.1 and tge changes in 2.2 of link below show network costs - extra fixed £103 adding to total  £121  (a third of the total network costs of £363 built in df dd cap at the time) dominating 2 year increase from £186 to £334

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

You cannot expect grid companies to add dozens of large scale high capacity and 100s if not 1000s more lower scale connections for renewables at zero cost.

And to transmit their power not just locally but literally 100s of miles given the gross mismatch between geographical placement and population / industrial demand.  Like c50% wind generation c14.5GW, with 6GW more in pipeline last Aug,  in Scotland for c8% of population.

So now connecting farms off Shetlands to midlands and N Wales if not quite literally the grid which now covers Lands End in Cornwall to Shetlands has a cost.

Think of the 5 major hvdc links to carry upto 10GW of that Scottish Power south - WGL in use, EGL1/2 approved last year - total projected cost £6 bn plus , maybe 2029 delivery,  egl3 /4 potentially in final pricing this year prior to Ofgem approval (Siemens AG just announced as preferred substation bidder for egl4 in last week)

MWT

MarzipanCrumble said:

My SC = exactly half of the pure KW electricity I use. I am a single user in a 4 bed house which is insulated.  Gas CH.  I am a higher rate tax payer so can afford.  BUT it is intrinsically unfair, IMO.  

The SC should be ratioed to amount of electricity used.  

As mentioned earlier, the standing charge is a mixture of network costs and various levies unrelated to the level of use, the standing charge serves as a way to spread some costs that are unrelated to use on a per household basis.

Similarly there are parts of the distribution cost that are already included in the usage charges so that already penalises high users, and after analysis Ofgem has pervious determined that it was unfairly loading those costs onto high users so had to adjust that back a bit in favour of adding to the standing charge.

You cannot take the entirety of the standing charge, already a mixture of per household liabilities and network costs and redistribute that across usage only without unfairly penalising heavier users as not all of the costs are even vaguely related to use.  

Chrysalis

My issue with the SC is that its not what I think it should be which is to pay for fixed costs on the infrastructure.  Ofgem playing games with it for favourable political headlines.

But of course I am grounded and obviously if charges are removed from the SC, then the unit rate goes up as a consequence, its not free money.  Just a different spread of where the charges fall.