Question: Standing Charge Abolish & Fixed Term Energy Contracts

techno12

On the flip side, I use less than 2000 kWh of gas a year, so I ought to be up on the deal ;-)

Swipe

https://forums.moneysavingexpert.com/discussion/comment/82183724#Comment_82183724

Maybe he'd have been better off polling only the people who had crunched their numbers. I somehow doubt the result would have still been 9/10.

Sea_Shell

https://forums.moneysavingexpert.com/discussion/comment/82183682#Comment_82183682

Similar here. Save £55 on SC, but our modest annual gas consuption of 9000 kWh (2 adults), could cost an extra £90*.

However, we're on a fix until October 2027, so likely we won't see any change. Fine by me.

By my maths, that means that anyone using more than 5500 kWh of gas would be worse off. Isn't that most households (who have GCH and HW)

(Fingers crossed that Fuse are able to honour our fixes)

*assuming 1p

RavingMad

Heard on the radio that they claim 2/3 of households would save money?

Sea_Shell

Just read ML post on FB and because this is based on the price cap, then…

"My guesstimate is the dividing line will be somewhere around 12,500 kilowatt hours of gas (can't know until there is actual pricing). "

And of course, assumes that one is on the price cap and not a fix, as he also said…

"This is primarily about the price cap standing charges. There will still be an open market, so other firms can offer other forms of prices with or without the standing charge."

tfhnota

Change will be after this winter so plenty of scope for high users to cut back (those with high bills due to medical needs will get some help) over the coming year, hints that electric standing charge will also be dealt with in due course. The govn never seems to mention the horrendous rip-off of council tax, though.

xflare

Maybe suppliers will offer new fixed deals minus standing charge but higher unit rates without an exit penalty if you stay with them? But if it's introduced in 2028, many fixes will have ended and you will have to switch to a more volatile and certainly more expensive variable rate until it starts or go for another fix and miss out on one with no standing charge in the future.

I believe about 40% of homes are on fixed deals? I dont think many are going to save money with this.

AeroJ

Regards the OP’s question on the effect of this for those of us on Fixed Term Contracts (FTC) my guess is that these will remain unchanged.

Those on SVR will see the SC removed when the changes take effect (earliest 2027) with new FTC’s from that date being priced with a zero SC.

It creates a dilemma for low gas users who signed up to FTC including a SC who may now be better off on a SVR without it. I wonder if the Gov or Energy Companies will waive exit fees for those in that boat?

As higher user this is not good news for me but my FTC protects me for winter 2026/27 and I’ll worry about it next year… by which time hopefully gas prices will have come down 🤞

Neil_Jones

My current tariff uses 16.6p standing charge and 8.2p per kwH.

So my current standing charge is £60.81. I use 6982 kWh of gas a year according to the energy club, so that's £573.52, so that's £634.33 in total.

If the extra penny comes onto the tariff due to standing charge removal, that's £642.34, so I would lose out by £8.

I am on a fix though so in theory if the standing charge disappears out the window and the unit rate is honoured at the existing rates, I save theoretically £61, though I'll be three months into that fix assuming the change happens in January 2027 its only going to be a pro-rata change of about £45.

The devil will be in the detail I think, like most of these things as to who wins/loses (and by how much). It just looks good to shout "everybody will save £x because we're doing <x, y, z>" from the rooftops on Budget day.

Section62

https://forums.moneysavingexpert.com/discussion/comment/82181411#Comment_82181411

It is an idiotic idea, so I would not be that surprised if it does happen.

If the policy objective is to reduce the country's use of gas for domestic heating (and eventually phase it out) then it makes perfect sense.

When the standing charge makes up a large proportion of someone's overall bill the incentive to reduce consumption is weakened. Load the costs onto use (vs having the supply connection) and the incentive to reduce consumption is increased.

Scrapping the previous Tier1/Tier2 and reverting to SC/Unit charge was the original idiotic idea because it was obvious it would punish very low users and disincentivise reduction in consumption. The same arguments were run through in policies to reduce motor traffic - if you load costs onto ownership of a vehicle (e.g. tax and insurance) then for some people the "I'm paying for it so I may as well use it" mentality kicks in. Make use - the cost of the fuel - more expensive and more people will leave the car at home and walk/cycle/take the train.

The contemporary idiotic idea would be failing to protect people who have high gas consumption through necessity from having unaffordable increases in costs. Because it was the failure to do that which caused the 'fuel duty escalator' policy to fail.

The argument that you have to have a standing charge to pay for the fixed costs of the supply was always a bogus one. Not least because the previous Tier1/Tier2 system had scrapped the standing charge, just in a way that some people found difficult to understand.