Standing Charge ?

[monabri]

How long will the daily energy standing charge(s) be held at the elevated rate? Is there a cut off point when they will revert back (or at least come down)?

[Mike4]

Have a guess....

Then guess what my guess is!!

[UncleEbenezer]

Well, if they ever re-introduce a market in energy supply (ideally not a pure race-to-the-bottom one), we might get a choice again. So we can, for example, trade off unit costs vs standing charge.

[Mike4]

Well, if they ever re-introduce a market in energy supply (ideally not a pure race-to-the-bottom one), we might get a choice again. So we can, for example, trade off unit costs vs standing charge.

There never was nor can there ever be a genuine market. Not when there is only one source of electricity.

All the 'suppliers' have to buy the same electricity from the same source (the national grid) so the only competition that can occur revolves around the levels of customer service offered by the call centres and the efficiency of their billing service, I'd suggest.

[Dod101]

Well, if they ever re-introduce a market in energy supply (ideally not a pure race-to-the-bottom one), we might get a choice again. So we can, for example, trade off unit costs vs standing charge.

There never was nor can there ever be a genuine market. Not when there is only one source of electricity.

All the 'suppliers' have to buy the same electricity from the same source (the national grid) so the only competition that can occur revolves around the levels of customer service offered by the call centres and the efficiency of their billing service, I'd suggest.

I hope we never get back to the open market arrangements of new entrants flogging electricity at spot prices and going bust. That is expensive for everyone and helps no one. Hopefully though there might be variations within certain parameters set by a responsible regulator.

Dod

[didds]

All the 'suppliers' have to buy the same electricity from the same source (the national grid) so the only competition that can occur revolves around the levels of customer service offered by the call centres and the efficiency of their billing service, I'd suggest.

or what deals they can strike with the provider to then pass on - maybe ?

[monabri]

My question was concerned with the standing charge which seems to have doubled. The current standing charge for our electricity supply is now £176 per annum, a not insignificant percentage of our energy cost.

I understood (perhaps incorrectly) that the SC was significantly increased to allow suppliers of last resort to recoup losses incurred when they took over the business from failed suppliers? At what point do they recover the losses and will they then reduce the SC?

[UncleEbenezer]

My question was concerned with the standing charge which seems to have doubled. The current standing charge for our electricity supply is now £176 per annum, a not insignificant percentage of our energy cost.

I understood (perhaps incorrectly) that the SC was significantly increased to allow suppliers of last resort to recoup losses incurred when they took over the business from failed suppliers? At what point do they recover the losses and will they then reduce the SC?

My reply about the market was really to say that this has now become a purely political question. Prices used to vary (I picked a package with standing charge about one third of most of the market in 2019), but now it's set by the government's price cap. So, watch the politicians. And lobby them if you get the opportunity.

Politically speaking, that price cap was a Labour policy first proposed by Flint and Miliband. Sunak as an opportunistic as well as interventionist big-state chancellor adopted it, and may be in no hurry to drop it.

[Maroochydore]

My question was concerned with the standing charge which seems to have doubled. The current standing charge for our electricity supply is now £176 per annum, a not insignificant percentage of our energy cost.

I understood (perhaps incorrectly) that the SC was significantly increased to allow suppliers of last resort to recoup losses incurred when they took over the business from failed suppliers? At what point do they recover the losses and will they then reduce the SC?

This is the point I put to Ofgem back in August. They replied:

Thank you for contacting Ofgem. Please accept my sincere apologies for the delay in responding to your email.

Standing charges are commercial decisions that energy companies can take. They do not have to charge these and there are tariffs on the market that do not include them. Ofgem does not have the regulatory remit to dictate whether energy companies charge standing charges or how much they charge if they do, as long as the overall pricing structure does not exceed the price cap. Energy suppliers also do not need to price up to the price cap and are free to charge under this. This is, again, a commercial decision over which Ofgem does not have the remit to control.

In other words, we allowed them to put them up to cover the costs of absorbing failed companies but we're not going to tell them to bring them back down. They will do so if and when they want to.

[Hallucigenia]

Might I gently suggest that since this is LBYM and not a politics board, people might want to either answer the OP's question or take their political comments elsewhere?

How long will the daily energy standing charge(s) be held at the elevated rate? Is there a cut off point when they will revert back (or at least come down)?

As discussed above, there's no real statutory basis for standing charges, from the utility's POV they're just part of the money that comes in to pay the cost of the electricity and gas they buy, plus their overheads. And standing charges aren't necessarily a bad thing, potentially they could be part of the long-term solution in ensuring a "universal basic income" of energy whilst making marginal kWh's more expensive.

But really your question comes down to "When will wholesale energy costs come down in the UK?".

And the short answer is - not for a while. The futures markets are pointing to next winter's prices being similar to now, and 30% less in the following winter, 2024/5.

Obviously there are lots of unknowns in that, but that's Mr Market's best guess at the moment - there's no short-term relief in sight, unless Putin was replaced with someone that Europe would be happy to buy gas from.

[servodude]

Well, if they ever re-introduce a market in energy supply (ideally not a pure race-to-the-bottom one), we might get a choice again. So we can, for example, trade off unit costs vs standing charge.

There never was nor can there ever be a genuine market. Not when there is only one source of electricity.

All the 'suppliers' have to buy the same electricity from the same source (the national grid) so the only competition that can occur revolves around the levels of customer service offered by the call centres and the efficiency of their billing service, I'd suggest.

I hope we never get back to the open market arrangements of new entrants flogging electricity at spot prices and going bust. That is expensive for everyone and helps no one. Hopefully though there might be variations within certain parameters set by a responsible regulator.

Dod

Well... that's three of my favourite (and most respected posters - yeah that includes you MIke) on this site wrapping up my sentiments on the whole thing in pretty much the same terms I run through it in my head.

There is no "genuine market"
There are things you can trim on "customer service" (think ING as a bank) but there is only one supplier (ex buying gas in tanks)
Pretending there IS a market, for the hell of it, can really only be a race to the bottom - because they are all delivering from the same source.

If I look at is as a "human" caring about what's best for all of us in general...
The whole thing needs a tear up and rebuild
- standing charge appropriate to cost
- with charging for usage proportionally (to encourage less overall consumption) and allow for decent reserves

And as much as it pains me, I can't see that being possible while the motive for the operators (of competing energy suppliers) is purely profit
In my head this is a (national/existential) security issue - and not many places would outsource that and expect a great outcome

if you allow energy firms to profiteer off international circumstances through the use of natural (and national) resources we're getting in to william gibson territory
- it's weird to me to see the UK govt. giving folk money to give to EDF for charges they would not be allowed to bring upon the French
- perhaps that's a laisse faire hill everyone is happy to die on - but that seems a bit wasteful and pyrrhic to me

-sd

[mutantpoodle]

qq
But really your question comes down to "When will wholesale energy costs come down in the UK?".
uq

sorry but I dont agree that the question hinges on that at all.
there will always be folk that get into financial difficulties with energy and as long as they are bailed out the suppliers will have need of 'reimbursement charges'...as they have decided to call the SCs

the actual cost of energy to suppliers will only affect the KWH costs and not the SC

[Bminusrob]

How long will the daily energy standing charge(s) be held at the elevated rate? Is there a cut off point when they will revert back (or at least come down)?

The answer is very simple. As long as we have the energy "price cap", the standing charge will remain high. The "price cap" is nothing more than a price the companies are allowed to charge.

It is a very unfair charge, as the result is that people who use very little energy are paying an extra 10p or 15p per kWh, and are effectively subsidising high energy users. I personally use about 8kWh per day, so the standing charge adds an extra 6p per kWh I use.

[AF62]

It is a very unfair charge, as the result is that people who use very little energy are paying an extra 10p or 15p per kWh, and are effectively subsidising high energy users.

Elements of the standing charge are unfair, but others are fair.

Should every property that is connected to the gas and electricity grid pay for a share of the cost of delivering gas and electricity to that property - well, yes. Those costs are incurred irrespective of the amount of gas and electricity they use, so a fixed charge is fair.

Should every property pay for the government 'green' initiatives at a flat rate - no, as those political aims would seem far more appropriate to fund from general taxation where an ability to pay is incorporated.

Should every property pay for the government's failure to manage the energy companies and the resulting failure and absurdly large costs incurred - absolutely no, and other than billing the politicians themselves for their stupidity, again that would seem to fit better with general taxation.

[Mike4]

It always appears to me that the system we have of charging for gas and electricity according to amount used fails to reflect the actual costs involved or incurred by the supply industry as a whole. I think it costs 'the system' a trivial additional sum if I burn a shedload of extra leccy or gas, but quite a lot to keep the service to my hovel 'live'.

I suspect most of the money collected (like with the railways) gets spent on providing and maintaining the infrastructure rather actually purchasing the fuel sent through it, so charging for fuel used doesn't really align with the way the costs are incurred. A more equitable way of charging would, I suspect, actually be to have a massive standing charge and very little charged for the energy itelf. (I can see all manner of other reasons not to do this though.)

[servodude]

It always appears to me that the system we have of charging for gas and electricity according to amount used fails to reflect the actual costs involved or incurred by the supply industry as a whole. I think it costs 'the system' a trivial additional sum if I burn a shedload of extra leccy or gas, but quite a lot to keep the service to my hovel 'live'.

I suspect most of the money collected (like with the railways) gets spent on providing and maintaining the infrastructure rather actually purchasing the fuel sent through it, so charging for fuel used doesn't really align with the way the costs are incurred. A more equitable way of charging would, I suspect, actually be to have a massive standing charge and very little charged for the energy itelf. (I can see all manner of other reasons not to do this though.)

I think you might be on to something... though I'm not sure that the costs of the consumable part is negligible.

And given everyone (or just about?), including businesses, NEEDS energy and access to it... why not maintain the infrastructure through general taxation and charge for usage in a way that encourages consumption that is sustainable?

If there's a reason other than the chance to profiteer I'd be really interested in it

[UncleEbenezer]

It always appears to me that the system we have of charging for gas and electricity according to amount used fails to reflect the actual costs involved or incurred by the supply industry as a whole. I think it costs 'the system' a trivial additional sum if I burn a shedload of extra leccy or gas, but quite a lot to keep the service to my hovel 'live'.

I suspect most of the money collected (like with the railways) gets spent on providing and maintaining the infrastructure rather actually purchasing the fuel sent through it, so charging for fuel used doesn't really align with the way the costs are incurred. A more equitable way of charging would, I suspect, actually be to have a massive standing charge and very little charged for the energy itelf. (I can see all manner of other reasons not to do this though.)

I think you might be on to something... though I'm not sure that the costs of the consumable part is negligible.

And given everyone (or just about?), including businesses, NEEDS energy and access to it... why not maintain the infrastructure through general taxation and charge for usage in a way that encourages consumption that is sustainable?

If there's a reason other than the chance to profiteer I'd be really interested in it

The standing charge is, in effect, a form of general taxation. It's (give or take) a locally flat rate per household, regardless of the size of the premises or household.

But it's not entirely disconnected from usage. It serves as an incentive to abandon gas and go all-electric. As I intended when I first moved here in 2019. With gas standing charge north of £100/year that incentive just grows.

[Mike4]

The standing charge is, in effect, a form of general taxation. It's (give or take) a locally flat rate per household, regardless of the size of the premises or household.

But it's not entirely disconnected from usage. It serves as an incentive to abandon gas and go all-electric. As I intended when I first moved here in 2019. With gas standing charge north of £100/year that incentive just grows.

With the price pr kWh of leccy fixed at 3.5 x gas, a standing charge of £100 a year is surely hardly an incentive to swap to leccy.

Oh hang on, you like to live in a fridge, I forgot!

[Itsallaguess]

The standing charge is, in effect, a form of general taxation.

It's (give or take) a locally flat rate per household, regardless of the size of the premises or household.

I can see the justification for some level of gas and electricity standing charge, but the flat rates per provider have never looked fair to me when viewed from the poorer side of society, and I've often thought that a much fairer system might be employed that raises the same revenue for the system-providers, but is tapered in relation to the council-tax bands of the buildings being supplied with the service.

For me such a solution would tick a few boxes in terms of providing some financial-relief for those in smaller houses, and also delivering a nudge for home-buyers or home-owners to consider dwelling-size as an additional influence on ongoing costs of energy-service provision, similar to the council-tax itself in many ways.

Linking energy standing charges to council-tax bands might also provide a relatively simple and low-cost solution to a tapered standing charge as well, given that it would require no additional per-property assessment to put such a system in place. Separate to personal households, perhaps a similar tapered standing charge system might be used for non-household locations based on business-rates.

Cheers,

Itsallaguess

[Mike4]

The standing charge is, in effect, a form of general taxation.

It's (give or take) a locally flat rate per household, regardless of the size of the premises or household.

I can see the justification for some level of gas and electricity standing charge, but the flat rates per provider have never looked fair to me when viewed from the poorer side of society, and I've often thought that a much fairer system might be employed that raises the same revenue for the system-providers, but is tapered in relation to the council-tax bands of the buildings being supplied with the service.

For me such a solution would tick a few boxes in terms of providing some financial-relief for those in smaller houses, and also delivering a nudge for home-buyers or home-owners to consider dwelling-size as an additional influence on ongoing costs of energy-service provision, similar to the council-tax itself in many ways.

Linking energy standing charges to council-tax bands might also provide a relatively simple and low-cost solution to a tapered standing charge as well, given that it would require no additional per-property assessment to put such a system in place. Separate to personal households, perhaps a similar tapered standing charge system might be used for non-household locations based on business-rates.

Cheers,

Itsallaguess

There is an even simpler, fairer and more granular way of tapering the standing charge to match the circumstances of the individual consumer. Make them proportional to the amount of fuel used.

Um....