Posted 26 November 2023
Ofgem launches review on energy standing charges
Ofgem has launched a review of standing charges with feedback soliciated from consumers, amongst others. Please respond to James Crump via email to StandingCharges@ofgem.gov.uk or by phone at 020 7901 7295 no later than Fri, Jan 19, 2024.
Background - from Jan 1, 2024, the average daily standing charge will be 53p/day for electricity and 30p/day for gas. So £25 per month before consuming anything.
In my opinion, this is a ridiculous penalty on low consumption households. On one hand, one of the stated objectives of these charges is to pay for social schemes that help those who cannot afford energy. On the other hand, these charges penalise those who have cut consumption because they cannot afford it. Or households who have made a conscious effort to cut consumption from an environment perspective - we fall in the latter category and standing charges are now a significant portion of our monthly bill (used to be 14p/day total when our last fix expired in early 2021).
My view - either abolish standing charges completely or have them capped at a sensible number like 15p/day total. Second, have 3 consumption based price bands for the actual energy consumed - low consumers should pay at least 20% less than the cap / market, median pays at the cap and high can be 20% above the cap. Low consumption cut off can be the 20th percentile while high can be 80th percentile. This shouldn't affect any social benefits linked to income and will actually help those who cannot afford energy.
Background - from Jan 1, 2024, the average daily standing charge will be 53p/day for electricity and 30p/day for gas. So £25 per month before consuming anything.
In my opinion, this is a ridiculous penalty on low consumption households. On one hand, one of the stated objectives of these charges is to pay for social schemes that help those who cannot afford energy. On the other hand, these charges penalise those who have cut consumption because they cannot afford it. Or households who have made a conscious effort to cut consumption from an environment perspective - we fall in the latter category and standing charges are now a significant portion of our monthly bill (used to be 14p/day total when our last fix expired in early 2021).
My view - either abolish standing charges completely or have them capped at a sensible number like 15p/day total. Second, have 3 consumption based price bands for the actual energy consumed - low consumers should pay at least 20% less than the cap / market, median pays at the cap and high can be 20% above the cap. Low consumption cut off can be the 20th percentile while high can be 80th percentile. This shouldn't affect any social benefits linked to income and will actually help those who cannot afford energy.
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35 Comments
sorted byI just hope they come to the right conclusion, but, the downside is by how much will they increase the unit rate , so they still get the same return ?? (edited)
The cheapest electricity in Western Europe is in Norway, where the average price of one kWh is USD 0.093. The Åland Islands (USD 0.118) is the second cheapest in Western Europe followed by Andorra (USD 0.127). Denmark is the most expensive in the region at USD 0.350. The UK (USD 0.251) is the 5th most expensive in Western Europe and comes 190th in the world for cheap electricity.
Ofgem usually sets a Supplier Margin cap, to prevent suppliers from incorporating and profiting significantly. For example Jul-22 the cap was announced at 1.9% (edited)
The directors and shareholders walked away from the disasters, with the profits in their pockets, and without shouldering any responsibility.
But never a share-out when times are good!
Whilst I can see the argument that low users should pay less, the cost of installing cables and maintaining them are exactly the same.
It make sense for Ofgem to calculate what are 'standard costs' that all customers have to pay, and those that should be levied against the unit rate, so that low users have some form of discount because they are not using the service as much etc.
With Smart Meters, variable rate pricing is much easier and costs can be tracked better so it possibly makes sense to move back to that old method.
The idea that it will save money though is wishful thinking for the people with large bills. It's possible that a portion of people with low power usage will benefit but a large percentage will see their bills go up, and go up, some by a lot. People with heat pumps and people with large families who do lots of laundry and never go out for meals would get hit hardest as the unit price goes up to subsidise the costs paid for by standing charges. Also, people with low standing charges because it costs very little to keep them connected to the grid (people in high density population areas) may pay more because they now are taking on the costs of connecting isolated villages in rural Scotland where the lines are constantly battered by extreme weather.
Should be the same price for everyone (edited)
so, no standing charge i think? Or at least a small amount (edited)