Massive standing charge inflation- why?

While the price cap deals with the total charges, the standing charge is part of the fixed costs which Ofgem mandate. They are looking at this for future prices 

Oh I think I can see what I got wrong. That sentence I quoted is ambiguouos. I took it to mean that it had set two caps - one for per-unit energy, and one for per-unit standing charge. I think what you’re saying it means is that they set a cap for the sum of those two, and set an actual fixed value on standing charge, is that right?

If so, it seems a very odd way to do it, and to describe it. They set a cap on a variable plus a constant? Why not set a constant value and a variable cap?

The maximum standing charge for tariffs subject to the price cap (i.e. the Standard Variable Tariff, which OVO call Simpler Energy) is determined by Ofgem as an annual cost for each fuel, region and payment method. You can see the current ones here: Benchmark Maximum Charges for the Charge Restriction Period 13a

The figures in the table are exclusive of 5% VAT. The standing charge is in the column headed Nil kWh - i.e. the amount to be paid even if there’s no consumption. Divide it by 365 to find the daily charge. The payment methods are Other ... - i.e. monthly Direct Debit, Standard Credit - i.e. on receipt of bill, and Prepayment. 

Next quarter’s equivalent figures are here: Benchmark Maximum Charges for the Charge Restriction Period 13b   
  

Thanks again for your help in understanding this. The tables broadly agree with what my Smart meter is telling me.

What makes this more puzzling is that I had a lengthy frustratfig dialogue with OVO on the standing charge. They kept giving reasons for the price rise which were clearly not logical and eventually stopped responding. They said the standing charges went up because the number of suppliers went down, so the existing cost had to be shared amoungst fewer. The reason that doesn’t work is that the number of consumers, presumably, didn’t go down at all.

I wonder why they didn’t just tell me what ou have done.

So now the question arises - why is OFGEM raising standing charge prices above inflation?
Any why haven’t energy prices gone back down, now that wholesale prices are lower.
I know about market leadtimes, but that excuse doesn’t seem to cover such an extended period as we’ve seen.

Why haven't energy prices gone down? How much time have you got?

Even before 2020 and Russia invading Ukraine there was an energy crisis developing. Asian markets were gearing up for higher production and if it hadn't been for COVID prices would have spiked in 2020. Instead they spiked even more in 2022 and this caused a big spike in inflation and this has now been baked into high energy prices for the next decade. This is because the generators, bidding for future generation, wouldn't accept pre-inflation rates which apply to futures market rates which is where the SVR and Fixed Rate prices come from.

Wholesale rates have come down and are very competitive but you have to be on a different type of tariff for that. I'm on Agile which is good most of the time but a few days ago my 4-7pm peak rate recently hit its cap at 99.99p a unit so sometimes you have to grin and bear it and have other heating and cooking options or a battery to get you through the peak.

Peter

It’s not just inflationary increases. The mix of what is covered by the standing charge has changed a few times in recent years, as this chart shows:
  

I’ll leave it to you to decode the impenetrable abbreviations, but TNUoS is basically the cost of the transmission network (think pylons), DUoS the cost of the distribution network (from the substation to your meter), and SoLR (Supplier of Last Resort) the costs we all had to bear in order to keep the lights on for customers of electricity suppliers that went bust following the meteoric wholesale price rise in 2021. Most of the TNUoS and DUoS costs used to be included in the unit rate, but that proved to be increasingly unfair on high consumers after the 2021 price hike.

You’ll notice that the elements at the bottom end of the chart are the ones that show inflationary increases over the years. They used to be the only elements in the standing charge; now they account for less than half of it.   

Thanks. From the document you cite: “… While we do not set standing charges...”. Doesn’t this completely contradicy youor assertion that they absolutely do?

The document is crammed with repetition, irrelevant background and esoteric jargon, but it does confirm that standing charges have more than doubled in the last two years. It ppints to using Suppliers Of Last Resort as one of the main reasons.

Well, I don’t have the time to spend on that 59 pages of corporate-speak. But - I realise you didn’t write it - so thanks for bringing it to my attentioon. Do you happen to have a, say, 100-word summary of why these charges doubled?

I asked ChatGPT for a summary

Energy standing charges have increased significantly in recent years due to a combination of regulatory, market, and infrastructure factors. Here's a summary of the main reasons:

1. Impact of Supplier Failures

The collapse of many energy suppliers, especially in 2021-2022, led to increased costs for transferring their customers to larger suppliers under the "Supplier of Last Resort" mechanism. These costs are recovered through standing charges, which are shared by all energy customers.


2. Network and Infrastructure Costs

Energy standing charges cover the maintenance of the grid and distribution network. Upgrades to aging infrastructure, coupled with the need to support the transition to renewable energy sources, have driven up these costs.


3. Government Schemes and Levies

Standing charges often include contributions to government-mandated programs, such as energy efficiency schemes and renewable energy subsidies. Some of these have increased to support net-zero targets and energy security.


4. Price Cap Adjustments

The UK’s energy price cap, which includes standing charges, has been adjusted to reflect market volatility. Ofgem, the regulator, has allowed higher charges to spread the impact of recent energy crises more evenly.


5. Rising Energy Wholesale Prices

While standing charges are separate from wholesale costs, the general instability in energy markets (e.g., due to geopolitical tensions like the Ukraine war) has influenced the overall system's financial strain, indirectly pushing up standing charges.


6. Regional Variations

Standing charges also account for regional differences in infrastructure costs. Customers in rural areas or regions with less energy demand may face higher charges.


In summary, standing charges have risen due to systemic costs from supplier failures, grid improvements, and market adjustments. These increases aim to stabilize the energy market but have disproportionately affected households with low energy usage.
 

Thanks, I hadn’t considered that approach. It’s still just a speaking surface wiht terms whose meaning and validity may be wrong - like the SoLR mechanism” but I don't have the energy. But thanks again.

It just occurred to me at the time to ask ChatGPT to see if it would come up with something half sensible and it did the whole thing. I read it through carefully to make sure it made sense and itdidn’t have any issues and even came up with the point that even wholesale prices affect the SC to a small extent. Who knew?

In the past I’ve use Bard (now called Gemini) and it manufactured a load of tosh so I’m a bit wary of that one and you do have to do a sense check before publishing. I also put this on here to give a demo to other customers and my fellow forum volunteers as a possible way of answering queries or at least giving a second opinion on issues. We might even be able to retire ​@Blastoise186 when we can get it to diagnose rare meter faults. Then I can make my way up to the top of the leader board.

Peter