Ofgem's Consultation on Energy Standing Charges

  • 22 December 2023
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Many of us have faced difficult choices in trying to balance household budgets to meet the cost of things such as high energy bills.  

Did you know that Ofgem are undertaking a consultation on energy standing charges?  Now is the time for all our collective voices to make the point that we cannot continue to meet ever increasing standing charges for costs that are not directly linked to the provision of energy or maintenance of the network.

I urge all of you to visit Ofgem's website and email them with your views on the energy standing charges as this may be the only time our comments on this topic may be considered.  

Details can be found at https://www.ofgem.gov.uk/publications/ofgem-opens-conversation-energy-standing-charges-ahead-winter or you can email directly to StandingCharges@ofgem.gov.uk.  Deadline for feedback is 19 Jan 2024.  

 

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Abby_OVO
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Great discussion you’ve started there @newjerseyminx.

 

OVO has started support for this, it's number 6 of our 10 point plan, check out the plan for more.

 

I’ve detailed below number 6 on the plan, surrounding standing charges too;

 

Make bills simpler and fairer by abolishing the standing charge


There are fixed costs to serving energy consumers, regardless of how much energy they use. The economic principle behind standing charges is sound, but the reality is standing charges represent the single biggest source of customer confusion on energy bills, and causes the greatest resentment. If we ever want to make a meaningful impact on energy efficiency, consumers must be able to make a clear link between the number of energy units they use, and the amount they pay. Doing away with standing charges is the simplest way to make energy easy to understand. It will also benefit low income households more than wealthy households, and further reward energy efficiency. It is a compromise, but definitely one worth making. We must make household energy bills simpler and fairer by removing the standing charge for all domestic tariffs.

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Firedog
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Doing away with standing charges … will also benefit low income households more than wealthy households, and further reward energy efficiency. It is a compromise, but definitely one worth making. 

 

Sauce for the goose isn’t always sauce for the gander. While the concept of zero standing charge sounds equitable for the great majority of cases, there are too many others that would deserve - and probably not get - special treatment. A couple of examples:

  1. The wealthy businessman from London who buys a six-bedroom cottage on the Pembrokeshire coast as a holiday home. It costs the distribution company and suppliers a fortune to maintain an electricity supply to properties in this remote location, but because the house is only used a few weeks in the year, its consumption is much lower than the ‘average’ low-income household. Is it fair that the businessman pays less towards those distribution and maintenance costs than the single mother in a council flat in Peckham? 
  2. The old man with dysfunctional kidneys living on benefits. The NHS provides and maintains his home dialysis equipment, but he has to pay the high cost of running it in order to stay alive. Is it fair to increase the cost of each unit he uses  just so the aforementioned businessman doesn’t have to pay towards the cost of supply?
  3. Closer to normal, perhaps: a pair of semis, one occupied by a retired couple living quietly, the other by a family with four lively children. The couple’s energy consumption is only a fraction of their neighbours’, but it costs precisely the same to deliver power to each dwelling. Is it fair that the family should pay much more towards those delivery costs than the old couple? 

I agree that the current standing charge regime needs adjusting, but scrapping them altogether doesn’t sound like the right way forward unless complex measures are introduced to mitigate the extremes. 

 

Noel | I have no official status; I'm just a volunteer who comes here to help other customers. My gear: Aclara SGM 1416-B Electricity-only E7 meter; Chameleon IHD3-PPMID-AAA
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Firedog, some very good examples here but lets be clear on the ‘delivery’ side of things.  In my mind electricity is delivered to each of the above by a cable/connection to a meter and gas is delivered by a pipeline to a meter at each property.  Lets call this simplistic example ‘the network’.  The network is the same regardless of an individuals socio/economic background and therefore to be fair, the cost of maintaining that network should be the same regardless - it is only the consumption costs that will vary.

Wealthy businessman may not be paying much consumption on a second home but may be paying a lot on a primary residence which is likely to be of a larger size than the residences of the other 2 examples.

The person on benefits and with a health condition is on benefits so already in receipt of Government assistance.  They would benefit greatly from a Social Tariff to cover the costs of high energy consumption.  Let us not forget that those on benefits are eligible to claim Gov support with energy bills whereas those who aren’t on benefits don’t get anything at all.

Pensioners - there are 2 types:  those with additional private pension income and those just living on a basic state pension.  Again, pension credit is available to those on low pension income and some pensioners (like my parents) are already in receipt of winter fuel payments.

I feel that all of the above should be paying the same standing charge to cover the cost of providing a network to deliver their power.  Everyone is responsible for their own energy consumption levels.  Agreed that it is unfortunate that some members of society through no fault of their own have energy needs greater than others BUT it is for the Government/Energy suppliers to support those people if they cannot reduce their consumption levels.

Standing Charges are NOT about energy consumption and nor should they be.  I hope you have written to Ofgem and sent them your great examples above perhaps with some suggestions as to how these members of society could be better supported with their energy consumption bills.

 

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Sorry to also add that I wrote to Ofgem but not to suggest that they  scrap standing charges because an energy network still has to be paid for but that they consider a tiered system of standing charged linked to energy consumption levels.  That way  anyone that is reducing their energy consumption for  whatever reason can be ‘rewarded’ with a lower rate of standing charge.  This would encourage those that can to use LESS energy altogether which is kinder to the planet.

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