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The_Dom
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October 22, 2024
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Why do standing charges differ by contract if the cost of maintaining the grid doesn't?

  • October 22, 2024
  • 16 replies
  • 595 views

Why do standing charges differ between contacts by the same supplier? The cost of maintaining the infrastructure does not change whether I choose a year to 2 year fixed contract or go for a variable contract. Prices may differ by suppliers, but should not differ in one suppliers contracts.

    Best answer by Peter E

    Updated on 20/07/26 by Abby_OVO

    @The_Dom , @Lpen , @Skeck , @LozT-B and others who find their way here I found a rather lengthy document from Ofgem called: Standing Charges: Summary of Responses which goes into some depth about the SC and Unit rate and it had asked for questions from the public and supplies regarding this issue and it came up with this. Now, it’s a bit of a long read but the interesting bit comes in at page 16 where it looks at the comments and tries to provide answers and some of the difficulties associated with each option.

     

    https://www.ofgem.gov.uk/sites/default/files/2024-08/Standing%20Charges%20-%20summary%20of%20responses.pdf

     

    The one that interested me most is reproduced below as a supplier comment:

     

    Q 1.5 A heightened burden of compliance was also referred to as a constraint to
    innovating with zero standing charge tariffs. Suppliers indicated that whilst the
    relevant conditions of the Gas and Electricity Supply Licences (SLC 28AD 32 and
    33) allow for alternative tariff structures, they also require the supplier to firstly seek a direction from Ofgem and to assess each customer’s charges under the
    tariff within the relevant Charge Restriction Period. One supplier noted that “we
    would find it very onerous to provide evidence to Ofgem that we are still
    compliant with the price cap across all customers and all regions - and this is an
    onerous assurance that would need to be repeated every time the price cap
    changes.”

     

    So from this it would appear that it is Ofgem (not the suppliers) that have put an obstacle in the way of zero SC tariffs so it would appear that, far from Ofgem helping customers, it is actually impeding the process with regulations that prevent customers being offered a better deal (significantly reduced SC). Anyway, there is a lot to read in that document but before you blame your supplier for not offering a tariff that is fairer to you then bear in mind that there are a lot of regulatory hoops that each supplier has to jump through before you even get access to a tariff. This is on top of the requirement for each tariff to pay its way otherwise they go out of business.

     

    I hope this provides the information you were looking for. Whether anything will change is anybody’s guess but at least the situation is being reviewed. The one thing everyone can do is look at ALL of the available tariffs out there and try and work out which is the best one for you. I’m not offering any advice but my suggestion is to gather detailed information about your energy usage and try a number of switch sites to see if there are any common results. Being a forum volunteer maybe I shouldn’t be suggesting that but being on the wrong tariff is no good to anyone if you are paying too much and end up in debt.

     

    I sincerely hope that helps

     

    Peter

     

    PS I also sincerely hope this is not my last post

    16 replies

    Peter E
    Super User
    Peter ESuper User
    Super User
    October 22, 2024

    Hi @The_Dom

     

    The standing charge (SC) comprises many different elements all of which change from quarter to quarter and the average of these charges, which have to be predicted by energy suppliers in advance, will change whether you are looking at a one year period or two year. You could say that the SC for the Standard Variable Rate is the only accurate version. The SC also varies from area to area as well. The other element to consider is that the the energy supplier might trade a slightly lower SC for a slightly higher unit charge (within the cap) and hope these balance out over the contract. To some extent it depends on their particular mix of high, medium and low usage customers that they have. Someone might list the elements that make up the SC but I'm keeping it simple at this point.

     

    Peter

     

    Reducing my yearly fossil fuel usage with an EV (-900 litres petrol), A2AHP (-8,700 kWh gas) and Timed Immersion heater (-1,500 kWh gas)
      L
      Newcomer
      Lpen
      Newcomer
      October 22, 2024

      I don’t know which contract had the lowest standing charges but I would have thought a longer you are tied in, the lower they should be.

        Peter E
        Super User
        Peter ESuper User
        Super User
        October 22, 2024

        Hi @Lpen Not true unless the SC is going down in the long term.

         

        At the moment the trend for SC is upwards meaning longer term SCs are higher. The SCs are currently under review because low users are unable to significantly reduce their monthly cost. During the summer my SC is ten times the amount of gas I use but only a small fraction of my winter heating costs so I put up with it.

         

        Here is a link to what charges are applied to make up the SC.

         

        https://www.moneysupermarket.com/gas-and-electricity/standing-charges-explained/

         

        Peter

         

        PS Looking at the information below here I've managed to reduce my gas usage to the point where the SC is a significant percentage of my gas cost. You could say this is the price of going green. Ho hum!

         

         

        Reducing my yearly fossil fuel usage with an EV (-900 litres petrol), A2AHP (-8,700 kWh gas) and Timed Immersion heater (-1,500 kWh gas)
          Peter E
          Super User
          Peter ESuper UserSolved
          Super User
          October 23, 2024

          Updated on 20/07/26 by Abby_OVO

          @The_Dom , @Lpen , @Skeck , @LozT-B and others who find their way here I found a rather lengthy document from Ofgem called: Standing Charges: Summary of Responses which goes into some depth about the SC and Unit rate and it had asked for questions from the public and supplies regarding this issue and it came up with this. Now, it’s a bit of a long read but the interesting bit comes in at page 16 where it looks at the comments and tries to provide answers and some of the difficulties associated with each option.

           

          https://www.ofgem.gov.uk/sites/default/files/2024-08/Standing%20Charges%20-%20summary%20of%20responses.pdf

           

          The one that interested me most is reproduced below as a supplier comment:

           

          Q 1.5 A heightened burden of compliance was also referred to as a constraint to
          innovating with zero standing charge tariffs. Suppliers indicated that whilst the
          relevant conditions of the Gas and Electricity Supply Licences (SLC 28AD 32 and
          33) allow for alternative tariff structures, they also require the supplier to firstly seek a direction from Ofgem and to assess each customer’s charges under the
          tariff within the relevant Charge Restriction Period. One supplier noted that “we
          would find it very onerous to provide evidence to Ofgem that we are still
          compliant with the price cap across all customers and all regions - and this is an
          onerous assurance that would need to be repeated every time the price cap
          changes.”

           

          So from this it would appear that it is Ofgem (not the suppliers) that have put an obstacle in the way of zero SC tariffs so it would appear that, far from Ofgem helping customers, it is actually impeding the process with regulations that prevent customers being offered a better deal (significantly reduced SC). Anyway, there is a lot to read in that document but before you blame your supplier for not offering a tariff that is fairer to you then bear in mind that there are a lot of regulatory hoops that each supplier has to jump through before you even get access to a tariff. This is on top of the requirement for each tariff to pay its way otherwise they go out of business.

           

          I hope this provides the information you were looking for. Whether anything will change is anybody’s guess but at least the situation is being reviewed. The one thing everyone can do is look at ALL of the available tariffs out there and try and work out which is the best one for you. I’m not offering any advice but my suggestion is to gather detailed information about your energy usage and try a number of switch sites to see if there are any common results. Being a forum volunteer maybe I shouldn’t be suggesting that but being on the wrong tariff is no good to anyone if you are paying too much and end up in debt.

           

          I sincerely hope that helps

           

          Peter

           

          PS I also sincerely hope this is not my last post

          Reducing my yearly fossil fuel usage with an EV (-900 litres petrol), A2AHP (-8,700 kWh gas) and Timed Immersion heater (-1,500 kWh gas)
            Blastoise186
            Super User
            Blastoise186Super User
            Super User
            October 23, 2024

            Hiya!

            @Peter E I just spotted your post so I hope you don’t mind a peer-review from me.

            As far as I can tell, everything in there looks good. One of the goals of Forum Volunteers here is to provide the best advice we can, even if that sometimes means suggesting leaving OVO if it’s in the best interests of the individual customer. Just as long as you’re not trying to make money out of it by doing things that’ll give you kickbacks, you’re good in that regard.

            I also take the view that being on a bad tariff is not in the customers best interests and I’ve said that many times before without issue, so I think you’re also good in that department too.

            Your comment is actually pretty useful! Far from heading to the Bin, I think you’ll find it gets a few upvotes. :)

            Securing energy by zapping security bugs... For that is The Blastoise Way! Remember, I'm just like you - AI Powered Evil Geniuses aren't Staff!
              Peter E
              Super User
              Peter ESuper User
              Super User
              October 23, 2024

              Hi @Blastoise186 Thanks for the confirmation I hadn’t gone too far. Having run down my gas usage to something that is very minimal I hadn’t really noticed how annoying/frustrating it is to realise that you can’t do anything about the SC. For me it’s an annoyance. For a lot of people it takes a significant proportion of their income and I had been having quite a chat with @Chris_OVO about the issue of how this can be fixed but basically it can’t be fixed with one tariff. The way it can be fixed is by energy suppliers offering a range of tariffs with a different ‘bias’ towards either SC or Unit Cost and I only learnt today that even the suppliers were complaining about Ofgem’s rules regarding zero SC tariffs. Unfortunately customers target the suppliers when they should be venting their anger at Ofgem. The very organisation that is there to be their champion. Hopefully something will change.

               

              Cheers buddy

              Reducing my yearly fossil fuel usage with an EV (-900 litres petrol), A2AHP (-8,700 kWh gas) and Timed Immersion heater (-1,500 kWh gas)
                Chris_OVO
                Community Manager
                Chris_OVO
                Community Manager
                October 23, 2024

                Hey @Peter E,

                 

                Thanks for sharing this with everyone and hopefully we’ll see some great discussions off the back of it. I’d agree with you that it’s important that every customer looks at their current tariffs and any benefits that come along with them. Everyone has different positions in life and there’s no one size fits all approach. Standing charges are still a challenge for many and hopefully we’ll see some progress on this front in the future in terms of how these are considered. 

                 

                I don’t know what you mean about this being your last post as we love having you here and hopefully i’ll have the chance to meet you again someday! 

                Renewable energy jokes never get old.
                Blastoise186
                Super User
                Blastoise186Super User
                Super User
                October 23, 2024

                I think Peter was just worried about getting kicked off the Forum with that post.

                Which definitely won’t happen!

                Securing energy by zapping security bugs... For that is The Blastoise Way! Remember, I'm just like you - AI Powered Evil Geniuses aren't Staff!
                  Chris_OVO
                  Community Manager
                  Chris_OVO
                  Community Manager
                  October 23, 2024

                  I think so too and they’d have to take me with him 😤 We’re big @Peter E fans here (inside joke as me and Peter have been talking about big fans recently!) 

                  Renewable energy jokes never get old.
                  Blastoise186
                  Super User
                  Blastoise186Super User
                  Super User
                  October 23, 2024

                  But you already know I am your biggest fan… Right…?

                  Securing energy by zapping security bugs... For that is The Blastoise Way! Remember, I'm just like you - AI Powered Evil Geniuses aren't Staff!
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