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Why have Standing Charges also increased so much with the Energy Crisis?

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Ovo increased their electricity standing charge massively in April. I have asked them to itemise what the Standing Charge covers and then justify the increase - they are refusing to do this.

The Standing Charge should relate to the actual cost that Ovo has delivering electricity to your home. Those costs did not substantially increase in April.

Wholesale gas price rises meant that the unit cost of electricity went up but that should not have affected the Standing Charge.

Ovo have just taken the maximum that Ofgem allow the Standing Charge to be decided to charge it.

You can try to avoid unit costs by cutting back on usage, but you cannot avoid the Standing Charge.

Customers need to band together and get them to justify the increase.

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Best answer by Jeffus 5 October 2022, 14:59

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M
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OVO are charging according to the OFGEM price cap rates - yes even the EPG doesn’t affect standing charges.  There’s lots on the OFGEM website about what goes into the standing charge - its guaranteed to give you a headache within minutes.  But it's pointless asking OVO - as at the moment they are not computing their own version of the standing charge - nor are the other suppliers.  A lot of the increase in April was to compensate suppliers for their cost increases because of taking on customers from failed supplier, their credit balances and moneys owed by the failed companies to other parts of the supply system - to prevent a cascade of failures elsewhere.  Much of these will drop out next April -in theory.

 

this will answer more questions than you’ve already thought about:

Your energy bill explained | Ofgem

Eon and EDF customer. Don't think smart meters are worth the expense.
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@meldrewreborn Yes, OVO are charging the maximum that Ofgem permits for the Standing Charge - but I think that is open to challenge.

If you read the Ofgem link that you sent it shows that the Standing Charge is “money goes towards maintaining, running and upgrading the networks”, plus some other things.

Those costs did not increase by the amount that Ovo bumped their charges up by. They should therefore be made to itemise what they are including in the Standing Charge and justify the increases.

Ofgem does not set the Standing Charge, it sets a maximum, and the charge made by the supplier is supposed to have some basis in what the actual costs to the supplier are.

 

 

 

Blastoise186
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So what you’re saying is that Energy Suppliers should lose even more money by making the standing charges have a 99% discount??? That doesn’t make much sense to me if I’m honest!

Securing energy by zapping security bugs... For that is The Blastoise Way!
Jeffus
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@meldrewreborn Yes, OVO are charging the maximum that Ofgem permits for the Standing Charge - but I think that is open to challenge.

If you read the Ofgem link that you sent it shows that the Standing Charge is “money goes towards maintaining, running and upgrading the networks”, plus some other things.

Those costs did not increase by the amount that Ovo bumped their charges up by. They should therefore be made to itemise what they are including in the Standing Charge and justify the increases.

Ofgem does not set the Standing Charge, it sets a maximum, and the charge made by the supplier is supposed to have some basis in what the actual costs to the supplier are.

 

 

 

Hi @AngryOVOCust that isn't how the world works unfortunately.

We are in a country where these companies are not owned by the state. They are commercial companies. The regulator is there amongst other things to set the maximum price a supplier can charge for the standard charge on the ofgem price cap. In a free market suppliers can then do what they want.

If you don't like the way it works they lobby your MP or add a petition on the Parliament website for example

https://petition.parliament.uk/

As it is a free market, some companies have decided to undercut the ofgem price cap standing charge, e.g. Octopus. So shop around if you want the best price, just like you would when buying anything. 

Ofgem has been considering removing some or all the standing charge and incorporating the costs in the unit rates. There did use to be tariff with no or low standing charges but these have long since gone. 

 

 

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 @Jeffus wrote;

….that isn't how the world works unfortunately.

We are in a country where these companies are not owned by the state. They are commercial companies. ...In a free market suppliers can then do what they want.”

Are they really free to do what they want though. They are operating in a regulated industry and there are also consumer protection Laws.

If they tell the consumer that the Standing Charge is to cover the cost of electricity delivery, then they cannot really charge for something else. Why are they afraid to itemise and justify what they are including in the charge?

Also Ofgem does not set ‘a’ maximum Standing Charge it sets multiple maximum Standing Charges based on population density and terrain to reflect the real cost of delivering electricity to those areas.

Ofgem cleary see that the Standing Charge is based on the physical reality of electricity delivery. In addition I am quite sure that Ofgem do not want to be seen as actually setting the Standing Charges, they are setting a maximum. I am quite sure Ofgem does not want suppliers to take that maximum figure and simply adopt it as the charge.

As a result I think if Customers banded together and demanded a breakdown of what Ovo is including in Standing Charges and then a justification of why those items increased so dramatically in April then Ovo will have a case to answer.

 

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If suppliers charge less for the standing charge than the maximum allowed, they can then charge more for the units supplied.  Such a move would favour lower than average users of energy and penalise larger users.

 

But since energy SUPPLY companies all claim to be losing money at the moment, they will set their charges to maximise income to ensure losses are as small as possible.  Remember 20+ companies went bust last year - is that what you want?

 

I think you are on a loser with this notion.

Eon and EDF customer. Don't think smart meters are worth the expense.
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If suppliers charge less for the standing charge than the maximum allowed, they can then charge more for the units supplied.  Such a move would favour lower than average users of energy and penalise larger users.

 

But since energy SUPPLY companies all claim to be losing money at the moment, they will set their charges to maximise income to ensure losses are as small as possible.  Remember 20+ companies went bust last year - is that what you want?

 

I think you are on a loser with this notion.

The wholesale cost of gas increased resulting in the cost of electricity generation increasing, it did not affect the cost of delivering electricity to the home which is what the Standing Charge is supposed to be for.

I expect the unit cost of electricty to rise substantially but not the Standing Charge. I can avoid the unit costs by cutting back on usage but I cannot avoid the Standing Charge.

You have your argument back to front. Raising the Standing Charge penalises small users of electricity who are subsidising larger users through inflated Standing Charges.

 

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@meldrewreborn ; I meant to add OVO CEO Stephen Fitzpatrick’s Cirencester mansion uses over £850/month on electricity. He suggested that, to stay warm, people should  'cuddle your cat, eat porridge and do star jumps' !

Why should my Standing Charge be increased to pay for his unit electricity costs?

Blastoise186
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It’s true though. Doing star jumps and eating porridge really can help to warm you up. And cuddling up to a St Bernard definitely helps too! :P

And none of that was Stephen’s idea anyway. He most likely wasn’t involved in coming up with those suggestions.

As for his electric bill? I’m pretty sure he pays it himself somehow...

Securing energy by zapping security bugs... For that is The Blastoise Way!
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@Blastoise186 

As for his electric bill? I’m pretty sure he pays it himself somehow...

 

Well that is the point he doesn’t. I pay part of his unit electricity costs because his company made an unjustified, inflated, increase in the the Standing Charge.

Let the Standing Charge reflect true delivery costs, and let the unit cost reflect the true generation cost. That is better for the environment and Mr Fitzpatrick would be paying his fair share.

Blastoise186
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You do realise that the costs of cleaning up the 30+ failed suppliers last year form part of standing charges… Right?

As does the cost of energy theft from thieves who don’t care about paying up?

And the cost of maintaining infrastructure?

Plus the costs of accessing the networks?

OVO barely makes any profit off of Standing Charges!

Securing energy by zapping security bugs... For that is The Blastoise Way!
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@Blastoise186 wrote

OVO barely makes any profit off of Standing Charges!

 

I presume that OVO was making a profit on Standing Charges up until April 2022. At that point they dramatically increased the charge by more that their costs increased.

OVO have been asked to identify the items included in the Standing Charge and then justify the cost increase - they are refusing to do that.

Why are you attempting to defend Ovo and identify what the charge covers when they are unwilling to do so themselves?

Theft, maintenance and network access did not increased dramatically. The suppliers failed last year.

If OVO can justify the cost increase why don’t they?

Blastoise186
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Maybe try Googling it? I found loads of helpful results just now

Securing energy by zapping security bugs... For that is The Blastoise Way!
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Maybe try Googling it? I found loads of helpful results just now

I did not try Googling it I asked OVO and I also asked Ofgem. At the moment I have a dispute with Ovo because they are refusing to itemise and justify the April Standing Charge increase.

Eventually that dispute will probably end up with Ofgem, and I think other customers should do the same.

If you have found a link that shows what Ovo includes in its Standing Charge and the justification for the increase in each item then please post it, because Ovo don’t seem to know or are certainly unwilling to share the information.

 

Blastoise186
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I probably do have that kind of info or something along those lines, but if I do, then it’s probably in my private Confluence site where I store tons of info that I give out on a regular basis. For various reasons, I don’t allow generally anyone else direct access to that site.

I also can’t give you a link because it’ll cost me another £25 a month if I did. Plus I’d have to reconfigure half the site to lock down all the other Confluence Spaces and Jira Projects I’ve got in there.

Securing energy by zapping security bugs... For that is The Blastoise Way!
Jeffus
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Updated on 13/09/23 by Abby_OVO

If suppliers charge less for the standing charge than the maximum allowed, they can then charge more for the units supplied.  Such a move would favour lower than average users of energy and penalise larger users.

 

But since energy SUPPLY companies all claim to be losing money at the moment, they will set their charges to maximise income to ensure losses are as small as possible.  Remember 20+ companies went bust last year - is that what you want?

 

I think you are on a loser with this notion.

The wholesale cost of gas increased resulting in the cost of electricity generation increasing, it did not affect the cost of delivering electricity to the home which is what the Standing Charge is supposed to be for.

I expect the unit cost of electricity to rise substantially but not the Standing Charge. I can avoid the unit costs by cutting back on usage but I cannot avoid the Standing Charge.

You have your argument back to front. Raising the Standing Charge penalises small users of electricity who are subsidising larger users through inflated Standing Charges.

 

 

Unfortunately the standing charge has increased for many reasons. 

 

1. The cost of all the failed suppliers apart from Bulb has been loaded on the standing charge and front loaded rather than being spread over a very long time as some energy companies suggested. There will be more of these costs still to come unfortunately and the government could yet decide to load all the costs of Bulb onto standing charges, many billions of pounds.

2. The number of people eligible for the warm home discount has increased. These are funded via the standing charge currently. 

3. Ofgem moved some of the network related costs from the unit rate to standing charges. At the same time network related costs have increased as inflation has risen, both material costs and wages have gone up. We have all seen what has happened to inflation generally. Also we need  upgrade the infrastructure as we move to renewable energy, heat pumps and electric cars, hence again the standing charge is increasing. There have been recent changes where new generation capacity is not required to contribute to the upgrade costs, this again will transfer costs from the unit rate to standing charges. 

These are just some examples, there are others i could give. 

The majority of standing charge has nothing to do with OVO, they are simply passing on costs from others and government schemes. 

Unfortunately there is no good news about the level of standing charge unless the government decide to shift costs to general taxation or to the unit rate which would benefit low energy users. While inflation is high, standing charges will continue to be under pressure unfortunately.

There did use to be tariff with low or no standing charge, but higher unit rates but these have long gone. For a short while there were even tariff with a fixed monthly cost irrespective of how much you used. My mum was on one of these tariff, these tariffs didn't last long for obvious reasons…

Personally i would prefer to see lower standing charges and some of the cost shifted to unit rates to benefit low energy users, but some people would be worse off obviously. 

Jeffus
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Maybe try Googling it? I found loads of helpful results just now

I did not try Googling it I asked OVO and I also asked Ofgem. At the moment I have a dispute with Ovo because they are refusing to itemise and justify the April Standing Charge increase.

Eventually that dispute will probably end up with Ofgem, and I think other customers should do the same.

If you have found a link that shows what Ovo includes in its Standing Charge and the justification for the increase in each item then please post it, because Ovo don’t seem to know or are certainly unwilling to share the information.

 

Complaints to OVO don't end up with ofgem. If the complaint isn't resolved in 8 weeks or you are given a deadlock letter, you can then  go to the Energy Ombudsman.

I really wish you were not putting in complaints like that as ultimately all you are doing is increasing the costs for us every time someone does. You are not helping me. I hope other customers don't do the same. There are many more important complaints people are trying to get resolved.

If you want things changed contact ofgem or respond to one of their consultation if it ever looks relevant. 

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@AngryOVOCust 

Since you clearly do not want to listen to the excellent points put to you by every other poster, but persist in your campaign which has zero merit, I’ll not reply to you anymore.

 

Polite community values prevent me from expressing my views as I would really wish.  But it's still goodby.

Eon and EDF customer. Don't think smart meters are worth the expense.
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@Jeffus wrote:

Unfortunately the standing charge has increased for many reasons.

...

These are just some examples, there are others i could give. 

 

Why are you trying to give reasons and OVO are trying to avoid doing so?

If the Standing Charge increase in April is justified then all they need to do is itemise the various constituents of the charge and justify the increase by showing how they increased.

@Jeffus wrote:

Personally i would prefer to see lower standing charges and some of the cost shifted to unit rates to benefit low energy users, but some people would be worse off obviously. 

Precisely. When I pay my bill I want to pay for the electricity that I have used.

My bill ‘B’ is composed of the Standing Charge ‘S’ and a usage charge ‘U’ based on the unit cost of the electricity I have used.

So B = S + U 

Is the S was substantially reduced and the unit charge was slightly increased then, overall my bill could remain the same even though I used more electricity at the higher cost.

 

How does this magic come about. Well everybody, millions of us, pay the Standing Charge. But some of that is being, wrongly, used to cover electricity unit costs. This means that we are subsidising the few people who burn massive amounts of energy like OVOs CEO.

Electricity generation costs have gone up hugely, There is no way to escape that and it is not going to change any time soon.  Those costs are unit costs and they should not be paid for through Standing Charges. Over the summer almost 50% of my bill was the Standing Charge!!!

@Jeffus wrote:

Complaints to OVO don't end up with ofgem. If the complaint isn't resolved in 8 weeks or you are given a deadlock letter, you can then  go to the Energy Ombudsman.

I really wish you were not putting in complaints like that as ultimately all you are doing is increasing the costs for us every time someone does.

I don’t want to complain at all but the fact is that OVO has a completely dyfunctional Customer Service department. They can answer simple questions but anything more than that and they just try to bat them away. The people answering the phones don’t know how the irsystem works and they do not seem to have any way of getting technical support to address problems.

My issue started because they could not perform the basic function of billing me monthly. Because they could not resolve that I was keeping a close eye on things and various other problems came to light. Yes it costs OVO money to deal with the complaints and so it should because they should have effective procedures to sort them out before they escalate.

You are correct eventually complaints go to the Energy Ombudsman. I was mislead because the Ofgem website has a webpage about making a complaint about your supplier but it does then point to the Energy Ombudsman.

Prior to Ovo I was another supplier for donkey’s years and everything ticked over nicely. Even after the switch to Ovo took place things went smoothly at first, then they just went completely and utterly to pot.

 

Blastoise186
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I should remind you that the Energy Ombudsman does not accept all cases put to them. They will reject stuff that’s invalid pretty rapidly - and the Supplier isn’t charged a penny for those.

I see little to no merit in your complaint if what you post here is all you’re relying on. Standing Charges are ultimately a business decision for the supplier. Don’t like what OVO charges? Just go somewhere else. It’s that simple.

You clearly have no interest in listening to me, and you have also like with @meldrewreborn - triggered my three strike rule. I will no longer assist you at all on this forum.

Securing energy by zapping security bugs... For that is The Blastoise Way!
J
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Can someone from OVO please come up with a sound reason as to why standing charges seem to have to increase when the fuel prices do?  Really not sure I understand why a base charge has to change in line with energy price increases!!!  Really look forward to a cohesive response.

Jeffus
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@Jeffuswrote:

Unfortunately the standing charge has increased for many reasons.

...

These are just some examples, there are others i could give. 

 

Why are you trying to give reasons and OVO are trying to avoid doing so?

If the Standing Charge increase in April is justified then all they need to do is itemise the various constituents of the charge and justify the increase by showing how they increased.

@Jeffuswrote:

Personally i would prefer to see lower standing charges and some of the cost shifted to unit rates to benefit low energy users, but some people would be worse off obviously. 

Precisely. When I pay my bill I want to pay for the electricity that I have used.

My bill ‘B’ is composed of the Standing Charge ‘S’ and a usage charge ‘U’ based on the unit cost of the electricity I have used.

So B = S + U 

Is the S was substantially reduced and the unit charge was slightly increased then, overall my bill could remain the same even though I used more electricity at the higher cost.

 

How does this magic come about. Well everybody, millions of us, pay the Standing Charge. But some of that is being, wrongly, used to cover electricity unit costs. This means that we are subsidising the few people who burn massive amounts of energy like OVOs CEO.

Electricity generation costs have gone up hugely, There is no way to escape that and it is not going to change any time soon.  Those costs are unit costs and they should not be paid for through Standing Charges. Over the summer almost 50% of my bill was the Standing Charge!!!

@Jeffuswrote:

Complaints to OVO don't end up with ofgem. If the complaint isn't resolved in 8 weeks or you are given a deadlock letter, you can then  go to the Energy Ombudsman.

I really wish you were not putting in complaints like that as ultimately all you are doing is increasing the costs for us every time someone does.

I don’t want to complain at all but the fact is that OVO has a completely dyfunctional Customer Service department. They can answer simple questions but anything more than that and they just try to bat them away. The people answering the phones don’t know how the irsystem works and they do not seem to have any way of getting technical support to address problems.

My issue started because they could not perform the basic function of billing me monthly. Because they could not resolve that I was keeping a close eye on things and various other problems came to light. Yes it costs OVO money to deal with the complaints and so it should because they should have effective procedures to sort them out before they escalate.

You are correct eventually complaints go to the Energy Ombudsman. I was mislead because the Ofgem website has a webpage about making a complaint about your supplier but it does then point to the Energy Ombudsman.

Prior to Ovo I was another supplier for donkey’s years and everything ticked over nicely. Even after the switch to Ovo took place things went smoothly at first, then they just went completely and utterly to pot.

 

Like i said imho your frustration is better targeted at feeding back your thoughts to ofgem regarding standing charges and the future direction of energy pricing. Or your local MP or a parliamentary petition etc. You clearly feel strongly about this. Just focus that energy somewhere it will make a difference? 

 

Jeffus
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Unfortunately the standing charge has increased for many reasons. 

1. The cost of all the failed suppliers apart from Bulb has been loaded on the standing charge and front loaded rather than being spread over a very long time as some energy companies suggested. There will be more of these costs still to come unfortunately and the government could yet decide to load all the costs of Bulb onto standing charges, many billions of pounds.

2. The number of people eligible for the warm home discount has increased. These are funded via the standing charge currently. 

3. Ofgem moved some of the network related costs from the unit rate to standing charges. At the same time network related costs have increased as inflation has risen, both material costs and wages have gone up. We have all seen what has happened to inflation generally. Also we need  upgrade the infrastructure as we move to renewable energy, heat pumps and electric cars, hence again the standing charge is increasing. There have been recent changes where new generation capacity is not required to contribute to the network upgrade costs, this again will transfer costs from the unit rate to standing charges. 

These are just some examples, there are others i could give. 

The majority of standing charge has nothing to do with ovo, they are simply passing on costs from others and government schemes. 

Unfortunately there is no good news about the level of standing charge unless the government decide to shift costs to general taxation or to the unit rate which would benefit low energy users. While inflation is high, standing charges will continue to be under pressure unfortunately.

There did use to be tariff with low or no standing charge, but higher unit rates but these have long gone. For a short while there were even tariff with a fixed monthly cost irrespective of how much you used. My mum was on one of these tariff, these tariffs didn't last long for obvious reasons…

Personally i would prefer to see lower standing charges and some of the cost shifted to unit rates to benefit low energy users, but some people would be worse off obviously.

Hope that helps. I don't work for ovo, am just a customer.

J
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@Jeffus, thank you for your time and explanation, I appreciate your contribution, which is probably far more than I would get from Ovo itself, they do have a tendency to prefer not to respond to their customers as I have found out of late, their customer service is abysmal to say the least so thank you once again for YOUR explanation 😊

A
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@Blastoise186 wrote:

Standing Charges are ultimately a business decision for the supplier.

 

Obviously they are not since Ofgem sets a limit based upon regional criteria. There are probably also consumer regulations about raising a fee for one thing and charging for another, and about refusing to give a cost breakdown when asked.

Let’s not forget all I am asking here is what is included in Ovo’s Standing Charge and why did those costs increase so much in April. Ovo should know that, why will they not say?

If they can break the charge down and justify the increases that is the end of the story. Because they are refusing to do that it suggests that they are simply taking and using the Ofgem maximum and I am not sure that the Energy Ombudsman will let them away with that.

As for your “assistance” I don’t recall getting any, you just seem to be an apologist for the company. You say that you have detailed info but cannot provide links. @Jeffus at least provided correct details of where to make complaints.

 

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