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Environmental and Social costs - where does this money go?


All consumers pay an addition to their fuel costs. This is the 'Environmental and Social costs'
of 13% plus 5% vat. How is this money- collected by Ovo on all bills -used and how much was collected by Ovo over the last financial year? I have e mailed and written to Ovo without
response. Do consumers know where this money goes?
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Best answer by Nancy_OVO 16 April 2019, 13:47

Hi @Ron Kipps - I think I've found out. More information about the breakdown of your unit rates and standing charges here. The environmental and social costs aren't an additional fee. They constitute a percentage of what your payments go towards.
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19 replies

Userlevel 7
Badge +1
@Ron Kipps

Not really something I have thought about or care 😂 I pay OVO for using Electric and gas. If I worried about where my money goes, I don't think I could live my life. I recommend not to think about it and enjoy being an OVO customer 😄
Dear ITGeek123,
As well as paying for your fuel you also pay an additional 13% plus vat. Probable in the region of £150 a year. I can only presume you must be rich to be able to ignore this extra charge and not wonder where the money goes. I hope you are as free with your charitable giving.
Best wishes Ron Kipps
Userlevel 7
Badge +1
Hi @Ron Kipps

Not rich. Just don't care what OVO do with their money once I have paid my usage. I am very free with my charitable giving 😁 working in London you do walk past a lot of homeless people so I do my best to buy them food when I can 😁

Conversation is getting side tracked. To be honest, I wouldn't worry about it and enjoy being a customer 😁 have a lovely weekend!
Userlevel 6
Hi @Ron Kipps,

I'm not sure what you're referring to here.

We charge unit rates (per kWh) and standing charges (per day). The former covers the cost of buying your gas and electricity, the latter is a fee that covers the maintenance and upkeep of the national grids. There are other factors taken into account when deciding on the pricing of tariffs, such as sustaining the business and its growth, and maintaining our standards of customer service. But in terms of what appears on your bill, there should only be these charges, plus VAT (which is 5% for energy), and any discounts or rewards you may be in receipt of.

Hope this helps,
Nancy
Nancy,
You say you are not sure what I am talking about. The subject is 'Environmental and social costs' , a 13% addition to my bill for fuel costs. I just want to know how this money is spent
and how much was collected by ovo under this heading last financial year.

regards Ron Kipps
Userlevel 6
Hi @Ron Kipps - I think I've found out. More information about the breakdown of your unit rates and standing charges here. The environmental and social costs aren't an additional fee. They constitute a percentage of what your payments go towards.
Dear Nancy,
The 'Environmental and social costs' are a 13% addition to what I pay for the fuel I use. Your energy bill breakdown' Tells me that 'only a third of my bill actually pays for the energy you
use.'. I accept that there are other charges involved such as Network costs etc. You give a general explanation of what comprise S &E costs but, as I pay an extra £140 approx p.a. for this, I would like more detail on how this money is used. Not an unreasonable request I think.
Rgards Ron Kipps
Userlevel 6
The 'Environmental and social costs' are a 13% addition to what I pay for the fuel I use. Your energy bill breakdown' Tells me that 'only a third of my bill actually pays for the energy you
use.'. I accept that there are other charges involved


Hi @Ron Kipps - as I've mentioned, they aren't an additional charge. Where 33(ish)% of the bill you pay covers the actual raw gas and electricity you've used, 13% of it covers Environmental and Social costs.

Just like all of the bigger suppliers, we have to help pay for government energy policies. These include the support mechanism for low-carbon technology and some of the schemes we help administer that support vulnerable customers or improve energy efficiency in homes around the UK. This is what 13% of your total costs will go towards.

If you click the link I provided above, you can find out how you money is used after you've paid your bill.

Hope this has made things clearer.
Dear Nancy_OVO,
I'm not sure what part of 'I would like more detail on how this money is used' isn't clear
but I still await a response to it.
Regards Ron Kipps ( no badges)
Userlevel 6
Hi @Ron Kipps - I mentioned what the costs go towards above. We have to help pay for government energy policies. These include the support mechanism for low-carbon technology and some of the schemes we help administer that support vulnerable customers or improve energy efficiency in homes around the UK.

What further details would you like? If you can specify, I'd be happy to look into it for you.
Dear Nancy,
  1. Details please on Government energy policies and last years spending on these,
  2. Details of the support mechanism for low carbon technology and last years spending on these
  3. Details of schemes you help administer that support vulnerable customers and or improve energy efficiency in homes around the UK and last years spending on these.
  4. You mention 'what costs go towards'. Are there other uses to which the 13% addition is put ?

Thank you.
Ron kipps
Userlevel 5
@Ron Kipps thanks for the points.

We're reaching out to other areas of the company for an answer on this one, we'll be back to you as soon as we have further information!

Thanks,
Ed
Dear Ed,
19 days and counting. I hope I hear soon as there are some other
topics I would like to raise. e.g. Who benefits from the large expenditure
on 'smart meter' installation we are paying for?

Best wishes Ron K
Userlevel 6
Hi @Ron Kipps,

I'm waiting to hear back from some teams internally. In the mean time, you can check out Ofgem's advice on this subject, here: https://www.ofgem.gov.uk/environmental-programmes

Thanks
Userlevel 6
@Ron Kipps

I've had a response from the team. Below are a list of Government Schemes and other costs which will go towards the Environmental and Social costs listed on our website (all of the below are schemes which we, and all other eligible energy providers, must pay by law and as such the costs form part of a customers' total bill. We are regulated by both Ofgem and BEIS, and our accounts are independently audited by PWC):

ECO - Energy Company Obligation
This is a government mandated scheme designed to help reduce carbon emissions and tackle fuel poverty. Ofgem mandate that all suppliers with more than 250,000 customers must contribute to the scheme. The level of contribution is dependent on our demand in MWh, the output of which is that we must deliver a number of Lifetime base Savings, or LBS, per MwH of demand. We are free to procure this ourselves, and the output of which is audited.

Warm Home Discount
This is a government mandated scheme designed to protect vulnerable customers and customers who are in/at risk of fuel poverty. Ofgem mandate that all suppliers with more than 250,000 customers must contribute to the scheme. In this case, the contribution is £140 per eligible customer and is paid directly to the customer. The cost of which forms part of our total base costs.

Renewable Obligation Certificates (ROCs)
This is a government mandated scheme under which all licensed electricity suppliers in the UK must source a proportion of their supply to customers from eligible renewable sources. The level of contribution is calculated dependent on our demand in MWh. The 2018 - 2019 calculation is that for each MWh we supply, we must buy 0.468 ROCs, and 1 ROC costs £47.22.

Feed in Tariff (FiT)
This is a government mandated scheme under which all licensed electricity suppliers who supply more than 250,000 customers must contribute towards the payout of electricity generated and exported to the National Grid. The calculation is dependent on our demand on MWh.

Renewable Energy Guarantee of Origin (REGO)
This is a government mandated scheme under which all licensed energy suppliers must prove their fuel mix declarations, and in particular, the origin of their renewable energy.

Smart Energy GB
This is a government mandated scheme under which all energy suppliers must contribute towards the advertising of Smart Meters, under the brand of Smart Energy GB. The contribution towards this scheme is calculated based on our demand in MWh.

Hope this helps!
Dear Nancy - ovo,
Thanks for the information on the schemes which comprise the Environmental and social costs. I will need a little while to go through the implications of this information and might come back later with further questions. However, in relation to all these schemes I would
like details of how much is collected from customers for each scheme and how the money is spent in the ECO, Warm home discount, and Smart Energy schemes. Can you give me a reference to somewhere these figures are published?

All the best, Ron Kipps
Userlevel 6
Hi @Ron Kipps,

We don't specifically collect amounts from each customer to go towards any of the above schemes; the cost to OVO of these schemes is factored into the Standing Charges and Unit Rates which we charge. We collect all revenue via our Standing Charges and Unit Rates, some of which we use to pay our Environmental and Social obligations.

In terms of published figures, one of the above is published and that is the Renewable Obligation Certificate (ROC); it is included as a note in our Financial Statements which are available to download from Companies House. Our latest published Financial Statements are for the year ended 2017, and our total ROC cost for that year was £50,063,000.

Thanks
Dear Nancy,
Sorry it's taken so long to reply to your last but belatedly thanks for your reply.
I still make these extra payments even if it is by Standing Charges. Over £50million
is a lot of money so I would like to know where it goes. I will continue to explore.
Meanwhile, perhaps you could tell me whether the figures I see on my smart meter
include Standing Charges?
Thanks, Ron Kipps
Userlevel 6
Hey @Ron Kipps,

We'll need a bit of further clarification regarding what figures you're looking at. On your smart meter for example if your were to press "1" it will show you your usage and cost of energy today Vs yesterday, where as your In Home Display will show you a running total of your consumption.

The IHD includes standing charge.

Please let us know! ☺

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