Why is there such a relatively wide variation in standing charges from different energy companies with some e.g. Ebico not charging anything and OVo charging a relatively high 25-30p per day?
Best answer by Lucy_OVO
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Why do standing charges vary from different energy companies?
A
Userlevel 5
Userlevel 2
High users benefit from a high standing charge and a low unit rate. Low users vice versa.
I wish the OVO would cater for both, as their SC is a killer to low usage users.
Userlevel 5
Isn't it time that Ovo scrapped the daily standing charge altogether and built it into the unit charge? I just compared the price I pay per unit with that mythical average and it's way out. In the interests of slowing down climate change it just doesn't make sense to financially penalise those who are trying to do do their bit by changing to LED lighting, turning things off etc.
Userlevel 5
Updated on 14/09/23 by Abby_OVO
Great question to ask about the variety of prices different energy suppliers might offer as a daily standing charge. So let’s break it down:
What is a standing charge?
A standing charge is a daily fixed charge that goes towards the cost of supplying energy to your address. It includes the cost of the pipes and power lines, and maintenance of your meters. You pay your standing charge no matter how much energy you use – even if you have a smart meter.
Why do OVO plans include a standing charge?
Because we use a standing charge, we don’t have to use structured unit prices like other suppliers do. We believe our way is honest, transparent and much simpler.
How do other suppliers cover this maintenance cost if they don’t use a standing charge?
All suppliers have to contribute towards these maintenance cost so it’s likely they will include this as part of your unit rate (which might be higher).
Obviously the impact of a standing charge cost will differ depending on whether you’re a high or low energy user. If you’re comparing plans we’d advise finding out your Estimated Annual Consumption (EAC) figure and entering these under the ‘Do you know how much you use?’ question on our Quote and Switch page.
There’s more details on understanding energy tariffs on this great guide.
Userlevel 5
But the problem is that a separate standing charge is not transparent. The cost per kWh consumed varies according to how much you use, and the more you use the cheaper it becomes per kWh. You need a calculator to work it out. If Ebico can give a single per kWh price, why can't you?
Userlevel 5
This might be the case for some other suppliers, SianiAnni but our price per kWh doesn’t fluctuate. For example, if your price per kWh for your electricity was 15p, then you’d pay this regardless of how much or how little energy you’ve used and regardless of when you were using energy (unless you’re an economy 7 customer).
Our daily standing charge is just one fixed amount that is taken each day. This also doesn’t fluctuate.
Hope this helps,
Lucy
Userlevel 5
I'm sorry Lucy, I obviously failed to explain myself very well.
Given that I have to pay a daily standing charge, regardless of how much or how little fuel I use, the cost to me of each kWh used is the standing charge plus the unit charge.
So if I use say 500 kWh of electricity in a year, the total cost to me is £100 (standing charge) + 500 x 15p. That works out at £175, or 35p per kWh, because I can only use those kWh if I pay you the standing charge.
And if I use 1500 kWh of electricity in a year, the total cost to me is £100 (standing charge) + 1500 x 15p. That works out at £325, or 21.6p per kWh, again because I can only use those kWh if I pay you the standing charge.
If I use 2500 kWh of electricity in a year, the total cost to me is £100 (standing charge) + 2500 x 15p. That works out at £475, or 19p per kWh. In this case the total cost per unit is approaching half of that for a 500 kWh per annum user.
So that's what I mean by saying the more you use the cheaper the total cost per unit becomes:)
Given that I have to pay a daily standing charge, regardless of how much or how little fuel I use, the cost to me of each kWh used is the standing charge plus the unit charge.
So if I use say 500 kWh of electricity in a year, the total cost to me is £100 (standing charge) + 500 x 15p. That works out at £175, or 35p per kWh, because I can only use those kWh if I pay you the standing charge.
And if I use 1500 kWh of electricity in a year, the total cost to me is £100 (standing charge) + 1500 x 15p. That works out at £325, or 21.6p per kWh, again because I can only use those kWh if I pay you the standing charge.
If I use 2500 kWh of electricity in a year, the total cost to me is £100 (standing charge) + 2500 x 15p. That works out at £475, or 19p per kWh. In this case the total cost per unit is approaching half of that for a 500 kWh per annum user.
So that's what I mean by saying the more you use the cheaper the total cost per unit becomes:)
Userlevel 5
Given that I have to pay a daily standing charge, regardless of how much or how little fuel I use, the cost to me of each kWh used is the standing charge plus the unit charge.
So if I use say 500 kWh of electricity in a year, the total cost to me is £100 (standing charge) + 500 x 15p. That works out at £175, or 35p per kWh, because I can only use those kWh if I pay you the standing charge.
And if I use 1500 kWh of electricity in a year, the total cost to me is £100 (standing charge) + 1500 x 15p. That works out at £325, or 21.6p per kWh, again because I can only use those kWh if I pay you the standing charge.
If I use 2500 kWh of electricity in a year, the total cost to me is £100 (standing charge) + 2500 x 15p. That works out at £475, or 19p per kWh. In this case the total cost per unit is approaching half of that for a 500 kWh per annum user.
So that's what I mean by saying the more you use the cheaper the total cost per unit becomes:)
Thanks for explaining this a bit more. 🙂
You've said that you'll only use those kWh's if you pay the standing charge, but the amount you pay is completely separate to the standing charge, so this won’t be true.
You’ve given the example of if you used 500 kWh of electricity in a year, the total cost to you is £100 (standing charge) + 500 x 15p. This is correct. Broken down, this would mean you would pay £75 for your electricity consumption and £100 for your standing charge. This won’t equate to you paying 35p for your unit price as this amount if fixed and won’t change so it will always be 27p for your daily standing charge and 15p per kWh (assuming that there isn't a price decrease or increase!)
I really hope this helps explain things a bit more. 🙂
Lucy
Userlevel 1
Given that I have to pay a daily standing charge, regardless of how much or how little fuel I use, the cost to me of each kWh used is the standing charge plus the unit charge.
So if I use say 500 kWh of electricity in a year, the total cost to me is £100 (standing charge) + 500 x 15p. That works out at £175, or 35p per kWh, because I can only use those kWh if I pay you the standing charge.
And if I use 1500 kWh of electricity in a year, the total cost to me is £100 (standing charge) + 1500 x 15p. That works out at £325, or 21.6p per kWh, again because I can only use those kWh if I pay you the standing charge.
If I use 2500 kWh of electricity in a year, the total cost to me is £100 (standing charge) + 2500 x 15p. That works out at £475, or 19p per kWh. In this case the total cost per unit is approaching half of that for a 500 kWh per annum user.
So that's what I mean by saying the more you use the cheaper the total cost per unit becomes:)
Thanks for explaining this a bit more. 🙂
You've said that you'll only use those kWh's if you pay the standing charge, but the amount you pay is completely separate to the standing charge, so this won’t be true.
You’ve given the example of if you used 500 kWh of electricity in a year, the total cost to you is £100 (standing charge) + 500 x 15p. This is correct. Broken down, this would mean you would pay £75 for your electricity consumption and £100 for your standing charge. This won’t equate to you paying 35p for your unit price as this amount if fixed and won’t change so it will always be 27p for your daily standing charge and 15p per kWh (assuming that there isn't a price decrease or increase!)
I really hope this helps explain things a bit more. 🙂
Lucy
Userlevel 1
I see, SianiAnni hates standing charges, and Lucy_OVO loves them, while not a piggy in the middle I can see both sides of the debate. However in my opinion the standing charge system is flawed. Let me explain, if I buy petrol/diesel I pay a price pre litre, and depending on the location of where I buy it determines the price, but I can quite simply compare. I live in the N Yorkshire Dales, where prices are high, distribution in rural areas dictates this. I do all my shopping in Darlington, and as a result always buy fuel there, it's much cheaper( I should rephrase that) it's less expensive there! 🙂 With a standing charge on gas and electricity, and in most cases variations by area of the kw price it seems to me the domestic energy companies want, and get, the best of both worlds. The daily standing charge also suits energy companies because it makes all comparison sites, door knockers and canvassers making totally untrue claims about how much they can save you by switching. Unless they know exactly what your annual consumption is there is absolutely no way to compare, quite simply because every supplier is free to, and does, set their own standing charges. Now I know exactly how much fuel I use and what it costs, from time to time I do checks on other suppliers, and yes there are cheaper alternatives to OVO, but I'm not one to switch for the sake of as much as £50 pa saving, I feel there is more to OVO than saving a pound a week! At the same time, the standing charge is to my mind high, and as it seems to be increasing bit by bit, sometimes more than a bit, the day could come for me to say , no this is now unacceptable, I hope not but I can envisage it. To end all the frustrations of this. all energy companies should sell as petrol and diesel is sold, by price and location, the customer chooses both ( in that he can move from an expensive area if he so wishes) At 73 years of age, spending 54p every day before I get out of bed does go against the grain a bit, well it would, thats what I earned in a week, and that means 7 days for doing a paper round until I left school. So now Lucy take off the OVO hat, even if only to yourself, admit I right 🙂
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Userlevel 7
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Please have a read of this OVO article, as standing charges are covered. Anything you’re not sure of, come back and post and we’ll find an answer for you! :)
Ovo please please sort out your shockingly high standing charges. As suggested above, please offer a low SC option for those aiming for low use, as we all must in these terrifying times.... We are all stuck with our current providers, but those of us with Ovo's high standing charges are least able to mitigate costs with lower fuel use. As discussed above the high SCs effectively mean lower fuel users are penalised with higher costs per unit consumption. I'm a single Mum with a school age child... Why can't I be allowed to reduce my costs?
Related to this, why are Ovo's standing charges higher than allowed by the price cap?
I've now got a 49p+ SC for electrify and 27p+ for gas (and the October terrifying rise hasn't even kicked in yet). That's 80p/day even if I use nothing... That's £300 before I have any fuel - a quarter of my old bill including all its power.
Can Ovo give us reassurance that it won't raise the already extremely high SC any further with the upcoming cap changes.?
Userlevel 7
+2
- Plan Zero Hero
- 2659 replies
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1 September 2022
Can Ovo give us reassurance that it won't raise the already extremely high SC any further with the upcoming cap changes.?
The price cap varies slightly by region.
You can see the new Ofgem standing charge caps by region on this page
https://www.moneysavingexpert.com/utilities/what-are-the-price-cap-unit-rates-/#tool
OVO have said they will give at least 10 days notice before the 1st October increase of what their new Simpler Energy rates will be given the maximum Ofgem cap.
Userlevel 7
+2
- Plan Zero Hero
- 2659 replies
-
1 September 2022
Related to this, why are Ovo's standing charges higher than allowed by the price cap?
I've now got a 49p+ SC for electrify and 27p+ for gas (and the October terrifying rise hasn't even kicked in yet). That's 80p/day even if I use nothing... That's £300 before I have any fuel - a quarter of my old bill including all its power.
The price cap varies slightly by region.
You can see the new Ofgem standing charge caps by region on this page
https://www.moneysavingexpert.com/utilities/what-are-the-price-cap-unit-rates-/#tool
OVO have said they will give at least 10 days notice before the 1st October increase of what their new Simpler Energy rates will be given the maximum Ofgem cap.
Can Ovo give us reassurance that it won't raise the already extremely high SC any further with the upcoming cap changes.?
The price cap varies slightly by region.
You can see the new Ofgem standing charge caps by region on this page
https://www.moneysavingexpert.com/utilities/what-are-the-price-cap-unit-rates-/#tool
OVO have said they will give at least 10 days notice before the 1st October increase of what their new Simpler Energy rates will be given the maximum Ofgem cap.
Hi Jeffus. Thanks. I see you have lots of replies on here - do you work for OVO/have access to them? (genuine question, not bait 😁). If Ovo's only reply is giving us 10 days notice, that literally makes no difference at all. We are all stuck with our current providers for now, ans Ovo's SCs are particularly eye-watering. Those of us in small places, desperately cutting expenses, subsidise the lavish fuel users.
Userlevel 7
+2
- Plan Zero Hero
- 2659 replies
-
1 September 2022
Can Ovo give us reassurance that it won't raise the already extremely high SC any further with the upcoming cap changes.?
The price cap varies slightly by region.
You can see the new Ofgem standing charge caps by region on this page
https://www.moneysavingexpert.com/utilities/what-are-the-price-cap-unit-rates-/#tool
OVO have said they will give at least 10 days notice before the 1st October increase of what their new Simpler Energy rates will be given the maximum Ofgem cap.
Hi Jeffus. Thanks. I see you have lots of replies on here - do you work for OVO/have access to them? (genuine question, not bait 😁). If Ovo's only reply is giving us 10 days notice, that literally makes no difference at all. We are all stuck with our current providers for now, ans Ovo's SCs are particularly eye-watering. Those of us in small places, desperately cutting expenses, subsidise the lavish fuel users.
No i don't work for OVO. I am just a customer like you. Some of us post from time to time if we think we can help with specific queries. I sometimes mention this when posting but not always.
You will see _OVO in a persons screen name if it is a reply from a OVO moderator on the forum. The OVO moderators also don't have access to your account.
All i would say is that OVOs standing charges on the Simpler energy tariff are in line with other suppliers. It is only fixed rate tariff you will see differences between suppliers.
Some suppliers may price their price cap tariff a very small amount lower than the ofgem price cap. Octopus have done that in the past. But it is very marginal. The biggest difference in the price cap rates is due to the region of the country you live in. Some areas of the country it costs more to get the electricity into your home unfortunately at the moment.
If you want to lobby anyone, i would start by writing to your MP. The more people do this, the more likely things will change.
Lots of suppliers are lobbying government for changes, just this morning Octopus Energy were lobbying for the scrapping of standing charges amongst other things as you suggested.
We should have a new Prime Minister shortly so the lack of action from the government recently will hopefully come to an end.
Userlevel 7
Hi Sarah,
Just one more thing to add, OVO are in favour of abolishing the standing charge, as we outline in OVO’s 10 point plan to address the national energy crisis
- 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.
If you wondered what a standing charge is for, we outline this below:
What are standing charges?
A standing charge is a daily fixed charge for supplying energy to your home. It includes the cost of the pipes and power lines, and maintenance of your meters.
You’ll pay your standing charge no matter how much energy you use – even if you have a smart meter. It’s like the ‘line rental’ on your telephone contract. You’ll see it listed on your ‘Plan details’ page.
We’ll apply standing charges to your balance every time you send us a meter reading.
And yet you have one of the highest? 🤔 as discussed in various places on your forums...
I do in fact like a lot of what 'Ovo' says (such as today's suggestion to discount the first chunk of units used, in order to proportionally benefit those with a smaller footprint more, whether by choice or lack of resources to do otherwise), but afaik, companies already choose how they distribute charges for SC and unit costs. Obviously you'd want to be able to charge a SC to some underoccupied homes (e.g. second homes), separate to usage. But in general SCs disproportionately cost low users, and reduce incentives to reduce use.
Userlevel 7
+2
- Plan Zero Hero
- 2659 replies
-
1 September 2022
And yet you have one of the highest? 🤔 as discussed in various places on your forums...
I do in fact like a lot of what 'Ovo' says (such as today's suggestion to discount the first chunk of units used, in order to proportionally benefit those with a smaller footprint more, whether by choice or lack of resources to do otherwise), but afaik, companies already choose how they distribute charges for SC and unit costs. Obviously you'd want to be able to charge a SC to some underoccupied homes (e.g. second homes), separate to usage. But in general SCs disproportionately cost low users, and reduce incentives to reduce use.
Where did you see something about OVO having high standing charges for their price cap tariff? I am not sure that is correct?
There are various comments online pointing to Ovo's standing charge and comparing it to very much lower/none with some other providers. But in fact I made 5 out of 2 plus 2, as this does not hold up to better scrutiny... You are right to ask, as OVO looks in fact to be in line with other major suppliers at present. Thanks.
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