Is your energy supplier failing to explain a ‘simple’ tariff?

“Petrol pump pricing” works for road fuel because we go and collect it. Gas, electricity, and oil are brought to the property and the distance makes a difference to the cost.

There is a case for standardising a maximum “service charge” across the country to incentivise the energy suppliers to do it more economically and not play swings and roundabouts with different elements of their costs.

There is also a case for having a standard connexion charge for each type of meter to cover installation, repair & maintenance, safety, compliance and interrogation.

The strongest case of all is to put these government levies where they rightly belong and not add them to people’s bills pro rata to consumption.

The fact that we have to keep having these Conversations – where we learn a little more each time and further wrinkles emerge – is evidence enough that the energy supply system in the UK, for an essential and identical end product, is a total mess; governments won’t deal with, they just kick it around until something else crops up.

I have a problem understanding your logic wc. You seem to be suggesting that the standing charge that relates to the infrastructure costs subsidises usage?!

If you do not want to pay for the facility of being connected to the main utilities then you are at perfect liberty to buy LPG and run your own generator and go off “grid”.

However in the spirit of absolute fairness whatever the consequence I suppose we should all pay towards the bills of those who are unable to connect to mains gas so they pay precisely the same charges as anyone else in the UK when it comes to heating etc.

If we wish to assist the low users who are poor then society can; but subsidising those who have two, or more homes is unpalatable. I can understand those who rent out holiday homes in remote spots will be eager for this sort of solution.

“Energy firms for years did not have a standing charge, and absorbed it into the unit pricing. I assume that’s exactly what SSE/ Ebico is doing.”

That is true, I pay 1 penny more per unit, but as I’m such a low user it’s cheaper than paying a 28p per day standing charge that NPower wanted.

Interesting to hear what Orange can do however the infrastructure cost of a pair of twisted wires is substantially less than gas and electricity mains.

However let us work with the concept that all those houses who just use gas for heating decide not to pay for those glorious 6 months of an English spring to autumn. Does this mean the infrastructure cost disappears or that those people who need gas for cooking or because of health issues need it for heating should pay more?

The case of Giffgaff and pressumably ebico is that they buy wholesale stay lean and have very small overheads and probably no infrastructure costs.

Lee, for a very low user you are – of course – getting the best deal. Ebico, for my area, charges 60% more per unit for gas and electricity compared to my supplier – but I pay a standing charge. Ebico would make sense for people who use less than 2000 units of electricity a year (an Ofgem “low user”), and less than 5800 units of gas a year (only 65% of what an Ofgem “low user” would use.

It is good there is this choice – consumers need to be able to find the best deal for their particular circumstances. But you need to be careful – a hard winter can push up consumption significantly and then someone will be paying a very high unit rate and lose any potential saving.

Dieseltaylor – You suggest that we should pay a standing charge to cover the costs of the infrastructure. We don’t pay a standing charge for petrol and diesel because the costs are covered in the unit price, as with most things we buy. Standing charges bear little or no relation to whether a property is in a built-up or rural area. Perhaps the government should fund infrastructure costs from taxes, since we all need energy.

You mention the possibility of going ‘off-grid’. I have spent many holidays doing this and it’s not cheap, even in the summer months when there is little need for heating. But is a very good way of becoming aware of energy use.

I very much agree that we should not be subsidising the cost of energy supply for second homes. Perhaps that could be tackled by increasing council tax for those who own them. As I have said, we need to address the problem that standing charges mean that low users are subsidising all high users, including many wealthy people. That’s as daft as giving fit people disability benefits.

So what about funding standing charges through taxation and having simple unit charges that can easily be compared?

wavechange, there is no logic in asssuming petrol pump pricing must be “right”, and energy standing charges are “wrong”. No single supplier brings petrol to your door and normally lets you pay monthly. They are different businesses. However, it might well be in your local petrol station’s interests to enrol local residents for an annual fee and give them discounted fuel – to attract more regular business. Or would that be anti-competitive? Just another business model to give consumers a choice.

Energy companies basic fixed costs are commercial costs – absolutely nothing to do with government, and certainly not your local council. We should pay what it costs to whoever carries the cost – straigtforward and fair. I would, however, propose that the regulatory charges imposed by the goverment might well be better funded from tax, and removed from the energy companies.

High energy user wealthy, low energy user poor? Can you provide evidence for that universal assertion?

The whole issue of second homes was bound to enter this Conversation because it represents yet another crazy anomaly. There are second homes used for earning a letting income and others just used as a holiday home. In my mind there is no question that owners in both cases should pay the full and fair cost of their energy use and not be subsidised by anyone else. But tinkering with the Council tax to iron out the anomaly would probably not be fair; Councils already have a discretionary power to allow discounts for second homes in recognition of the fact that their owners should not have to pay twice for education and social services, but the use of this discretion, and the percentage discounts applied, are totally inconsistent and their availability or otherwise in different areas are more closely associated with political attitudes than any rational judgment. I wouldn’t want to see energy supply thrown into this mix and stirred up by local politicians.

Malcolm – It was not me who suggested simple unit pricing for energy, though I suspect that there would be a lot of public support from the public.

“High energy user wealthy, low energy user poor? Can you provide evidence for that universal assertion?” I have not made that assertion, have I? What I have suggested is that our benefit system could be used to support people who have a medical condition or other genuine reason for having to use more energy.

Information about the number of people who are in arrears with payment of energy bills or have been disconnected is publicly available, I believe. Obviously some of this is due to poor financial management, but there are some people who are really struggling for other reasons.

If we applied just a fraction of the combined intelligence and computing power currently being exercised by the energy and other utility suppliers in fragmentising and rebundling their tariffs to the problems of customising assistance to those who need and deserve it in the face of this budgetary maelstrom it would be a great service to our entire society. As well as medical conditions, I should like to see included in your “other genuine reason” box the case of people who have virtually no choice but to live in homes that are impossible to heat economically and can hardly be improved. We could start by targetting the Winter Fuel Payment now coming out to where it’s really needed. Perhaps if we can get the immigration issue out of the headlines we can get the politicians back on topic.

Well said John. Let us give support to the people who need it.

wavechange, this is not a personal argument! I refer to your pseudonym simply to ensure my reply is linked with the right comment.

However you have said “As I have said, we need to address the problem that standing charges mean that low users are subsidising all high users, including many wealthy people”. I do not see there is a universal distinction between wealth, and energy use. What single unit pricing would do is simply mean higher energy users would subsidise lower uses – why is one right and the other wrong? I’d rather see all energy users pay the going rate for the energy used, and the going rate for the actual cost of providing them with a service. Fair then to all – wealthy, just-getting-by, or poor!

This does mean ensuring that the fixed cost is fairly assessed – and preferably with the goverment’s imposed costs removed into general taxation. My (ex) supplier’s costs were about 13% of an average bill including customer services, billing, metering. Whether these are fair or not should be assessed and agreed. But some % will be fair, and will be for every customer’s benefit and should be paid for.

My criticism of the Which? petrol pump pricing philosophy is that they have not given a balanced argument. It was partly based on our inability to multiply two numbers and add a third, and that energy companies could not show why they have fixed costs (my paraphrasing). Well, clearly they do have fixed costs, and many people can do simple arithmetic. I object to persuading people to jump on populist band wagons without giving them inbiased information to allow them to make a proper judgment.

Peter M The quotes appear to be from my posts.

Regarding Ebico and giff-gaff and infrastructure costs. My guess is that they simply tender for a volume of gas or spectrum usage which a major company then sells to them as the supplier has a surplus.

For simplicity I suspect the originating supplier will have calculated some or maybe no infrastructure costs because overall it will be making money from the extra usage sold by these companies.

There is an academic piece from Australia on the “Death Spiral” of reduced electrical usage by households and businesses. The standing costs of the infrastructure will grow to a higher proportion of the single unit price. The people who use the most units will therefore save more money if they therefore take on LED’s , solar heating and generation, and heat pumps.

Having reduced their usage considerably the standing charge portion of the single unit price increases further ratcheting the cost benefits for changing. Standing charges need to be seen for what they are not hidden in unit cost of gas or electricity.

This the slide pack
http://www.aie.org.au/AIE/Documents/PER140429_Presentation.pdf

Thank you for posting that malcolm. Feeling very smug that my yearly bill is £47-£50 (including VAT) when the average bill of £1326 lol

On a side note, I do wonder if SSE/Ebico make any money on my account at all, and if so, i wonder how much it is….

(I use between 312 & 364 units per year)

Lee – although your unit rate is likely to be very high compared to a “normal” tariff, your usage is so low as to make it the clear best choice. And I am all in favour of choice! For someone else on your tariff they need to be careful if they use more energy than expected – they will continue to pay a high unit rate and could end up well out of pocket. One feature of the now-defunct two tier tariff was that once you reached a particular usage you would automatically drop to a cheaper tariff, so avoiding continuing high cost.

“although your unit rate is likely to be very high compared to a “normal” tariff

My unit rate is 15.91, I’m not sure what the normal rate is for Yorkshire if im being honest, the last time I checked NPower is was 16.02, not checked the rest.

I didn’t know you was in Yorkshire too? You must have a very very cheap rate for Yorkshire – well done. Do you pay the normal 18p daily standing charge too?

(as you know I don’t pay a standing charge)

Yorkshire (my postcode anyway):

NPower – Unit rate: 16.79 p/kWh – Standing Charge: 26.586 p/day

That is the next cheapest for me (as shows by the switch.which.co.uk website) after what I pay now to SSE @ 15.91 p/kWh and a 0 standing charge.

Lee , no i’m not in Yorkshire. I was just drawing attention to the difference in unit rates. I think Ebico in my area is around 18p.

Peter M, I last looked at Ebico when comparing tariffs on the Which? Switch site that I use for choosing my own tariff. I pay a standing charge plus unit rate because that gives me the best deal for my consumption. Using my “effective” unit rate, if I combine the two costs, Ebico is probably around 30% more. Ebico clearly has its own fixed costs to recover out of just a unit rate so must charge significantly more per kWh. The point I was making was that having different methods of charging gives consumers a choice – and in a very low user’s case paying a high unit rate with no standing charge is clearly a good choice.

I take “infrastructure” as including pipelines and wires used for distribution. Network companies charge for these by how often they are used, how much energy is transported, and the distance covered from generation source to centre of demand (so locality will affect the cost). The charges are regulated by Ofgem. The costs make up around 25% of an average bill. These costs are consumption related so do not fall into the “standing charge” category which should only reflect the fixed business costs of the energy supplier.

There should be no subsidy, either by low users to high users, nor high users to low users. Subsidy should be from Government via benefits and tax, not private business. We should pay the energy companies actual costs, and these should be vetted and transparent. We should also be offered tariffs that give us a choice as has been discussed above.

I suggest that you compare some of the tariffs on offer. When I did this, I found significant differences between standing charges, and of course there are tariffs with no standing charges but higher unit prices. Energy supply is an utter mess, which is why there is so little public confidence in the sector.

North Sea gas comes ashore at three places on the East Coast so my guess would be that the pumping of the gas to local areas will be cheaper than to Liverpool.

What does your research show WC? You make claims but provide no detail.

As for paying infrastructure costs through taxation this suffers the same problems that
a] You disguise real costs from the public
b] You subsidise holiday homes
c] People who are out all day from their London flat and go to their country home at weekends.

Options could include standardising the rate for the entire country benefitting rural dwellers and certain areas to the detriment of others.

It could be a means tested payment which also looks at the property of the applicant and how they use power. I have a neighbour who at all times seems to have a window open – a ventilation system where for 60watts an hour you exchange stale air with fresh air using the same piping to pre-heat the incoming air would be a good measure.

Most of the public are not aware of the costs of the NHS but is that a reason to get rid of it?

I doubt that many of the contributors to Which? Conversation are those who have to think if they can afford to turn on their central heating or are seriously worried about how they will pay their next energy bill (or the last one, if they are in arrears).

We certainly must not subsidise those who own second homes, but there are various options for preventing this.

Meanwhile our country will go on letting poor people subsidise the energy bills of those who have pots of money through standing charges.

DT, I agree costs should not be disguised or artificially imposed. Infrastructure is an energy supplier’s issue, not for government. Costs should be transparent and properly monitored by Ofgem. Different energy companies should have different costs, so should visibly be part of the competitive deals on offer. Some may decide to structure their tariffs to suit high users, and some low users (unit only tariff for example). Then we can choose.
It’s worth remembering we have below average electricity prices, and well below average gas prices, compared to the rest of Europe.

This conversation is open to all – who, from other conversations, seem to cover the spectrum from less well off to wealthy. Many of us will watch our bills and consumption – I certainly do.
Poor people may be high energy users for all sorts of reasons – health, house insulation (lack of), age, family size etc. I don’t want to see them subsidising low users – who may be wealthy couples both working, modern home, out all day. This poor vs. wealthy argument does not correlate with energy consumption. Appropriate assistance / subsidy for those unable to heat their homes properly should be provided through the benefit channel, not from energy companies.

Malcolm – As I have said many times before, those who have high energy needs for health or other reasons should be eligible for support if they are short of money. The fact is that those who are really struggling are being forced to subsidise people with plenty of money thanks to standing charges. Perhaps it is time to consider the less fortunate members of society.

wavechange, “Perhaps it is time to consider the less fortunate members of society”. I do care about other people. I generally respect your views, even where we disagree, but the implication I do not care is, I think, neither a fair nor appropriate response to my comment. I have on many occasions proposed that those who need help should be helped. It is how we achieve it, and arbitrarily using high energy users to subsidise low, or vice versa, when neither classification is necessarily related to ability to pay, is not the way to do it – in my view. Please disagree with that, but not with my moral status.

Hi both, perhaps it’s time to step back from this discussion and return to it later?

Malcolm – My comment is not meant to be personal. I enjoy our discussions, even though there are a few things we disagree on. We can certainly agree that there is some work to be done to improve our approach to renewable energy.

Consider people living in large houses with high energy bills but plenty of income. The standing charge means that their energy is subsidised by smaller users who are struggling to pay their bills. I believe this is unethical. The information available on the Which? Consumer Insight website shows that energy prices are the main concern of our population. I’m very glad to support Which? in trying to sort out problems with the energy sector.

Patrick, you are right. Perhaps both these comments are best removed from the conversation? Certainly remove mine.

Sorry. You are welcome to remove mine too.

I don’t think that’s necessary 🙂

🙂

I am all in favour of people paying less for energy but my view is that Which? could perhaps put some effort into helping people reduce consumption.

The added benefits of heavy curtains , wooden shutters, newly available double glazing with triple glazing performance, the cost advantages of heat punps, clothing that keeps you warm, do you really need to heat your mani room to 21C, thermal surveys of houses, elderly people banding together to maximise purchasing power and provide mutual support.

Just a few ideas and given the membership numbers you would think sufficient support would make this an interesting project.

MR –

I wonder whether when we are all Europeans that gas prices will be made uniform over the EU.

Currently we are just in the bottom half – beaten by many ex-Communist countries who may have Russian sweetheart deals.

Electricity – we are actually expensive compared to the majority of the EU. And we have a low fuel VAT rate compared to many.

I hope we can all agree on the many ways of saving fuel and I would definitely support effort by Which? to help us save money and make us more environmentally aware.