/ Home & Energy

Rewarding high energy users sends the wrong message

Young girl by radiator

The majority of us struggle with our household bills. While offering discounts for high energy users might help some, does it really deliver the government’s objective to ensure we cut back on our energy usage?

In October’s Which? magazine, we reported that energy suppliers cut the costs of gas and electricity units for higher users – sometimes as much as 30%. Surely a good deal?

However, what happens if you flip this deal? What if you describe it another way – people who use low amounts of gas and electricity could be paying 30% more than their energy guzzling neighbours?

Schemes to cut energy usage

Now the government says that it has cost suppliers £5.5bn to help us, the public, to cut down on energy in our homes by improving insulation. This is the industry which will spend over £11.5bn to provide us all with smart meters with the aim of helping us cut down on energy.

In January, we’ll be offered Green Deal finance to help us implement green initiatives in our home with the aim of – you’ve guessed it – cutting down on energy.

In fact the government has said that the energy market will need further financial investment to meet environmental targets which can only be reached if we cut down on the energy we use in our homes.

Use less, pay more

So energy deals that essentially run on the premise ‘use less, pay more’, really don’t appear to be such a good deal after all. Those who have made the effort to cut down on energy are not only being penalised but, like millions of consumers, are footing the bill for the billions of pounds being spent to try to get us all to cut down on the amount of gas and electricity we use.

Which? wants the regulator, Ofgem, to make all energy tariffs simple so that consumers can compare prices at a glance. One supplier, Ebico, is already doing this by just offering one tariff for gas and one for electricity with one price per unit (kilo watt hour, kWh). Imagine if all the energy suppliers did this and you could compare energy deal prices in seconds. Like a certain meerkat says, wouldn’t that be ‘simples’?

Are you a low-energy user? Do you feel your supplier is penalising you for trying to save energy?

Comments
Profile photo of dave d
Member

I didn’t think I was a low energy user until I looked up the ONS’s average household consumption figures for Gas and Electricity a year or so ago.

Much to my surprise I found that I use almost exactly the national average amount of gas (which as I have a 33 year old G rated boiler and also cook by gas and do a hell of a lot of cooking including up to 500 Xmas puds for charity every year and dozens of cakes every summer to sell at open garden days seems quite ‘good’ to me) and I use rather less than the national average amount of electricity (which as I have 2 ponds with filter pumps running 365 days a year, 24 hours per day, an aquarium and an electrically frost-protected greenhouse, plus I still use a fair number of incandescent light bulbs and on open garden days have a Burco 5 gallon electric tea urn on the go for about 6 hours each time, also seems quite ‘good’ to me).

Having found out what the averages are, and that I fall on or below them, I realise that I’m actually a reasonably low user and I now understand why I’ve never been entitled to any of these “high volume user discounts” ……… but these discounts are all wrong. How on earth can it be in any way correct to encourage us to use MORE energy? The unit pricing structure is alsoo all wrong – the first X units are always priced more highly than the remaining uniots each quarter, surely to goodness it shoudl be the other way round.

As for tariffs, I use Ecotricity to get my gas and electricity and they only have one tariff for each and also no discounts for any payment types and no surcharges for any other payment types …. all suppliers should have this simple arrangement.

I don’t actually feel penalised but I do feel that there is no financial incentive to economise further.

Member
Sophie Gilbert says:
25 September 2012

I don’t feel penalised for trying to save energy, but I feel victimised and fed up with being incessantly targeted by the media and various ecofascists out there, including at my place of work, regarding my “carbon footprint”, especially when I see shops with their lights on all night, public transport not being subsidised as it should, fruit and veg arriving here by plane, overpackaged goods, recycling facilities being inexplicably lesser in some areas than in others, brand new houses or redevelopment not being as ecofriendly as we have the technology to make them, etc, etc, etc. And some people lecture me about the kind of lighbulb I have in my house??!

There, rant over.

Profile photo of dave d
Member

Couldn’t agree more: this is one of my main bugbears with CFL’s being compulsory: shops, offices, pubs, etc., can all go on using incandescents and they use millions of times more than domestic users.

That’s just an example – all commercial users are able to be profligate and wasteful whilst we are penalised and dictated to.

Agree totally with all your other points too Sophie.

Profile photo of wavechange
Member

Offices and shops have used fluorescent lighting and CFLs for a long time, but halogen downlighters have become increasingly popular in recent years. The only way they save significant energy is to burn out fairly quickly. I’m surprised by pubs continuing to use incandescent lighting for so long when many are struggling or have closed because they cannot compete with cheap booze from Tesco et al.

I cannot see why we should differentiate between homes and commercial premises, etc. regarding phasing out of incandescent lamps. The householder who pays the bills is more likely to choose to save money than those working in a shop or office.

Profile photo of wavechange
Member

It is disgraceful that high energy users should be rewarded with lower bills. If anyone is to be rewarded it should be those who use less.

As Sophie points out, there are many ways in which we can and should save energy and resources. What is needed is an integrated approach.

Profile photo of william
Member

I like to think I’m a low energy user, my usage comes in at almost half the national average. No only am I penalised in the price per unit I pay, I’m also paying the same standing charge as a high user.

And I won’t be turning the thermostat any lower this year, 15 degrees is low enough for me.

I also feel penalised for already having loft insulation, when so many are entitled to it for free, why not reward me (and everyone else), for already having it.

Profile photo of Jenny Driscoll
Member

Totally agree. It sounds as though you have done everything possible about getting best deal eg switch to better tariff (especially if you have been on the Standard for a long time), paying by direct debit, having online bills if appropriate and phoning in regular meter readings.

We agree that it isn’t fair.

Profile photo of dave d
Member

Absolutely agree William.

My heating has never been above 15 since it was first installed in 1979. That’s quite warm enough for me and if I feel chilly I put a jumper on (or, now they are trendy and I’ve got one, a “onesie”!!)

I have loft insulation which I had topped up only last year (by a professional, not by a “free” cowboy form an energy company) to almost 1.5 times the current requirement.

I have Everest secondary double glazing in all but one room (not having windows changed as they are the originals, 85 years old, and a major feature of the house).

I don’t have cavity wall insulation as various energy-company sponsored installers won’t touch it due to an extension and the builders all tell me that this house is not suitable.

I have solar hot water heating.

I can’t do much more to save energy really, and I do far more than almost everyone else I know, so why should I either feel guilty (especially now I find that my energy use is actually below national average) or be penalised in any way?

Profile photo of b martin
Member

Dave D,
Please advise the average gas and electricity consumption figures to which you refer.

Profile photo of william
Member
Profile photo of wavechange
Member

I’ve been struggling to find these figures too.

I have seen some average household figures but I’m living alone and I don’t think it would be useful to compare my energy use with that of the average family, though now that I’m retired and in most of the day the difference will be less. e.on have upped my monthly direct debit from £61 to £73.

Profile photo of dave d
Member

I got mine from my supplier, Ecotricity – they show them via their website, but they in turn have clearly got them from OfGem as they are identical and set out identically to the ones in William’s first link above.

Profile photo of wavechange
Member

Thanks both. I was already aware of the Ofgem information but it’s so vague that it tells me that I use less gas and electricity than average. I have known that for a long time and would be interested to find out how my consumption compares with others living alone in a small house. Having had another look, my new direct debit will put me well in credit to e.on if their predictions for my gas and electricity usage are correct, unless they raise their prices. That might be what they have in mind.

Member
graham says:
25 September 2012

Lets face it folks, its a they win, we loose on this one.The only way low use = cheaper prices will be for a state run company.Every other utility is in it for profit. .So more efficeint= less gase/electric sold = lower profit..yeah right thats not going to happen is it? so prices will rise constantly to cover profits.Why do water baords like water metres? same thing maximise profit. yes i know its cheaper att he moment but as soon as most people are on metres the cost per gallon will rise well above the rateable charge.
The goverment rings its hands and plays the green card when it suites it. Thats life i’m afraid.

Profile photo of wavechange
Member

Water companies like water meters because they discourage waste and that is important in parts of the country that suffer regular shortages. Most people who move to meters usually report savings.

Don’t forget that the energy supply companies are regulated. If they are told to offer lower prices to low consumers, they will have to do it. Those of us old enough to have lived through the time when many services were nationalised may remember how inefficiently these services were run. The lack of competition means that there is less incentive to run an organisation efficiently. I do feel we need much tighter regulation of companies that provide essential services, but even under strict regulation they are still competing with each other and to make a profit.

Profile photo of dave d
Member

Yorkshire Water and USwitch both offer tools to calculate if you’d be better off on a water meter or keeping the water rate. Both tell me that I’d be paying at least 4 times as much on a meter, but I don’t know if you can trust the calculators as some friends of mine had a meter in and find that they are paying barely half what their water rate used to be, yet the on line calculators tell them they’d pay 3 times more with a meter …. clearly wrong.!!

Profile photo of ChrisGloucester
Member

“Rewarding high energy users sends the wrong message”.
Well I certainly agree that the currently very commonly practice of lowering unit cost once you’ve reached a higher level of consumption is very unfair and down right wrong. More efficient usage should be rewarded with lower unit cost, whereas higher usage perhaps with gradually increasing unit cost. The complete reverse of current common practice.
The simple reason suppliers apply stepped tariffs is to hide a proportion of standing charge and make tarriffs look more attractive. Anyone with even a modest grasp of arithmetic who takes the time to run the numbers can see what they’re up to. But most suppliers do it so it must work for them as a selling aid.

Although a pricing policy reversal would seem more fair there are other factors to consider. If unit price increased with higher usage it could be argued that larger households, with larger families, who are bound to use more energy will be unfairly penalised. So I would argue the fairest overall approach would be to make unit cost the same however much is consumed, and abolish standing charges. Perhaps the best compromise, and this would make supplier price comparison really easy?

Of course we also must not forget that if or when our overall comsumption reduces we might not end up saving much anyway. Lower energy sales will result in higher unit cost (economy of scale in reverse) and of course “share holders dividends must be protected”. So as we appear to be seeing even now we could end up using say 20% less but paying 20% more for what we do use. The real losers here will be those who don’t find ways to reduce consumption. They’ll get hit big time.

I say re-nationalise the lot with a strong independant overseeing body to ensure efficiency of supply and fair pricing. No shareholders profit to pay and we can all influence future pricing through the ballot box.

Profile photo of wavechange
Member

I don’t think our government could afford to re-nationalise energy. If it could, we would probably all end up paying more. It’s like perpetual motion – it looks good but it does not work well.

Profile photo of ChrisGloucester
Member

Well wavechanger, I’d agree you’re probably right that the Government could not afford to re-nationalise. Afterall remember the utilities were privatised by Maggie to bale us out of a previous recession. Once the family silver is sold it’s sold, very hard to get it back.
However I disagree with those who argue nationalised industies simply don’t work. Because those industries were wanting before does not automatically mean they won’t work now. Granted Government needs to grow a few brain cells, employ the right people and use modern industrial methods but there is no fundamental reason it should not work.

Perhaps start small. The government buys up one small energy supply company and goes into competition with the big six cartel. If they get it right they’ll get all the customers and re-nationalise by stealth. Mind you that probably breaks no end of EU laws, but the EU is another issue.

Profile photo of william
Member

@Chris, Government and brain cells in the same sentence, shame. We all know they have to have those removed and gold plated spoons inserted to be able to work for Government.

And don’t forget, they kind of own at least 2 banks, and neither is doing what the government want. So Mr Cable is proposing to set up another one rather then get the 2 we own to do it 🙁

I’m always amazed how the government claim we’re broke, yet in all this time they haven’t set up their own PPI claims company to cash in on all those fees that are been paid out. Not even the banks are start enough to have done that either.

But your idea is a good one, they could even build a few nuclear reactors, to make their own money, kinda like the EDF model which uses around 60% nuclear from its own reactors.

Profile photo of wavechange
Member

Chris

You are right about what Maggie did, but if Harold Wilson had not got us into such a mess beforehand it might not have been necessary. I had no time for either of them and jointly they have given me a distrust of all politicians.

Your suggestion about the government running one of the ‘big six’ makes sense. They would have to compete effectively to succeed.

Profile photo of ChrisGloucester
Member

wavechanger,
Certainly agree with you regarding distrust of all politicians.
Idiots to a man (and the women). There is no one to vote for nowadays, they’re all basically useless. In Victorian days if you had an idiot child well to do parents directed them into the church. Nowadays assuming that child can talk a lot (but mostly rubbish) guess where they end up?
Glad you like my idea about buying up one of the energy supply companies, it would prove if a modern day nationalised operation could actually work or not. Providing of course at least a small section of capable Government could be found somewhere to run the exercise.
(Yes I know it’s a very very long shot)

Perhaps we need a “which” campaign to promote the idea?
But I won’t be holding my breath.

Profile photo of wavechange
Member

I’m glad to hear that we have something in common regarding our distrust of politicians. A government that could carry this off effectively might win my support, but they would have to offer lower prices to small consumers to demonstrate a commitment to reduce energy use.

Anyway, I’m wavechange, not wavechanger. In the interests of economy. 🙂

Profile photo of malcolm r
Member

This all started as a debate on costs to low vs high energy users, and has deteriorated into slagging off politicians. We should all pay one tariff for electricity and gas units used, with a separate fixed charge for the distribution cost. Direct debit should attract a discount as it saves the vendor money in paperwork and postage. As to competitive tariffs these should be dealt with under price-fixing legislation to ensure true competition exists. Can a statutory body handle this? If it had sanctions to order refunds to consumers mischarched in the past, the energy companies might be more careful about how they charged. But don’t have energy companies represented in determining the outcome – too many government initiatives are thwarted by allowing vested interests to interfere. There are experts not allied to the industry that would provide the necessary knowledge – hopefully sourced from our universities perhaps, with a boost to their income, rather than from overpaid and underqualified consulting organisations.

Profile photo of wavechange
Member

The discussion has drifted off topic but let’s go right back to the title: ‘Rewarding high energy users sends the wrong message’.

Clearly this is wrong. At the very least we should dispense with standing charges, so I disagree with everyone paying a distribution charge. That will do a bit to help low users. But I think we need to do more to cut down on waste.

Profile photo of ChrisGloucester
Member

I would agree with wavechange, at least get rid of the standing charges. But I’d go further and at least in addition make unit cost the same however much you use.
Not only more fair but how much easier would price comparison be?

As for Malcom’s comment that this conversation has “deteriorated into slagging off politicians”.
Deteriorated? If this currently unfair system of charging for energy is to change where do you think the change is going to have to come from?
Nothing wrong with a bit of politician bashing as “encouragement” if they’re dragging their heels when it come to doing the right thing.

Or do you expect those “fair and honest” people who run the private share holder owned energy supply companies to put things right all on their own?
If you do, dream on.

Profile photo of malcolm r
Member

No one is rewarded as a high energy user – that’s a misleading headline. If you use a lot of energy you pay a lot more – that’s not a reward. We can help ourselves to save energy – the reward is in reduced bills. I would agree that the objective would be better if wasted energy were reduced. Better advice plus incentives from Government would help, and reduce the need for some additional generating capacity. Incidentally, better than payng inflated rewards for solar power feed in. It has happened with cars in excise duty, and we generally buy more fuel efficient cars to save on running costs. Is dealing with your home energy very different?

Profile photo of wavechange
Member

Malcolm

Read the introduction and the magazine and you will see that people are being rewarded for being high energy users.

If we are going to reward anyone it should be low users of electricity, gas, fuel, etc.

Member
Yippeekiay says:
8 October 2012

A single rate for all energy is the best way to go as I see it, the more you use the more you pay has to be the fairest way for any utility and anything else for that matter. I don’t pay standard charges for electricity or gas but due to me being a low user over 80% of my water charges are fixed charges which certainly is NOT fair.
As for car excise duty, don’t get me started !!!. That is currently one of the most unfair running cost as anything else discussed in this topic. Car ‘tax’ should also be charged on fuel usage NOT a fixed charge. My car covers 1500 miles a year and I pay £460 in tax yet someone with a lower emission vehicle who could be paying £35 or even ZERO tax can do 10’s of thousands of miles resulting in much higher emissions…..how’s that being more efficient than me?? Pffft!!

Profile photo of rarrar
Member

Surely the 2 level tariff is just a way of incorporating the standard charge into the usage .
You used to be able to choose between a tariff with a standard charge and one without – for most people they worked out exactly the same but with very low users being better off on the ” no standing charge” tariff.
To be fair to everyone we should go back to a standing charge which covers the base cost of providing the supply, admin etc and a flat rate usage or cost per unit element.
High usage households arent necessarily wasting energy they probably have bigger households/families and thus bigger houses.

Profile photo of malcolm r
Member

Chris – the objective of this discussion is surely to look at the best ways of charging for energy, which an organisation such as Which can then lobby for. The point I was making was that blaming politicians was not the best way of taking the discussion forward.
Wavechange – it is not unresasonable for energy companies to want to recover the cost of supporting the supply and distribution network, and should those connected not contribute equally to that. Currently options available are to pay a single tariff for units used plus a separate contribution to the distribution cost – the standing charge – or to pay a two tier tariff. The best option for your circumstances and the best supplier can be found online; not so easy if you can,t go online admittedly.
This does not mean you pay more if you are a low usage consumer – you just don’t pay pro rata less.
Come up with charging methods that are fair to all – with no cross-subsidies.

Profile photo of b martin
Member

To Jenny Driscoll,
In your opening statement you claim that high users are charged up to 30% less than low users.
Can you name one specific domestic tariff that reduces the standing charge and/or the charge per kWh consumed the more energy is used, ( please quote actual figures of standing charge and kWh consumed.)
I have always found that the more energy consumed the higher the total bill.

Member
Buddie Ollie says:
10 October 2012

All one needs to do is go onto one of the utility switch sites and plug in lots of scenarios for say dual fuel —high and low usage—is there a difference? Can you save money?

When you plug in your actual info in with a view to switching, everything is taken into consideration
usage, standing charge or not——the annual price you should pay comes out at the other end—-if it is cheaper, go for it.

It cannot be sensible for lower users to pay more per unit than higher users, If our aim is to conserve energy and ultimately the environment—–however if the energy company wishes to benefit its best customers then the laws of the jungle prevail.

Profile photo of malcolm r
Member

1. Looking at npower, who supply me, there are simply too many tariffs – 10 gas and 26 electricity. Silly. But there do need to be different charging methods available to suit different customers. So for electricity, at least a couple of standing charge + unit charge options, no standing charge + higher unit charge (to compensate for admin/distribution cost), a day + night to allow heavy night consumers to benefit from a lower rate when demand is low. For gas, at least a couple of standing charge + unit charge options, and no standing charge + higher unit charge only.
2. It is misleading to say that low users are penalised. They use less fuel and have smaller bills than heavier users (who may simply be larger families). They still need to make a similar contribution towards the admin and distribution, but have a choice of tariff to get the best deal.
For example they can choose electricity at 9.6p a unit with a standing charge £107, or 13.7p and £25. At 2000kWh they both cost £299 and thereafter you benefit from the first. Or you could opt to pay no standing chage, but 18.2p for the first 728kWh and then 14.4p. At 2000kWh you pay £315 – more or less the same.
Below 2000kWh you are probably better off paying the 2 tier unit charge, above 2000 you are better off paying the higher standing charge.
But this is all too complicated – multiply the choice of tariffs from one supplier by the number of suppliers, then combine that with gas tariffs, plus contract terms and price changes, and you’ve lost the will to live. On line comparisons give you the best deal on the day – assuming you can accurately predict your usage, and that your usage does not change. A bout of very cold weather, or a warm winter, can significantly alter your prediction. And you don’t have much control over how much energy you use, apart from investing in insulation, double glazing, thick clothes or hypothermia.
Would it not be better if the energy company simply calculated for you at the end of the year what your cheapest tariff would have been, and charged accordingly? You could still get estimates from what they publish to initially decide your preferred supplier, still pay a regular charge, and then get an annual adjustment? Too simple? Too little scope for profiteering?

Member
Pete says:
13 October 2012

I live in a fairly typical 3 bed semi in East Anglia built in 1947. I’ve got only 4″ of loft insulation, no cavity upstairs, uninsulated cavity down stairs, single glazing, and a 30 year old cast iron boiler. I heat the house to about 18-19C.

My gas bill is 10% below the average, and the electricity is 30% below average. Some of the energy savings advertised for various measures are nearly as much as my entire bill. I don’t know where they get some of the figures from, but I think they must be liberally sprinkled with propaganda.

I’ve carefully costed the price of switching to a new condensing boiler, but when you take into account depreciation, interest on capital, and above all maintenance, it just doesn’t pay. The problem is reliability, my old boiler has never broken down in 30 years, so with the £300 or so for maintaining an unreliable condensing one that just about wipes out all the benefit.

With no cavity upstairs, insulation only just pays, and when you look at this

http://askjeff.co.uk/cavity.html

it’s a damned liability.

Profile photo of b martin
Member

To the Which staff
I notice that you appear to be unable to give a factual reply to my question of the 8 October. Is this because your cannot find such a tariff and your opening remarks are without foundation?

Profile photo of Nikki Whiteman
Member

Hi b.martin,

You asked:
“In your opening statement you claim that high users are charged up to 30% less than low users.
Can you name one specific domestic tariff that reduces the standing charge and/or the charge per kWh consumed the more energy is used, ( please quote actual figures of standing charge and kWh consumed.)
I have always found that the more energy consumed the higher the total bill. ”

This is something that happens across a number of tariffs. If you have a tariff with no standing charge, customers are often charged one rate for the first batch of energy used (depending on the company and the tariff, this can be per month, per quarter, per year), then a lower amount for any units used on top of that. Hence if you use more units, averaged out over your bill you’re paying less per unit than someone who doesn’t use enough to be charged the cheaper ‘tier 2’ rates. If you have a daily standing charge, you pay a set amount per day then per unit on top of that. Because the standing charge is the same for everyone, again those who use fewer units will end up paying more per unit than those who use a lot more energy.

I understand your point that as you use more your bill goes up – of course that’s true (if it were the other way round we’d all be very warm through winter!) but the point that Jenny is making is that you pay proportionately less per unit. If you want any specific examples of this, just have a look on an energy company website – there are a few tariffs with a flat unit rate for everyone regardless of usage, but these tariffs are quite rare, and the most common tariffs work on a tier 1/2 or standing charge model, as explained above.

I hope this helps.

Profile photo of b martin
Member

To Nikki Whiteman,
Thank you for your reply which is exactly as I expected.For domestic consumers the cost of providing the supply is the same whether the consumption is high or low and it is therefore fair that all should contribute to the system cost by way of a standing charge. With a flat rate charge regardless of usage the majority will subsidise the low consumption user and will end up with a larger bill than with the other method.
You say that there are a few companies offering a flat ratr regardless of usage of usage, will you please quote at least one of them and their charge. I look foreward to your reply.

Profile photo of Nikki Whiteman
Member

Hi b.martin – it’s not a few companies, but a few tariffs. Ebico offers these tariffs (there might be others like this available from other companies) and you can see details on their website.

Profile photo of John Ward
Member

Having read all the contrasting opinions on standing charges I remain of the view that there is a strong case for it [provided it is equitable across all consumers irrespective of supplier/tariff] and that there should be no reward for using more energy, indeed incentives for using less would be desirable. Serious thought still needs to be given [a] to those who need to heat their homes all day for survival or to keep them out of an institution, and [b] to those who cannot have a gas supply and must heat with electricity or oil. In the case of [b], it might be worth exploring whether the property valuation banding system used for council tax adequately reflects this disadvantage – a £200 saving in council tax might just create a level playing field [but the redistribution of council revenue collection across the adapted banding profile would then impact on the larger properties which might have other unintended consequences].

Member
Andrew R (Plymouth) says:
18 November 2012

Oh dear oh dear. Bad reporting and a bad headline. The more expensive units are only for a very low amount of electricity (which is for the standing charge element).

I would be amazed if anybody could live on (say) £ 45 of electricity a quarter or whatever the break point is?

All totally misleading