You may have seen today’s Daily Mail story about the ‘standing charges’ energy companies levy on customers. If you’ve ever read your bill, you’ll be familiar with the term, but what are these charges? Why do they vary?
The British Gas jargon buster on its website describes energy standing charges like this:
‘Suppliers have to pay various costs no matter how much (or little) energy a customer uses. The standing charge is a fixed charge designed to recover these costs.
‘These costs include the distributor’s cost of transporting energy to your premises and the meter operator’s cost of looking after your meter.’
Simple, right? The standing charge is a fixed amount to cover the cost of getting power to your home and maintaining your meter. So you’d think that energy companies would charge a similar amount for all of their customers.
Yet today’s Daily Mail article found two Npower tariffs with different standing charges – a difference that could cost you an extra £140 over the course of a year. Not an insignificant amount. We found another example, British Gas this time, where two different tariffs had total standing charges for a year differing by almost £50. This makes you wonder whether the standing charge really is there to recapture these fixed costs.
Simple prices, not standing charges
Hopefully you’ll have seen our campaign to introduce single unit pricing to the energy market. A single, simple price would allow all of us to compare energy tariffs at a glance. We wouldn’t have to wonder which energy company had both the lowest standing charge and the lowest unit rate. We wouldn’t be scratching our heads working out whether we’d be better off with a high standing charge and a low unit rate, or vice versa.
It would make it clear to all and sundry that one tariff is going to cost you more than another. It would help people to switch to the cheapest deals and stimulate competition in an uncompetitive market.
Continuing with the same old standing charge approach means that people will struggle to find the best offers. And this research clearly questions the energy industry’s claim that standing charges are needed to recover certain fixed costs. Yet, Ofgem’s new tariff proposals will make them mandatory.
The energy market just doesn’t work for the average consumer; people don’t trust their energy supplier and they don’t think they’re getting a fair price. We want people to be much better informed about how much they’re paying. For that to happen, Ofgem and the government need to make sure that simple energy prices are introduced.
We’d love to hear what experiences you’ve had with your energy company’s prices and standing charges. Do you think a single unit price would make energy prices easier to understand?