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The standing charge lottery on your energy bills

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Rising energy prices are consistently one of our biggest worries, but many don’t switch because the market’s too complicated. And our latest research shows a huge variation in standing charges on our energy bills.

I like to think of myself as a savvy customer who gets a good deal on most things I buy. And it’s no different with energy bills. The only problem is that it’s pretty tricky to work out whether I’m paying more than I should for my gas and electricity.

When I buy a new book or DVD I can compare prices across different shops. And when I fill up my car with petrol I can avoid the really expensive garage in town. But, having just moved house, I now need to decide on an energy supplier

Confusing energy prices

So all I need to do is look at how much suppliers charge for their gas and electricity and pick the cheapest one; right? Wrong. Most energy firms split their prices into a confusing array of different rates and standing charges; the latter being a fixed amount applied to your bill daily or annually.

So to even get a rough guess-timate of which tariff will be the cheapest for me, I need to know how much energy I use. Now, this might be just about possible for people whose energy consumption is pretty consistent. But I’ve just moved to a completely different type of house and have no idea how much gas and electricity I’m likely to use this year.

It would be like pulling up to a petrol station and the prices at the pump changing depending on how fast you drive or how many miles you cover.

Huge variation in standing charges

Our latest investigation has revealed the huge variation in standing charges for just one customer. We looked at the range of gas, electricity and dual fuel deals on offer for a specific customer in one region of the country – we found 109 different tariffs including some 75 different standing charges.

And if you think that’s mind-blowing, then factor in all the different regional variations, types of meter, payment methods and so on and you’ll find thousands and thousands of different prices across the country.

Most energy firms say that the standing charge covers fixed costs, such as bills, meters and distribution. But why would these so-called ‘fixed costs’ range from zero up to £402 a year on individual gas and electricity deals combined?

It also seems strange that standing charges can vary widely even within the same firm – leading me to question whether standing charges really relate to ‘fixed costs’ at all.

A low standing charge doesn’t mean a low bill

You can’t even assume that a high standing charge means the highest bill. As our illustration shows, a customer using a lot of gas can be better off with a higher standing charge:

Energy standing charges comparedThis bewildering array of charges is yet another example of how the energy market’s too confusing for us to find the best deal. That’s why Which? has been calling for simple tariffs, without standing charges, displayed in the style of petrol forecourt prices, so that we can all easily spot the cheapest deal.

Ofgem’s current reforms to simplify the energy market don’t go far enough, as companies will still be allowed to include a standing charge and a unit price. If the government fails to take more radical action, such as by introducing a single unit price, we won’t feel confident that we’re paying a fair price for our energy.

Do you find gas and electricity standing charges confusing?

Comments
Trevor Surrey says:
20 October 2013

Trouble is its all right to say change your supplier then what happens they put there prices up so you cant win since they privatized the Energy Industry we are being held to Ransom .God help us if as it seems possible we get a really bad winter like 1962/63

Telent says:
2 November 2013

My quarterly bills from Cooperative Energy include a historical usage summary of my gas and electricty usage for the past 4 quarters, giving me annual usage data. This is essential information for running price comparisons . It is also useful to see whether one’s usage is increasing or decreasing over time. Do other suppliers provide this information?

Telent, npower gives me this for current and previous years.

Ann T says:
21 February 2014

I switched to a company called D-Energi for our small bed and breakfast but had not realized that they charge a distribution fee of 98p a day for both gas and electricity as well as a Kwh charge and a standing charge per day. I was also surprised that I will be charged a minimum annual charge based on the previous year and not on the amount of energy we use.

Unfortunately the salespeople are absolutely charming and persuaded me to sign within an hour or so and send back to secure rates. I checked the quoted Kwh and standing charge but did not read carefully enough the extra charges as the salesperson had not alerted me to any extra charges and presumed the only extra charges were VAT and Climate Change Levy.

Feel a fool as I am stuck with them for a year and the termination charge is £7,000.

I wonder whether you might be covered by the doorstep regulations – http://www.gov.uk/doorstep-selling-regulations – which give certain cancellation rights.

Dianne says:
28 February 2014

SCOTTISH POWER AND STANDING CAHRGES
I do not use gas, although I do have a gas metre. Scottish Power have just informed me that the government has made it compulsory for companies to impose a Standing Charge on their meters even if they are not used. Comments, anybody?

If you don’t use gas then there is no need for you to have a gas supply contract. The presence of a meter is neither here nor there; the supplier can remove it if they wish.

My gas was with Scottish Power too, i never used Gas and they had a no standing charge so it was perfect, Till last month and they billed me and it turned out they scrapped standing charged in December but didn’t bother telling me.

I really kicked off on Twitter bad and with the help of Which Scottish Power cancelled the bill, gave me £50 compo for not letting me the tariff was changing and my gas supply is now with Ebico who I have had my elec with the for years.

http://howilivemylife.co.uk/special-blog-postscottish-power/

(Legally every energy supplier now has to have a standing charge, so Ebico’s is £0.00)

Dianne says:
28 February 2014

Thank you. I will cancel the gas contract part. It is costing me26p per day, although I do save £10 per year with dual fuel savings-it doesn’t cover the extra standing charge tho.

I am not sure you can just cancel the gas contract, as you are connected (presumably) to the gas main. You may have to have your gas supply disconnected, or switch (e.g. to Ebico with no standing charge).Standing charges are to cover fixed costs that energy companies incur – meter maintenance and reading, account administration etc. You could switch to a company that has a low dual fuel standing charge – I’ve found one at £52, one at £88.

Ofgem are investigating ways of dealing with zero energy users:

“Request For Information – Standing charge for gas customers with zero consumption
Publication date
20th February 2014
Information type
Open letters & correspondence
Policy area(s)
Electricity – retail markets
Gas – retail markets
Ofgem has received correspondence from consumers, their elected representatives across Great Britain, and from consumer bodies on the impact of standing charges on certain groups.

This correspondence has highlighted a number of concerns about the fairness of some consumers, who do not use their gas supply and therefore have zero consumption, having to pay a standing charge.

In this letter, we ask domestic suppliers about the actions they are taking to meet the needs of gas consumers who have low to zero consumption.”

CB says:
15 July 2014

First utility just increased my standing charge by almost 100%. Is is appalling. What is Offgem doing about this? Aren’t they supposed to protect consumers? This is particularly bad for low users and is how the utility companies are making money when consumers are cutting usage. I am disgusted with the way Offgem are letting them get away with it….once again the consumer is ripped off!!!

http://regulationbodyofknowledge.org/wp-content/uploads/2013/03/Gomez-Lobo_The_Welfare_Consequences.pdf

“The Welfare Consequences of Tariff Rebalancing in the Domestic Gas Market”
Written in 1996 discusses how competition would lead to the ending of cross-subsidies for fixed charges. Essentially low users of power were being subsidised by larger users.

One of the answers:
“Pensioners, for example,receive benefits that are linked to weather conditions as a way to compensate for higher energy bills. Programmes such as thisis could be expanded if negative distributional effects on some groups are to be avoided by tariff restructuring.The advantage of these programmes is that they address distributional issues through the welfare system and thus allow prices to be set by efficiency considerations only. ”

I note that several cases in the press cited OAP’s who just use gas for a small amount of cooking. The easy answer for high standing charges is logically that they cook using electricity.

Sally says:
14 May 2015

The reason for the confusing bills and tariffs is done on purpose to do just that, confuse you. You are then more likely no to move or take the gamble on changing tariff. The whole UK energy system is out to scam you and theres nothing you can do about it. You always end up paying over the top so the only way to try and win is to use less electricity, install low energy bulbs etc. BUT you will then be paying for spectacles for your families damaged eyes from poor lighting. Its a no win situation.

CLIVE DESCOMBES says:
7 June 2016

Standing charges should be controlled by regulation or not charged at all by any of the energy companies,the price of electricity in this country is scandalous my friend in Thailand runs his aircon cooks has his tv on all day and has a 12hr period every day of darkness when it is necessary to have his lights on as well as ancilliary
products using power yet his bill is between £15-18 per month in this third world country and yet we who who are supposed to be tech savvy pay extortionate rates for our power merely to boost the profits of some fatcats.

One might think living in a tropical country that energy needs would be substantially less.

Heating of water is assisted by a roof-mounted hot water cylinder. Though with normal Thai temperatures I suspect cold showers are more welcomed. No requirement of heat from users to stay alive in “winter” either.

Given the equable climate then the entire grid and generating system can be sized for one type of climate with no need to have surplus power stations for winter demands.

Bob goode says:
14 August 2016

Look, just have the same standing charge across all suppliers, say 15p per day per meter, then the suppliers will have to fight for your custom by offering the best price per kWh, simple.
Why do we always try and make things so difficult .

The costs that make up a standing charge will vary from supplier to supplier. I see no point in forcing them all to charge the same; it simply means some will be better rewarded, artificially, than others. What matters is your total estimated bill. Most people have a dual fuel contract; to see how to get the best deal means not just looking at unit charges but the proportion spent on gas, and on electricity, as one supplier may be more competitive for gas than anther, and less so for electricity.

There is no escaping doing simple arithmetic if you are looking for the cheapest supplier. But this can all be avoided, and far more deals examined, by using Which?Switch. All the deals are shown not only as total estimated cost, whether standing charges are involved or not, but also how much you might save, or lose, compared with your present deal.