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The less energy I use, the more I pay per unit. Sound fair?

Are you a high energy user or a low energy user? Personally I fall into the latter category. Is it right that low energy users like me have to pay more per unit compared to people who consume more?

I live in a compact (OK, I mean small!) flat with two other people. We’re mainly out at work during the day and when we’re in, we take care to keep our energy use to a minimum.

We put on an extra jumper when it’s cold, turn off lights and always make sure that we turn the TV off at the wall when we’re not using it to prevent racking up a big and scary energy bill.

At this point you may be giving me a metaphorical pat on the back for being so energy conscious. But it appears that not everyone approves of my low usage. Despite what they say about promoting green ways of living and low consumption, energy companies seem to be punishing me for my energy-conserving habits.

Kilo-what? Using less, paying more

The problem is that I end up paying a higher average price per unit than a high energy user. Let me explain why: by charging substantially more for the first set of units in a ‘tiered tariff’ or by having an expensive daily ‘standing charge’, energy companies ensure they don’t make a loss from low-energy users like me.

They’re recouping the cost of getting the energy to my door, which they need to do, but I have no idea how much of this is actual cost or how much is extra profit made from low energy users. Ultimately this means that the less units you use, the higher the average cost of those units.

This seems very strange to me and makes me question if it’s a disincentive for people like me who try hard to save energy. Moreover, for many it’s a real problem – often low-energy users are some of the most vulnerable people, who may be in fuel poverty.

I recognise that fixed costs, which we all have to pay regardless of energy use, will probably represent a higher proportion of low users’ energy costs. However, I think that both Ofgem and energy companies need to ensure that the proportion of fixed costs is kept to a minimum and that there is adequate transparency over what these fixed costs are.

Help us tackle tariffs – email Ofgem

Our campaign to tackle tariffs addresses exactly that issue. The simple tariff that we’re proposing here at Which? means that everyone would pay a daily standing charge, set by Ofgem at the minimum possible amount to cover costs.

On top of that we’d pay for our units, meaning that we all pay the same for a kilowatt no matter how long we leave the lights on. I think that sounds fairer.

So if you want to join us in campaigning for fairer energy tariffs, email Ofgem using the box above and tell us what you think in the comments.

Do you feel penalised for being a low energy user? Or perhaps you have a large family and are grateful for the current system?

Comments
Member

I would like zero standing charge and companies to sell energy at lower cost for moderate use, charging higher prices and making their profit from bigger (domestic) consumers. We need to encourage everyone to be more frugal with their use of energy, and some need much more encouragement than others.

This would penalise larger families but sooner or later we are going to have to work towards controlling population in the UK. A recent estimate suggested that the UK population is likely to rise to 70 million in the next 16 years, and world population does not bear thinking about.

Member
Dave C says:
27 October 2011

A different view! We have no gas connection, no oil boiler, no LPG tank etc. Our energy is totally provided by electricity which we try to buy from a supplier who sources from renewable generation and non-fossil (ie nuclear) as much as possible but with cost a factor too. Because we heat the house, cook, provide hot water and run all our “appliances” using electricity our consumption is high. Should we have to pay more per unit because of this? As for reducing energy consumption, we have insulation to a high standard, draft proofing, low energy light bulbs and do everything we can to save energy/money by switching off lights etc when not in use. We also minimise waste in areas such as a “spare/guest” bedroom by keeping the thermostat low and the curtains closed.

In addition we have chosen to invest in renewable energy such as solar panels to help reduce our net use of imported electricity.

Should we be penalised by higher unit charges for the electricity we use? Perhaps those who are lucky enough to use gas for heating and hot water should be charged more per kilowatt.hour of gas they use, over some minimum figure, which is likely to be a much larger kWh useage than ours of electricity?

Also remember that the incentive is there for all of us to use less energy, which will inevitably reduce our bills, whatever the tariff, and will also reduce our collective carbon footprint and our reliance on fossil fuels, either directly with oil and gas, or indirectly via a lower use of electricity generated from coal, oil and gas.

Simplify tariffs, yes. Make energy available at reasonable prices for all of us, of course. However, don’t forget that many who are off the gas grid in rural areas are forced to use (more than the national average amount of) electricity to heat, cook and provide hot water for our needs.

Member

@Dave C

It’s quite clear that there is not a one-size-fits-all solution here and there may have to be policy adjustments made in other areas to compensate for the impact of what we have proposed on all-electric households.

For example, I recently read a paper by the Fuel Poverty Advisory Group (FPAG) that made some interesting points about electricity-only consumers (FPAG has a particular interest because around 1m of the 2.5m all-electric households are in the lowest income deciles. The paper makes the point that electricity bills currently bear a much higher level of government carbon-reduction policy costs than gas bills. This is because funding for renewable electricity (the Renewables Obligation), emissions levies on electricity generators, and the Feed-in Tariff for microgeneration, such as solar PV panels) are – logically, some might say – recovered through charges on electricity bills.

The paper proposes that this could be offset by transferring a much greater proportion of the costs of non-electricity-related carbon-reduction policies, such as the Carbon Emissions Reduction Target (CERT), which pays for free or subsidised energy efficiency measures in people’s homes, to gas bills. The effect on gas users would be negligible as they would see a reduction in their electricity bills (virtually all homes with gas have mains electricity), but the gains for electricity-only households quite substantial.

So, no easy answers, but this is an important issue that we are aware of and one that we will not lose sight of as the debate progresses. With the replacement programme for CERT about to be consulted on we will ensure that the situation of electricity-only consumers is represented.

Member

I’m sure that one university or another has done research into energy requirements for different types of households. These figures could be used to give a fair figure for the successive “wedges” which I propose.

As to single source users, the figure derived for a particular household could be combined so that for single source users the initial “wedge” would be in effect the sum of the inital “wedges” of those with dual energy sources. This isn’t rocket science and could be introduced quickly. As I (and others) have said, profligate users should be stung for excessive use.

Member
Stow says:
27 October 2011

As a frugal user BUT now with solar panels I am looking for a company that has NO standing charge and a level charge per unit whatever I use. There only seems to be one company for that. Why do we need to pay a standing charge when the meter and equipment are already there? A flat rate seems to be beyond these companies while they can get more money out of us by confusion.

Member

As one of “the 99%” I suggest that the UK needs only one supplier to provide both electricity and gas. This should be a State Monopoly (nationalisation) and would result in a vast improvement in efficiency.
i) The management costs of the single company would be considerably less than that of a multitude of competing companies. ii) The employment costs of the many thousands of staff non-productively employed in vast call centres would be saved. Similarly the lighting and heating costs. iii) Perhaps the call centres could be converted to flats to help alleviate the housing shortage. This would give work to many unemployed workers in the building trades. iv) Our political leaders claim that householders should spend their time seeking the cheapest tariff. If such ‘leaders’ were to try to select the most favourable tariff for their own properties, I fear that they would consider it quite acceptable for perhaps 20 million householders to waste their time regularly using the internet for this futile past-time. v) The upper management of the present companies could be offered jobs in the Inland Revenue’s department responsible for tax evasion – they may have ideas, unknown to the existing staff, which could be invaluable in collecting much needed revenue from many multi-national companies.

I suggest that Which? or perhaps some other organisation should circulate a petition requesting re-nationalisation of our energy suppliers. Although our government would probably require EU approval, there is some hope that by the time we have a million signatures to a petition that the EU will have disintegrated, and that our elected representatives will have regained their powers to govern the country.

Member

I’m not sure I follow the logic of this Conversation.

I’m a high energy user. Therefore I buy most of my units at off-peak rates; it’s the only way I could afford them. And so, because they are cheaper than full tariff, I must therefore be profligate in my use of energy???

The reason I “enjoy” lower kWH rates, but probably still end up paying more for my total energy needs than most households, is because there is no mains gas available in this village. So I heat my house – built and insulated to Scandinavian winter conditions – using electricity. Even then, I don’t get the best tariff because the dual fuel (electricity + gas) option is not available!

So yes, electricity tariffs are not always fair in every respect, but the rapidly increasing price per kWH is a lot less fair on those of us who do not have access to mains gas for heating.

And should I really take the argument that cheaper units results in more waste to its logical conclusion? Since I’ve already paid my standing charge for unmetered water, I really must try harder to leave all the taps running!

Member

Hi Em, thanks for commenting.

It sounds to me that although you are a high user, you are aware of your energy consumption and try to ensure that you use it as cost effectively as possible. I do understand that people with large families or electrically heated houses can’t be as energy efficient as me. Thus my gripe is not with high users – it’s with the way that energy companies structure their tariffs. I essentially end up paying more per unit in comparison to a high user. To me this seems illogical because it acts as a disincentive by encouraging me not to be so careful with my energy consumption. After all, if I leave all the lights on – I’d use more units yet the more I use the cheaper each individual unit becomes. I could end up wasting lots of energy but not really increasing my bill that dramatically. On the other hand if I was rewarded (with c