Energy companies' standing charges

[StandingStill]

If the standing charge is the charge for being connected to energy infrastructure, it shouldn't go up due to the cost of fuel, should it? So why is it going up?

Sorry.

It's just not a convincing explanation.

It doesn't need to be convincing, it's the truth.

If it's not convincing it's not the truth, or at least not the whole story.

We're all paying massively increased standing charges because avro etc went bust. So where's the numbers on my bill telling me what those companies going bust cost British Gas?

This diagram shows the breakdown of the energy cap. If you exclude VAT, then the cap is going up from £1877 to £3380, and the main reason is wholesale costs going up from £1077 to £2491 (131%).

The other costs are increasing from £800 to £889 (11%) and it is some of these costs that the standing charge is meant to cover. These include things such as £19 per customer for the roll-out of smart meters, £153 for government policies - mainly green policies (renewable obligation) and things like subsidising feed-in tariffs for those with solar panels, the warm home discount, and insulation schemes.

"Network" costs cover paying National Grid for delivery of gas and electricity, including a big subsidy for supplying to rural areas (especially N.Scotland) and covering the costs of suppliers who have gone bust. The "DD uplift" covers the costs of payment methods and bad debts. Headroom covers uncertainty and variance of costs between suppliers. I think the "Adjustment" is due to costs in the current period being underestimated when the £1971 cap was set last February.

The energy supplier gets the "Operating" amount which has gone from £220 to £258 (17%) which pays for their costs (and profit if they can keep costs down).

If it's not convincing it's not the truth,

Brilliant. Absolutely astounding. You win the internet for for possible one of the most stupid things I've ever read.

So, why are standing charges increasing?
Here are the main factors that are driving the increases.
Costs of the failed suppliers
The largest driver in the recent increase has come from the costs of the 29 suppliers who have exited the market in recent months (excluding Bulb).
As we explained in a previous blog, the total costs (roughly £2bn) are shared across all remaining suppliers in the market through ‘Last Resort Supplier Payments’. These are added to the electricity standing charges as the costs are ultimately recovered on a flat rate basis per customer. For gas, they are being recovered via a volumetric charge, meaning the costs are added to unit rates.
Good Energy campaigned hard for these costs to be spread over a longer timeframe. However, Ofgem decided differently and accelerated the claims process instead, which means the cost recovery began from April this year over a 12-month period, with further rises also likely.
Warm Home Discount Scheme
The Warm Home Discount Scheme started in 2011 and is the primary government initiative to provide relief to vulnerable households for their energy bills. Like other energy related social and environmental policy schemes, the Warm Home Discount is paid for through energy bills, rather than general taxation.
And to ensure the schemes are paid for evenly amongst consumers, the costs are added to standing charges on energy bills.
The additional increases came earlier this year when the government announced an expansion of the scheme spending to a total of £475m.
Good Energy, and a few other suppliers, have been enrolled in the scheme for the first time this year, as the government recently lowered the threshold for suppliers that need to participate. This means this is a new additional cost for Good Energy customers from 1st April this year.

Network charging reforms
The way we all pay for using the network has been under reform by the energy regulator for a number of years now.
From April this year, the first of many decisions came into effect – moving distribution network residual charges to a fixed cost (which is added to standing charges).

In simple terms, this means where previously a portion of the network costs (the costs for using and maintenance of the network infrastructure) were included in your unit rates, Ofgem has decided this should move to a fixed charge and collected via standing charges.
Again, Ofgem’s rationale for this change relates to fairness – so we all contribute to network costs in a way deemed proportionate by Ofgem’s new fixed charging bands. Finally, on top of this, network costs have been increasing because of the need to upgrade and expand our energy infrastructure. This has recently been compounded by inflationary pressures with rising costs for materials and wages.

www.goodenergy.co.uk/what-are-standing-charges-and-why-are-they-increasing/

Costs of failed suppliers
Ofgem have appointed new suppliers to take on the customers of the 29 suppliers who have exited the market since autumn last year (excluding Bulb).
This is done via the ‘Supplier of Last Resort’ process, and it is extremely costly. Newly appointed suppliers have to buy power for their new customers at the very high market prices and take on all the operational costs of setting up thousands of new accounts.
The costs are ultimately shared across the market, with the recovery of ‘Last Resort Supplier Payments’ added to the network charges that all suppliers are liable for.
Normally, suppliers are given at least 15-months’ notice, and so this extra cost would not be added to bills until 2023. However, on this occasion, Ofgem granted special permission for the payments to be collected under an accelerated timescale, with just two months’ notice for suppliers. This is why electricity standing charges have increased across the market recently.
The result leaves the average consumer paying in the region of £34 on electricity bills and £32 on gas bills, spread over 12 months, to recoup the costs of the failed suppliers for 2022-23, with further rises also likely.

I'm sorry, I still can't over it.

If it's not convincing, it's not the truth...

Just imagine how little progress humanity would of made over the last few thousand years if everyone human thought this way. Boggles the mind. How can people be this intellectually incurious and yet still function in the modern world.

More stupid than being told you're going to have to pay £7000 a year to energy companies, in a country where minimum wage take home is £12500, "because of increased costs" and your only response being "well ok then I guess that's just how it is"?

You, as they say, do you.

@StandingStill do you know how much of that £7000 is the standing charge that you have an issue with?

Indeed.

We would have had no enlightenment, no revolutions, nobody would have questioned tropes batted at them as justification for inequality, disease, war etc. There would have been no progress at all, if people without assets had just accepted that that's how things are because those with money told them so.

Thank goodness that's not the case.

If it's not convincing, it's not the truth...

+++

Or alternatively unless I am convinced of something then it is not true.

Now I'm not convinced on the dynamics of flight and the explanation that the difference in pressure creates a force on the wing that lifts the wing up into the air.

Does that mean that my ignorance of flight dynamics mean that it's not true that planes can fly?

Do people who build planes have a vested trillion dollar interest in lying to you?

If not, you can probably rest easy.

Gas standing charge 28.485p and electric standing charge 46.356p from Oct 2022.

28.485 + 46.356 is 74.841p a day.

74.841 x 365 is £273.17 (rounded up) a year.

So approx £23 (rounded up) a month.

If you're worried about the £7000 a year you need to be focusing on the cost per kWh.

Slightly ot but there is a move to not pay waste water charges to eg Thames or Southern Water. Given the amount of discharges going on clearly the water is not being treated so why are we paying? The movt I've seen says yes I'll pay for what I've used but if you are pumping raw waste into the rivers/sea where are those charges going?

Yes, that's a good point I think. Why are we paying them to dump actual shit into our seas and rivers?

There was a spate of news stories earlier this year about dogs on the coast getting sick and dying after going in the sea, vets were warning people about a possible mystery virus etc. The water companies must have seen these stories too and they kept pumping literal shit out. No statement, no apology, no nothing. Bastards.

The companies that went bust had failed to hedge, or forward buy, sufficient energy. Companies like British Gas, hedge a proportion of their energy purchases on a rolling basis, so they will have bought some 6 months forward, some 12 months forward, some 18 months forward, etc etc possibly going out as far as 5 years. So the price customers pay, will be an average of current, ‘spot prices’ as well as the 6m, 12m, 18m etc prices they secured a year or two ago.

British Gas hedged on the basis it wouldn’t have to take on lots of other customers at short notice, so they had to suddenly buy a lot more at the higher ‘spot’ or today’s price. And they have to pass that on to everyone or they will go bust too.

Well I guess British Gas can hedge on any basis it wishes given that it has a wholesale arm that sets whatever price it wants. And it can also watch its wholesale arm edge out any smaller companies by charging whatever price it wants. Doesn't mean we should pay for that. As well as pay British Gas just for being British Gas.

Look various previous posters have kindly and carefully explained with links to back up their argument that a large part of your standing charge (which by the way forms the minority portion of your energy bill- the majority being the cost of the actual energy) is down to covering the cost of failed suppliers.

Under the suppler of last resort the new suppliers taking on these stranded customers had to continue to charge the old contractual price. The cost of supplying these customers was higher than the guaranteed contractual price resulting in a loss which has been passed on to you in the form of a higher standing charge.

So the rise in the standing charge you pay is indeed down to clearing up the mess of folded supply companies like Avro Energy.

Whether you choose to believe it or not is up to you but it doesn't make it any less true.

Now coming back to the aviation industry which is indeed a trillion dollar industry. How do you think that they would continue to sell their planes if the "truth" came out that they in fact only managed to fly on "magic pixie dust".

It's to make up for all the selfish people using less energy. Those profits don't come from nowhere do they ?

Saying that energy companies are bent is not the same as believing in magic pixie dust.

Bulb has failed but their customer base is too big for any one supplier to take them over as a supplier of last resort. This means they are basically run by the UK government. The government buys the energy their customers need on the day so it costs far more than what it costs other suppliers who estimate their future needs. As energy prices to consumers are capped part of all our standing charges is to ensure Bulb customers get gas and electricity.

When I joined my energy supplier they weren't part of a group with an energy producer, however to avoid collapse they had to find one to merge with.

In most other industries, if a business fails that is the end, yet consumers of energy are being forced to bail out failed companies that were not well run. Can you imagine taxing patrons of Wetherspoons to cover the losses if the pub chain went bust?

If they were a nationalised entity, the profits to shareholders could be put towards reducing standing charges for customers.

You have to remember that major shareholders include pension funds.

It's a completely screwed system.