Friday, 7 October 2011

Standing charges - the big energy rip off

Energy bills here in the UK are formed of two parts, the standing charge and the usage related charges. These charges are billed to customer in a couple of ways. Either the standard charges are separately listed on the bill or the first units used are charged at a higher rate compared to the later units. With the later method, once the standing charges are amortised into the higher price early units, the per unit charge decreases. Recently many utilities companies have moved from the higher price early units charging methods to the listed standing charges method.

We have been looking after an unoccupied house recently, and received a combined gas and electic bill that comprised of £19 gas and £1 electric usage charges and £80 of combined standing charges. The standing charges were £16 for the electric £40 for the Gas, £10 as a Non-Energy charge and £20 gas transportation charge. We had the central heating on low and used the lights occasionally so the units are reasonable. The standing charges are an outrageous rip off for lower usage consumers.

We were also upset by the change of fundamental contract, without agreement. When we took over the property it was on a split price units tariff but EDF changed the electric contract to one with standing charges without content and refused to continue the supply on the previous agreed basis.

When EDF was asked to explain the bill or at least provide some justification the following lies were included in the explanation :
  1. It works out cheeper for the users of more units.
  2. EDF was compelled by the regulator to change the tariffs to separately listed standing charges.
  3. It's easier to understand the bills.
Those points are bogus because :
  1. The standing charges are fully included in the cost of the higher price first units. Once the threshold to the lower cost units is crossed there is no difference between a bill that has separately listed standing charges and one that have higher and lower unit charges.
  2. Consumer Direct, the government consumer advice service, said that tariff structures are within the energy companies remit to decide.
  3. Bills that are bigger the more energy used are less confusing than paying large standing charges for almost no energy usage.
Minimum billing amounts only benefit the utility companies and penalise low energy users. Fixed standing charges give no possibility of an energy charging holiday, every bill will be at least the minimum standing charges amount.

Small quantity users are paying a disproportionate infrastructure subsidies for the larger users. Consider the user that has a small flat and goes on holiday a lot. The standing charges are the same every quarter regardless of the low usage holiday periods. In most retail business the infrastructure costs are folded into the prices. Would you go to a petrol station that charge £5 every time you drove onto the forecourt even when you only bought a small top up of petrol ?

How it should work, is the exact reverse of the previous high cost for the first units arrangement.
If standing charges are to be used then the first units should be set at lower cost, until a cross over point of average usage then uplift the fixed price units. After the unit price threshold is crossed the units are charged at a higher level to discourage profligate use.


1 comment:

Ste que said...

yeah hiya

i havent used my gas meter / gas from scottish power for approx. two years now. i owed £10 and since then they are now billing me and have a debt collection company chasing me for £500!!! all in "standing charges" i will not *ever* be paying it and have started an official complaint procedure. UTTER RIP OFF!