Why are standing charges so high?

In the UK, most people will pay over £300 just for the privilege of using gas and electricity, even if you don’t use it! 

Daily standing charges are the culprit, over recent months they have skyrocketed with no view of being reduced any time soon.

From July 1st 2023, the Energy Price Cap dropped the average household bills by 17% which affected 90% of those in the UK. 

Standing charges remain UNCHANGED (29.11p/day gas, 52.97p/day elec)

Electricity unit rate has DROPPED roughly 10% (from 33.21p/kWh to 30.11p/kWh)

Gas unit rate has DROPPED roughly 25% (from 10.31p/kWh to 7.51p/kWh)

Due to this change in the Energy Price Cap and unit rate reductions, higher users can see a larger drop of 17% yet lower users will see a lower percentage. This is due to the unchanged standing charge rate. This can also be affected by the region, a useful source for your standing charge rate can be seen here.

An element of disempowerment.

Due to the unfair truth of standing charges currently, it means that lower users save proportionately less and less by reducing their usage. This disempowers users, particularly those on pre-payment meters. The 4+ million UK customers could see themselves in debt during low usage periods such as the summer months due to the meter still ticking over with large standing charges each day that goes by. This unnecessary situation affects the most vulnerable people in the UK right now – something that needs to be addressed by OFGEM.

Who sets the cap, Energy firms or OFGEM?

The Energy Price Cap is decided and set in place by OFGEM – from standing charges to unit rates. These gets applied to 90%+ of “standard tariffs” – which most customers are currently on.

Since September 2021, rises of over 60% have taken place on standing charges, causing many companies to go bust.

Due to a privatised energy industry, we cannot blame the Energy firms for all of the price hikes. Remember, their primary job is to make profit for their shareholders. Lower rates and prices come directly from the politicians and regulators like OFGEM.

It’s worth noting that some energy suppliers (who we pay directly for energy) are currently running at a loss. Standing charges contribute massively to this. Regulators need to be helping here by lowering standing charges which will prevent further energy suppliers going bust and ultimately the UK population having lower overall bills.

So, why are the standing charges so high right now?

Energy has it’s “fixed costs”, just like any other industry. Charges for fixed prices are heavily put onto the electricity standing charges as it’s more universal than gas. Costs for covering the energy suppliers that went bust during the energy crisis only makes up around 6% of the standing charges as seen below.

Policies and network costs are the two factors that have substantially increased causing the standing charge rate to increase sharply and dramatically. The below chart from Money Saving Expert really helps put things into perspective.

No standing charge on a tariff?

The energy company, Utilita, have launched a tariff which has no standing charge on. This can be made available to new pre-pay customers. However, some direct debit customers can move to it.

It of course means that the unit rate is substantially higher than other companies for the first 2kWh of usage per day. This means that if you are a relatively low user, you will save money. For typical usage it works out to be similar to the Energy Price Cap.

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