The Standing Charge and Fuel Poverty – Campaign

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There may be little we can do to reverse the rise in gas prices, but there is one aspect we must address: the standing charge.

For people in fuel poverty the standing charge is a significant issue. A person could choose to heat only a single room but they will still be charged a flat rate for the connection. In the extreme case, a person might not use gas at all and they will still be billed for the standing charge. At around 30p per day, the standing charge is not an insignificant amount for someone who may be a low energy user. To put it another way, before a low user of gas actually pays for their usage they must pay over one hundred pounds a year. This is similar with electricity, so someone who has gas and electricity connections and does not use them would be billed £220 per year (assuming a 30p standing charge).

Another way of looking at it is from the perspective of energy conservation. A low user of gas has little incentive to reduce their energy use because it may not help that much reduce their bills. Using more has the effect of reducing the price per kWh.

There is an argument to be said that the standing charge is, in effect, a subsidy mechanism for large gas users. Small gas users are effectively paying more so that large users pay less. We don’t have to pay a standing charge for petrol – a charge just for arriving at the pump – so why should gas and electricity be any different? Let’s pay for what we use and allow low users of energy to save. Any infrastructure costs should be absorbed into the cost of the energy itself. Otherwise we have an absurd system where we have a kind of private Poll Tax on gas and electricity.

So while the government might not be able to set the wholesale prices of energy, they have the power to recommend the removal of the standing charge (via their regulator Ofgem). The removal of the standing charge would probably require a higher p/kWh – this will increase bills for large users and reduce bills for small users and make it fairer and simpler.

Removing the standing charge would be a significant step towards ending Fuel Poverty in the UK.

Please consider writing to your MP, Ofgem and your energy company on this issue.

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Pan containing the average daily standing charge in the UK (30p for gas and 30p for electricity)

Note: This is not a new idea, but it is an idea for which the time has come with the significant energy price rises in the UK. Until 2016 a standing charge was required under Ofgem rules and the non-for-profit Ebico had to work hard to provide a zero standing charge tariff back then. Since 2016 very few energy companies have offered zero standing charge options and it appears that only those with second homes regularly make use of the few that are there. So the benefit of zero standing charges is not really being realized by those that need it. To help those in fuel poverty it should be applied to everyone so that those in fuel poverty have access to competitive unit rates too.

Even Ofgem understands that the standing charge is unfair. “The standing charges levied by energy firms are substantially greater than the related costs they incur” as the dual fuel “cost-reflective level is … approx. £60 p.a.” (8p not 30p for gas, for example). “[M]ost costs … should be recovered through the unit rate rather than the standing charge”. “This excess is economic rent”. Ironically, “government policies aimed at tackling fuel poverty and reducing carbon emissions” can be recouped “through the standing charge rather than the unit rate”. “This makes energy less affordable for low income households while incentivising higher energy consumption and emissions so actually exacerbates these problems”. Thank you Ofgem – that’s exactly our point!

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