£300 a year even if you use NO gas or electricity. Only one way to escape standing charge | Personal Finance | Finance
The fixed charge covers the cost of providing and maintaining the wires, pipes and cables that deliver power to your door, including the energy company’s staff and buildings.
It currently costs the average household 53p a day for electricity and 30p a day for gas, adding £303 a year to bills regardless of how much energy you use. The charge is covered by the energy price cap, which also sets a ceiling on what billing providers can do.
MoneySavingExpert.com founder Martin Lewis is campaigning to lower fixed charges, claiming they “unfairly penalize” lower income households. “It’s amazing that most people will pay £300 a year just for the convenience of having gas and electricity, even if they don’t use any. “
High fixed charges also discourage households from cutting back on energy use because there’s only so much you can save by doing so, he said.
Historically, prepaid meter customers have paid higher fixed charges than direct debit customers, reflecting the higher cost of servicing them.
The Government is currently subsidizing them through the Energy Price Guarantee but this support is due to expire at the end of March.
Lewis said many prepaid customers are in debt during the summer because the meter is still ticking because of the fixed charge. “This is an unnecessarily horrific situation for the most vulnerable.”
Last week, the energy regulator Ofgem asked bill payers and suppliers to give their views on the fixed charge, and to make recommendations on alternatives.
Ofgem’s director of markets, Tim Jarvis, said the cost of living crisis had fueled the debate but warned it was a complex issue. If the standing charge were to be charged or cut, suppliers would have to charge a higher price for each unit of power used.
This would penalize vulnerable households such as the elderly or disabled on low incomes who spend long periods at home and need to stay warm. “It’s a difficult balance to strike,” Jarvis said.
The fixed charges are too high and the current approach is unfair, said Peter Smith of fuel poverty charity National Energy Action. “How can it be right that someone who can’t afford any energy for their home pays a daily fee that is the same or more than someone in a residential home? Overhaul has been in the works for a long time.”
Many on prepaid meters have reduced energy use to the point where just seeing fixed charges double in recent years could harm their physical or mental health, Smith said. It asked Ofgem to demonstrate customer usage and payment method when setting the fixed charge.
Where you live has a big impact on what you pay, as people in North Wales and Mersey pay a third more per year than London, said Ben Saltmarsh, head of National Energy Action in Wales. “How can it be fair that areas across Great Britain that are more likely to struggle pay so much more with their bills? Ofgem’s review should have a clear focus on reducing or eliminating these regional variations.”
It can be avoided, however.
READ MORE: ‘I feel like I’m on a knife edge as energy bills could rise by 5%’
Utilita Energy says yes one of the only energy providers that has no fixed charge whatsoever. “This means you won’t pay anything if you don’t use any energy.”
The Smart Energy tariff has two rates. Your energy gets cheaper when the Savings Rate kicks in automatically after you’ve used 64p a day.
This may be suitable for low users or those whose properties are empty for a large part of the year. Do your sums carefully, though.
Choosing a tariff with no standard charge will not help those with higher gas and electricity usage. This option may be more expensive due to lack of choice of suppliers and higher unit energy costs.
Elsewhere, EDF has announced it will be rolling back permanent “regressive” charges. to its most vulnerable customers this winter as part of a £40 million support package.
Its financial support will be applied to around 260,000 eligible customer accounts as a £30 credit in December.
Others have little choice but to pay up. Where fixed fees are concerned, there are no easy answers.
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