The standing charge is supposed to be a standard fee that recovers the basic, fixed costs of supplying a home with gas or electricity. In effect, it's a 'pipeline charge' used to recoup the daily expense of transmitting energy to your home.
Unfortunately, standing charges are a minefield, largely because there are so very many to choose from. Indeed, the number and level of different standing charges vary widely, depending on your supplier, tariff and even your method of payment.
By the end of this year, British Gas has promised to cut back to a single standing charge. At present, it has a bewildering number of different standing charges: eight in total. Clearly, having eight different charges for providing exactly the same service baffles customers, leaving British Gas open to accusations of confusion marketing.
This table shows the number of standing charges for each of the UK's 'big six' energy suppliers
As you can see, British Gas leads the way for complexity, with eight different standing charges currently on offer. ScottishPower takes second place with six, while npower is third with five different standing charges. At present, EDF Energy is the only one of the big six to charge a single standing charge, but British Gas will join it before 2013 is out.
How high is your standing charge?
Currently, energy customers have to navigate a minefield of 45 different standing charges across different suppliers. What's more, standing charges vary widely from supplier to supplier, as well as across different tariffs from the same supplier.
To see how much standing charges can vary from one customer to another, check out the following table:
|Supplier||Maximum standing charge (monthly direct debit)||Minimum standing charge (monthly direct debit)||Difference||Maximum standing charge||Minimum standing charge||Difference|
As you can see, there are wide differences between the minimum and maximum standing charges various customers pay. What's more, standing charges tend to be higher for customers who prefer to pay by cash or cheque (notably low-income customers), rather than by direct debit.
Paying by direct debit
For example, npower charges customers who pay by direct debit a maximum standing charge of a whopping £276 a year, which works out at almost 76p a day. Also at the high end, customers of Spark Energy pay a flat standing charge of £234 a year, which comes to 64p a day. At the lower end of this scale, SSE has the lowest maximum standing charge of £120 a year, or under 33p a day.
As for minimum standing charges for payment by direct debit, the highest after Spark Energy's £234 a year are the £201 (55p a day) charged by npower and the £200 (55p) charged by E.ON. The lowest minimum standing charges are levied by Utility Warehouse (£54; a mere 15p a day) and First Utility (£103; 28p a day).
Of the 17 energy suppliers listed above, eight charge a flat standing charge for direct debit payers, regardless of the tariff you're on. These flat fees vary from Spark Energy's £234 (64p a day) to Good Energy's £142 (39p a day).
For those customers who don't pay by direct debit, the highest maximum standing charge is £261 (72p a day), levied by npower. The next-highest maximum charge is £260 (71p a day) from M&S Energy.
The lowest minimum charges for non-DD customers are levied by Utility Warehouse (£54; 15p a day) and Co-operative Energy (£146; 40p a day). The highest minimum charges in this category come from ScottishPower (£225; 62p a day), npower (£201; 55p a day) and E.ON and SSE (both £200; 55p a day).
Could standing charges get more complicated?
One reason for us all to be concerned about standing charges and their complexity is that they could get even more complicated in the near future.
This is because Ofcom has ordered energy suppliers to scrap the two-tier charges currently employed. These mean they charge customers a higher unit rate for energy usage up to a certain threshold, then a lower rate beyond this level. Ofcom believes that this two-tier charging makes it too difficult for consumers to calculate their energy costs and understand their bills, so it is being binned.
By being forced to charge a single rate for all usage, suppliers will surely look around for ways to replace any lost income. So it's entirely possible that some will be tempted to jack up their existing standing charges, or introduce an even more bewildering maze of charges. Clearly, this would go against Ofcom's drive towards greater simplicity in the energy market - and could lead to more clashes between the regulator and energy suppliers.
Ofcom needs to ensure that standing charges are fair, understandable and not excessive. Otherwise, energy suppliers will use them to disguise price increases, confuse existing and potential customers, and thwart much-needed market reform.
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