New research by uSwitch.com has found that 45 different standing changes are currently available on the market. The news is a blow for Ofgem, which recently launched its Retail Market Review in a bid to simplify energy costs for consumers and facilitate price comparisons.
For example, just one supplier, British Gas, operates eight distinct standing charges across its range of tariffs and payment methods.
Market-wide, the average difference between standing charges across distinct suppliers’ offerings is £68; however, uSwitch research found gas and electricity supplier First Utility offers plans with standing charges ranging from £139 a year to £242 a year.
A ‘minefield’ for consumers
Ofgem set out to add clarity to the market by getting rid of the previous two-tier charge system; a system that saw consumers pay a higher per unit rate for energy until they reached a set level of consumption, at which point a lower rate was applied. This process made it difficult to calculate costs and understand bills.
Ann Robinson, director of consumer policy at uSwitch.com, said: “With standing charges we are in danger of seeing one layer of complexity being replaced by another. The end result could be that consumers will still be left facing a minefield – it will just be a different minefield to the one they were trying to navigate before.”
The new system requires suppliers to charge a single rate for all energy use but allows them to set a standing charge to cover the basic costs of supplying the household. The success of this initiative has been mixed, with just one supplier — EDF Energy — currently applying one standing charge for all tariffs.
The other suppliers apply various standing charges, depending on the tariff and even the payment method chosen. British Gas has announced the creation of a single standing charge for end of the year. However, other suppliers are yet to comment.
Creating a clearer and more competitive market
Speaking on the issue, Robinson said: “Standing charges need to be fair, easy-to-understand and truly reflective of the fixed costs of supplying households with their energy. While some variation and choice will benefit consumers – giving them more cost-effective options dependent on their energy usage, payment method and behaviour – too big a range will simply leave them baffled. It’s a balancing act and it’s rapidly starting to look as though some suppliers have not yet got it right.
“We would urge suppliers to follow EDF Energy and British Gas and to review their standing charges as a priority to ensure that consumers get the simpler, clearer, competitive market they deserve. There is a warning here for Ofgem too – it has one shot at getting this market right for consumers, which is why it must keep a close watch on standing charges to ensure that complexity isn’t allowed to creep back in. Failure to remove complexity could see its vision for the competitive market derailed once-and-for-all.”