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Ofgem urged to clear standing charge minefield facing consumers

  • Plans to simplify market for consumers are in danger of being derailed as suppliers introduce a plethora of standing charges

  • Currently 45 different standing charges on the market – British Gas alone has eight across its range of tariffs and payment methods

  • First Utility customers face a difference of up to £139 a year in the standing charge they are being asked to pay

  • Of the big six suppliers, just one bucks the trend and settles for one standing charge across all its tariffs and payment methods, however British Gas has now announced that it will only have one standing charge by the end of this year.

Ofgem’s push for simplicity in the energy market is in danger of being derailed by a plethora of standing charges, according to Uswitch.com, the independent price comparison and switching service. One supplier alone, British Gas, has as many as eight different standing charges across its range of tariffs and payment methods. And it is not alone, in total consumers now have to navigate a minefield of 45 different standing charges across the market.

Of the big six, just one supplier, EDF Energy, has bucked the trend and settled for one standing charge across all its tariffs and payment methods. British Gas has now announced that it too will only have one standing charge in place by the end of the year. However, other suppliers are yet to reveal their hands.

The news will come as a blow to those expecting a simpler energy market as a result of Ofgem’s Retail Market Review. Simplification is expected to enable consumers to compare prices easily across suppliers and to feel confident about shopping around for a better deal. To achieve this, the regulator is canning the two-tier charges that saw consumers paying a higher unit rate for their energy usage up to a set threshold, and a lower rate once they had exceeded it. This system made it very difficult for consumers to calculate costs or understand bills.

Instead, suppliers are now required to charge just one rate for all usage, but in return they are allowed to set a standing charge – a base fee – which should recover the basic, fixed costs of supplying a home. Unfortunately, while some suppliers have kept things simple and have one standing charge applied across all their tariffs – others have set different standing charges for each tariff and even for each payment method leaving consumers facing a bewildering maze of charges.

And complexity isn’t the only concern – there are also large anomalies in the standing charges being set by some suppliers across their different tariffs. In the worst case, First Utility’s standing charge differs by up to £139 a year. Customers on its iSave Everyday tariff are being charged £103 a year, while those on its iSave v15 tariff are being charged £242 a year.

Amongst those suppliers with different standing charges across their product range, the average difference in the amount they are charging consumers is £68.

Ann Robinson, Director of Consumer Policy at Uswitch.com, says: “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.

“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.”

Maximum and minimum standing charges per supplier

|

Supplier

|

Monthly Direct Debit

|

Cash and Cheque

|

Maximum standing charge

|

Minimum standing charge

|

Difference

|

Maximum standing charge

|

Minimum standing charge

|

Difference

|

British Gas

|

£178

|

£142

|

£37

|

£190

|

£151

|

£39

| |

Co-operative Energy

|

£146

|

£146

|

|

£146

|

£146

|

| |

Ecotricity

|

£166

|

£166

|

|

£166

|

£166

|

| |

EDF Energy

|

£165

|

£165

|

|

£165

|

£165

|

| |

E.ON

|

£210

|

£200

|

£10

|

£210

|

£200

|

£10

| |

First Utility

|

£242

|

£103

|

£139

|

|

|

| |

Flow Energy

|

£148

|

£148

|

|

|

|

| |

Good Energy

|

£142

|

£142

|

|

|

|

| |

M&S Energy

|

£194

|

£180

|

£14

|

£260

|

£194

|

£66

| |

npower

|

£276

|

£201

|

£75

|

£261

|

£201

|

£60

| |

OVO Energy

|

£168

|

£168

|

|

|

|

| |

Sainsbury’s Energy

|

£157

|

£142

|

£15

|

£157

|

£157

|

| |

ScottishPower

|

£230

|

£187

|

£43

|

£252

|

£225

|

£27

| |

Spark Energy

|

£234

|

£234

|

|

|

|

| |

SSE

|

£120

|

£108

|

£12

|

£200

|

£200

|

| |

Utility Warehouse

|

£140

|

£54

|

£87

|

£140

|

£54

|

£87

| |

Woodland Trust Energy

|

£168

|

£168

|

|

|

|

|

Source: Uswitch.com

*Differences may be slightly out due to rounding

Number of standing charges per big six supplier:

|

Supplier

|

Number of standing charges

|

British Gas

|

8

| |

ScottishPower

|

6

| |

npower

|

5

| |

E.ON

|

3

| |

SSE

|

3

| |

EDF Energy

|

1

|

FOR MORE INFORMATION

Jo Ganly

Phone: 020 7148 4662

Email: jo.ganly@uswitch.com

Twitter: @UswitchPR

Notes to editors

  1. All data provided by Uswitch.com. Correct as at 5th July, 2013. Data based upon dual fuel tariffs paying by either monthly direct debit or quarterly on receipt of bill with standing charges averaged across all regions.

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