Ofgem has recently called for a conversation on the future of standing charges. There is a lot of confusion on what these standing charges are on an energy bill, and what they are used for, so here's some detail.
Standing charges are a fixed daily amount that customers have to pay, no matter how much energy you use. This charge covers the cost of supplying your property with electricity and gas. Standing charges vary by supplier, where you live, how you pay and what meter you have.
The charge pays for costs such as government schemes to help reduce carbon emissions and fuel poverty, connections to and maintenance of the energy network as well as service administration charges. It's a bit like the line rental you have for your phone, but for your energy.
The costs cover maintaining and repairing the grid, essential upgrades as more people use renewable energy such as solar panels, and energy bought by providers who then close.
Like your unit prices for energy, standing charge costs are capped but can change as the costs to maintain the energy network also change. Standing charges are reviewed and set every three months by Ofgem, the energy regulator.
Why have they increased so much recently?
One reason is supplier closures.
In recent years some energy suppliers have closed. This means E.ON Next and the other energy providers take on their customers so their gas and electricity supply isn’t interrupted. They also take on the extra share of the energy grid costs (and pass them on to their customers).
Energy companies buy energy a few years ahead. But, when a supplier fails, if the providers taking on the customers can’t or don’t want to buy the failed supplier’s pre-bought energy, it is paid for by the energy network.
Another reason is the increasing numbers of renewable electricity sources.
The energy grid is currently built to work from a small number of very large power stations sending electricity ‘one way’ from power stations to homes and businesses at predictable time, such as when most people are at work.
However, with weather-dependent renewable electricity sources, increasing special equipment needs to be installed so power stations can know how much renewable electricity is being put into the energy grid throughout the day.
We're here for you.
Our Energy Specialists are here to help if you're concerned about the impact of the increase on your energy bills. If you're struggling to pay, please visit our help page to find out more about how we can support you.
You can reach out to our Energy Specialists for personal advice on Facebook and Twitter. You can also find more information over on our price cap information page.
Feel the Community power.
The E.ON Next Community is a space for customers just like you, sharing their experiences to offer a helping hand. Find support or suggest your own unique topics, plus get involved in discussions of all the latest news. Join the conversation now.