Vale of Clwyd MP Dr James Davies has welcomed the launch of a review into standing charges by regulator Ofgem and is encouraging people to respond.
The standing charge is a cost that is included in everyone’s electricity and gas bill. It is a cost set by the supplier to recover the legitimate costs of serving customers.
Standing charges are charges that suppliers pass on to their customers, a significant element of which is the cost of operating the electricity and gas transmission and distribution networks.
As it costs more to distribute electricity to some regions than others, there are regional variations in standing charges to reflect higher costs to serve. The standing charge is passed on to consumers as a flat rate per day, rather than as a percentage charge, based on how much energy they use.
The standing charge includes the costs energy suppliers incur to provide a live supply of gas and electricity to all properties connected to a supply.
The amount consumers pay will depend on their supplier and where they live within Great Britain.
James has been contacted by a number of residents concerned by the soaring cost of Standing Charges in the SP Manweb region (Merseyside, North Wales and parts of Cheshire) and has repeatedly raised this matter with Ofgem and the Department for Energy Security and Net Zero (DESNZ).
James wrote Ofgem in July 2022 and April 2023, and DESNZ in July 2023 and October 2023. Recently, James has received a further response from Ofgem on this matter and was pleased to hear that they were looking into standing charges.
“Energy standing charges are now at record highs in North Wales, and there continues to be a significant regional divide.
“Customers in the SP Manweb region have been used to paying some of the highest average costs in Great Britain – more than £380 a year even before using a single unit of energy, compared to the lowest, in London, at £299.
“Having had so many constituents contact me over this, I wrote to Ofgem and DESNZ asking them to outline why this is the case, and what steps are being taken to address this issue.”
In their response, Ofgem stated:
“We are especially aware of customer concerns over the level of standing charges. Standing charges pay for important network build and maintenance projects, the cost of which must be shared fairly across the market. However, standing charges have increased over the last year or so, due to several factors, one of which is costs from the failure of several energy suppliers in 2021 and 2022.
“These costs would still exist if the standing charge were to be scrapped. In previous reviews, we found that shifting costs to unit rate disproportionately impacts some customers who unavoidably have high demand. This includes customers with electric heating, renters in poorly insulated houses, customers with disabilities and those with families at home. The extra costs for these customers were far higher than the modest savings that customers with lower-than-average demand would see.
“However, we recognise that customers are concerned about increasing standing charges and with that in mind, we are undertaking a programme of work to look at standing charges and the impact that they have on customers.”
Their review was launched last Thursday, and James is keen for people in Denbighshire to respond.
“They want to hear views from: consumers, people who pay the electricity or gas bill in their household; energy sector, including suppliers; consumer groups; and charities
“Feedback from the Review will help them to set out recommendations in their formal consultation due to be published next year. This formal consultation will lead into a policy on standing charges.”
To respond to Ofgem’s Review, read their standing charges call for input discussion paper and reply with your views by Friday 19 January 2024.