Why is our energy standing charge up 192.8% in seven years?

Last weekend the unit price of electricity and gas in our household fell slightly, as it did in most of Britain.

That’s because the Ofgem price cap of £2,074 is now better than the government’s energy price guarantee, which was set at £2,500.

Shell Energy, my supplier, sent an email to say our new electricity rate would drop from 33,981p to 30,720p per kWh and gas from 10,203p per kWh to 7,398p per kWh.

So far, so good. Wholesale costs are down and hopefully we’re over the worst of energy inflation chaos when it comes to how we’re priced per unit.

However, in the same email we were informed that the flat rate for electricity per day remains at 43.65p and gas at 29.11p.

No discount on that part of our bill.

Fixed costs have become a bone of contention for households.

In principle, the standing charge covers the costs of the energy supplier for connecting electricity and gas to your home.

But in most cases you have to pay the levy, even if you do not use gas or electricity.

This is Money’s Simon Lambert has moved out of his home while working on a DIY project, but says he still earned £20.92 in fixed costs in June.

For some bizarre reason, he pays slightly lower fixed costs than I do, despite the fact that he also has an energy rate.

Many people have complained about the rising cost of these fixed costs in recent years.

At the maximum energy price cap levels of 53p for electricity and 29p for gas, this could add £300 to an annual bill.

The new price cap will result in lower bills, especially for households that use a lot of energy.

But for those cautious households and those living in smaller properties, the discounts are likely to be less noticeable – and part of the reason for that is the standing charge.

So I did some digging. We’ve been with Shell Energy for seven years – before it took over our old supplier, First Utility.

Logging into our online account allowed me to go back to the beginning of our accounts.

Now I knew that the standing charge element was probably going to move up a little bit, but what I didn’t expect was a 192.8 percent increase.

In June 2016 my fixed fee for electricity was 14.91p per day and for gas 16.26p. Today it is 43.65 pence for electricity (+192.8 percent) and gas for 29.11 pence (plus 79 percent).

According to This is Money’s historic inflation calculator, headline UK inflation through early 2023 is 31.81 percent, so the standing charge is nearly seven times higher than headline inflation.

That’s outrageous.

Shell told me: ‘The fixed costs reflect the industry and network costs we incur as a supplier and are set by the regulator Ofgem.

“There are a number of factors that affect this, including your location and how you pay.

“The amount that suppliers pay to network companies is increasing for two main reasons. Firstly, the costs of maintaining the network have risen and secondly, there are costs associated with the collapse of so many energy suppliers in previous years.’

I’m not blaming Shell at all here – they happen to be my energy supplier and it will be broadly the same no matter who you’re with.

The vast majority of the standing charge consists of two elements: operating costs and network costs.

There are also other factors at play.

The third largest part of the fixed charge is green levies and the provision of the Warm Home Discount, and the fourth is the cost of the controversial roll-out of the smart meter.

The big question is: should fixed costs be reduced and instead rely more on the unit price of energy?

That would mean smaller households, and those who are less energy intensive could potentially save more.

We all understand that it costs money to stay connected to the grid, but it’s hard to swallow an almost 200 percent increase in seven years to do so.

Networks must be maintained regardless of how heavy the consumption per household is, and meter reading and maintenance must also take place regardless of consumption. These steps cost money.

Also, the total collapse of many smaller energy companies means that the provider of the last resort charge has also swelled.

All households have suffered from the incompetence that comes with allowing unknown fly-by-night firms to set up and attract clients they shouldn’t have, before the founders vanished into the sunset .

So, is Ofgem going to do something about it?

It doesn’t seem.

It conducted an evaluation and concluded that it was not feasible to move costs from standing charges to usage per unit.

A spokesperson for the energy regulator told me: ‘After reviewing some of the fixed costs for electricity that covered supplier outage costs (SoLR costs), we took a long, hard look at whether moving the cost of fixed costs according to use was the right choice. but the numbers just didn’t add up.

Our analysis shows that it would have a disproportionately negative impact on some of the most vulnerable consumers who consume large amounts of energy and are least able to reduce their consumption, such as people with disabilities and the elderly, while resulting in minimal savings. for those who would benefit – about £1 per month.

“This continues to be a worrying time for people across the country and we recognize the challenges facing many.

“While this was specifically related to recovering SoLR costs, we will continue to review fixed costs and consult broadly on potential future changes.”

It seems that high fixed costs remain and there is nothing you and I can do about it.

If that rate of inflation continues at the same rate, we’ll be paying about £1.27 a day for electricity by 2030 – or £463 a year.

Gas at 79 per cent inflation would be a jump to around 52 pence a day – or £190.

That would mean almost €600 a year…