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Standing charges are a presence on most (although not all) energy plans on the market today. But what are they? What does your standing charge pay for? And why must we pay them? Especially when a little research shows us that there are some energy plans with no standing charges whatsoever. They are very important for understanding your utility bills.
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We are all reliant on energy. It lights our homes, it cooks our meals, it keeps us clean, warm and cosy. But some of us may be unaware of what we’re paying for when our energy bill arrives. Whether you pay monthly, or by Direct Debit, your energy bill is made up of more than just the unit rates of the gas and electricity you use. You’ll also see a daily standing charge on both fuels. Likewise, whenever you’re looking for a new energy supplier, it’s important to factor in your prospective new suppliers standing charges on the fuel they supply as well as the unit cost per kWh of the fuel itself.
What are standing charges on energy plans?
Most energy tariffs on the market have a standing charge. Even tariffs for customers that use prepay meters have daily charges folded into their energy costs. This is because the energy industry operates on extremely thin profit margins. This is one of the reasons why smaller suppliers (who try to gain traction by undercutting their competitors on price) go under from time to time.
Most energy suppliers make very little profit on the energy they sell. Typically, energy suppliers make around 5% profit on their energy. And there are some suppliers, like Pure Planet, that make no profit at all on the energy they supply.
As such, standing charges are a way to make sure that energy suppliers are able to keep themselves afloat, pay their employees a living wage and use the networks that carry energy to your home. As well as investing in measures to reduce their carbon footprint.
How do standing charges work?
Standing charges are added to your bill on a daily basis. Depending on your supplier and tariff, they can be anywhere from 5p to 60p for electricity and between 10p and 80p per day for gas. These standing charges are the same, regardless of how much energy you use.
Standing charges are then used by energy suppliers to cover a range of operational costs including:
- Using and maintaining the local energy network.
- Meter maintenance.
- Costs associated with government initiatives to reduce carbon emissions and protect vulnerable consumers.
- Personnel costs.
- Operations and systems costs.
You can find out more about your energy bills and how they are composed by visiting Ofgem’s website.
Are there any plans without standing charges?
There are a number of suppliers that offer energy plans that have absolutely no standing charges. These ensure that your energy bills are composed only of the cost of the energy you use. Suppliers include:
- Good Energy
- N Power
However, these plans are not necessarily cost-effective for everyone.
Which brings us to…
Should I switch to a plan without standing charges?
For most energy consumers, the honest answer is no. While this may seem counterintuitive, the lack of a standing charge will be offset by much higher unit rates for the electricity and gas that you use. Tariffs without standing charges will likely be more expensive for households with moderate-to-high energy use.
They are best suited to:
- Properties that are vacant for 9 months a year or more.
- Households that have an infrastructure to generate their own energy through PV solar panels, domestic wind turbines etc.
Get the perfect energy plan for your needs, with or without standing charges
Whether or not to get a tariff that includes standing charges is a decision that only you can make. However, we can take the time and effort out of scouring the market for the best energy tariffs on your behalf.
What’s more, we can even manage your switch from end-to-end so that you can enjoy cheaper energy completely hassle-free!
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Standing Charges FAQs
How much are standing charges?
That depends entirely on the energy supplier and the tariff. As with unit rates per kWh, standing charges tend to be higher for variable rate tariffs as these represent more of a risk for suppliers. Standing charges can vary enormously, between 10p and 80p per day for gas and between 5p 60p per day for electricity. By rule of thumb, the lower the standing charge, the higher you can expect your unit rates to be.
Why should I pay a standing charge if I don’t have to?
It’s true that there are a number of tariffs on the market with no standing charges. Which begs the question, why should you pay a standing charge if you don’t have to. However, zero standing charges inevitably means much higher unit rates. These tariffs are intended primarily for those whose usage is very low. Such as those whose properties are empty for most of the year or those who generate their own energy and are less reliant on the grid.
Which energy suppliers have rates with no standing charges?
At the time of writing, there are a number of energy suppliers that offer tariffs with no standing charges. However, as previously stated, you should make absolutely sure that a standing charge-free tariff is a good fit for your energy use.
These include Good Energy, E.On, Ebico, N Power and Utilita.
Do energy suppliers make a profit on standing charges?
One thing that many energy consumers are unaware of is that profit margins in the energy sector are razor-thin. Hence, why so many smaller energy suppliers seem to go out of business so often. Typically, an energy supplier will only make around 5% profit on the energy they supply (more if they have the infrastructure to generate it themselves). Indeed, some suppliers, like Pure Planet, don’t make any profit on the energy they provide at all. Hence, the standing charges are the only way for them to pay their workforce a living wage, invest in operations and maintain customers’ energy meters.
Updated on 3 Dec, 2020