Standing charge lottery yet another symptom of broken energy market

Ahead of Energy Secretary Ed Davey’s party conference speech today, new Which? research shows a huge variation in standing charges in consumers’ energy bills.

A standing charge is a fixed amount applied to your gas and electricity bill daily or annually.  Our investigation looked at the range of gas, electricity and dual fuel deals on offer for a specific customer in one region of the country, so we could accurately compare all the tariffs and standing charges available to that customer.  We found more than 109 different tariffs that included some 75 different standing charges.

These standing charges varied, sometimes even within energy companies, ranging from zero up to £402 a year on individual gas and electricity deals combined and as much as £373 on a dual fuel tariff.  

The bewildering array of charges is yet another example of how the energy market is too confusing for consumers to find the best deal for them.  That’s why Which? has been calling for simple tariffs, without standing charges and displayed in the style of petrol forecourt prices, so people can easily see the cheapest deal.

Ofgem’s current reforms to simplify the energy market will still allow companies to include a standing charge as well as a unit price in their tariffs.  We don’t think these measures will make it easy enough for consumers to spot and switch to the cheapest deal, so competitive pressure on prices will remain inadequate.

Rising energy prices are consistently one of the biggest worries for consumers but many people don’t switch to save money because the market is too complicated.  We recently found eight in 10 consumers could identify the cheapest deal when using the petrol forecourt style single unit price, and more than 10,600 people have already joined our campaign in support of this change.

Which? executive director Richard Lloyd said:  

At a time when consumers are struggling with the cost of living, and rising energy bills are one of peoples’ biggest financial worries, the Energy Secretary must step in to make it easier for consumers to work out the cheapest deal.

“Ofgem’s current plans to reform energy tariffs do not go far enough to simplify the market for consumers.  If the Government fails to take more radical action, people will not feel confident that they are paying a fair price for their energy.”

In a separate study, we’ve also looked to debunk some of the most common myths in the energy market.  With 79% of consumers saying they are worried about the rising cost of their energy bills, we have set out to answer some of the questions consumers have.  You can access the full list here.

Notes for editors:

  1. Prices quoted are based on tariffs on the market on 20/08/13 for a customer living in the West Midlands with a standard meter, mains gas, paying by direct debit and no economy 7 and include VAT
  2. £402 a year calculation is based on our specific customer signing up to Pioneer Energy’s Fixed 24 Months tariff with an annual standing charge of £266 for gas and Npower’s Energy Online October 2014 tariff for electricity which costs £136 per year.
  3. Highest standing charges do not necessarily mean the highest overall price for the customer – this will depend on a combination of standing charge, unit rate and consumption.
  4. Which? has investigated the impact of retail market as well as the wholesale energy markets on consumers and the cost of Government’s green policies, and published findings in a series of three reports.  You can find links to the reports here: The Imbalance of Power: The Challenge of Decarbonisation, The Imbalance of Power: Wholesale Costs and Retail Prices, The Imbalance of Power: The Retail Market
  5. Which? recently invited industry representatives and MPs to discuss our findings and recommendations, hosted by the Institute for Public Policy Research (IPPR).  You can find a write up of this meeting here
  6. Which? is asking consumers to come together and support our pledge for simple energy prices. More than 10,600 people have already pledged their support here.
  7. Our recent research revealed eight in 10 consumers could identify the cheapest deal when using the petrol forecourt style single unit price.  More detail can be found here
  8. People can compare energy prices using Which? Switch.  You can find more information here.

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