Money saving guru Martin Lewis has described charges which mean people are paying £300 before they’ve actually used any of the product as a ‘moral hazard’. Mr Lewis hit out over the high energy standing daily charges and said he believed they should be reduced.
They mean that people are paying around £300 per year - regardless of the prices of power, or whether that actually use it. He said on Twitter: “The high energy standing (daily) charges are a moral hazard and should be reduced. It is outrageous that people have to pay £300/yr just for the facility of having gas & electricity even if they use none.”
Mr Lewis spoke out as people from tomorrow will have a big reduction in their power bills when the energy price cap changes - meaning an average 17 per cent drop for most. However Mr Lewis pointed out that the standing charge remains the same, with the wholesale electricity prices down 10 per cent, and gas down 25 per cent.
He explained: ”So higher users, especially with gas will see a bigger than 17% drop. Lower users, especially electricity only, will see a lower than 17% drop. Keeping the standing charge high means lower users can save proportionately less and less by reducing usage - that disempowers them.
“I have long campaigned for lower standing charges. MSE is submitting a consultation on this about shifting some of the cost the unit rates. The reason Ofgem mandates firms to have high standing charges in the price cap is because they use it to pay for the ‘fixed costs’ of energy (distribution, transmission etc) - which it believes should be mostly shared equally.
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“It is especially loaded onto the electricity standing charge as that is ‘more universal’. I think a more progressive split would be better, by putting a bigger proportion of the cost on the unit rate. And in past polls I’ve done on here the huge majority agree. “
Campaign National Energy Action has criticised the standing charges saying they disproportionately affect low-income households, in particular prepayment customers, meaning 13% of the typical dual fuel energy bill is unavoidable. It says a standing charge of £350 per annum accounts for 41% of what those in the poorest 10% of households have available to spend on energy and leaves them with only £508 worth of gas and electricity every year.
The Guardian earlier this year reported that Ofgem consulted on calls to incorporate the standing charge into the unit price, so customers pay in proportion to what they use. It reported this idea had been rejected, arguing that “it would have a significant and disproportionate impact on some of the most vulnerable consumers, including the elderly and those living with disabilities, with very small savings of around £1 a month for others”.
It added: “Our priority is to protect the interests of consumers and we’ll continue to keep standing charges under review and consult widely on any future possible changes.”
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