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Highlands and Islands Greens
Highlands and Islands Greens

Feather-Bedding the Energy Supply Industry – Smallest Users Hit Hardest

Thursday, November 28th, 2013

The Highlands and Islands Branch of Scottish Green Party has today released the following statement, condemning the Coalition Government and Ofgem for their statutory requirement for energy supply companies to include standing charges in their new domestic tariff structure. [1, 2]

“While we broadly welcome the principle of simplifying tariff structures, this standing charge measure will have a discriminatory and adverse impact on millions of small-use and/or energy efficient domestic consumers, who will – in effect – be paying a higher overall unit-price for their gas and electricity than will larger-users, because any standing charge will form a larger proportion of their overall energy bill” said Anne Thomas, Secretary of the Highlands and Islands Branch.

“This means that those domestic customers who consume the most energy will have their gas and electricity costs subsidised by smaller-users – the more you consume, the more you’re subsidised by others!

“The standing charge requirement is also liable to perpetuate fuel poverty and act as a potential barrier to the benefits of smart metering.

“The requirement clearly and directly conflicts with both the Scottish Government’s aim to ensure that by November 2016 people are not living in fuel poverty in Scotland, and with one of the Dept. for Energy and Climate Change’s (DECC) three high-level objectives, namely to minimise costs to consumers and subsequent impacts on fuel poverty.

“Ofgem have publicly claimed [3] that standing charges were ‘just a way of recovering overheads that are unrelated to energy use’.  But all organisations have overheads, which they normally reflect in the prices and charges they make for the goods and services they provide.  Petrol and diesel-supply companies, for example, do not set standing charges, despite having similar types of overheads.

“So why should the regulator step in with a statutory requirement that will provide energy companies with what is effectively a guaranteed income, and to the financial detriment of millions of smaller-use and poorer consumers?

“Greens have previously pressed Ofgem to abandon its decision, and also for the Coalition Government and the Scottish Government to step in – all so far to no avail.

“Abolishing the requirement for standing charges now provides a once-in-a-generation opportunity to make significant inroads into fuel poverty, to encourage greater energy efficiency and discourage unnecessary consumption.  But if Ofgem instigates its requirement, we cannot realistically see that there would be sufficient political will for the provision to be abolished in anything other than the long-term.

“We consider that it would be disastrous for the lives of many millions of people, for the environment and for resource conservation if Ofgem goes ahead with its plans.

“For standard, domestic tariffs at least, we would prefer to see standing charges abolished, and a single-rate tariff, or a ‘rising’ tariff introduced which would help low fuel users address fuel poverty, encourage greater energy efficiency and discourage unnecessary consumption.

Notes

1. See para 2.13 of Ofgem’s Retail Market Review (27 August 2013)

2. Ofgem’s report says that: “We still propose that the key rules that address the number and complexity of tariffs will be in place by the end of 2013 and most others by the end of March 2014.12

3. See Ofgem’s 3 September 2013, in a letter to ‘The Guardian’ of 3 September 2013

4. ‘Which?’ have also called for the abolishment of standing charges.

5. See also our Q&A Briefing.