In this article we’ll delve a little deeper into what elements make up standing charges, and what’s changing.

What are standing charges?

Standing charges are the daily costs shown on your invoice, and will be applicable regardless of your energy usage.

For example you might see a standing charge of £1.00 per day. This £1.00 will be charged every day, regardless of how little energy you use.

Why do standing charges exist, and what do they cover?

Energy costs are made up from numerous different underlying charges, such as metering, distribution, transmission and government charges.

Think of all the costs that go into any product or service. There are often multiple cost elements which make up the end cost to a consumer, and energy is no different.

For example, wholesale electricity makes up around one-third of the cost you see on your bill. The other two-thirds is from the other cost elements.

Some of these other costs are charged to suppliers as a fixed daily rate. Therefore from a business perspective, it makes sense for suppliers to also model their charges taking into account these fixed daily costs, rather than base them on consumption.

Where these fixed underlying cost elements are known in advance, suppliers can account for them in their quotes. Where they are unknown, suppliers need to try and forecast them. This can be tricky.

Along with individual suppliers having different risk profiles and tariff structures – this is why you might see suppliers quoting different standing charges to one another. Hence some suppliers might quote cheaper standing charges than others, or vice versa.

Why are standing charges going up?

The fixed daily cost elements described above are increasing. Specifically, some distribution and transmission costs.

Transmission costs in particular for larger electricity users are increasing significantly, by up to 220% in the next 5 years.

Therefore suppliers are having to pass these increases onto customers because otherwise they would either be making a loss, or risk basing these costs on consumption – but that would simply push up the unit rate instead.

Suppliers are often blamed for the increase in charges because they are the party that invoice customers, however the reason for the cost increase is that suppliers are having to pass on the extra costs they incur.

But my standing charges seem very high?

Let us check your current status to see if we can spot anything wrong or whether any adjustments can be made. Please email us at enquiries@costadvice.co.uk or call us on 01246 252780.