Crunch time......

[pabenny]

I also think the time has come to stop the "standing charge" ripoff and recover infrastructure costs from the unit price..... without penalizing the consumer. My responsibility, as a consumer, is not to guarantee the supplier a fixed basic cost for their services.... I don't do it for supermarkets or petrol stations, why should I do it for an energy company?

For some services - telecoms, music and video streaming - the amount we pay is fixed, irrespective of usage. Of course it's not described as a standing charge, but in essence it's the same thing.

Incorporating standing charges into the unit rate has some regressive consequences
- owners of second homes (typically well-off people) end up contributing relatively little to fixed costs;
- Low income households are likely to be over-represented amongst high energy consumers - with poorly insulated rental properties, inefficient heating and appliances that they are unable to change.

[macliam]

I also think the time has come to stop the "standing charge" ripoff and recover infrastructure costs from the unit price..... without penalizing the consumer. My responsibility, as a consumer, is not to guarantee the supplier a fixed basic cost for their services.... I don't do it for supermarkets or petrol stations, why should I do it for an energy company?

For some services - telecoms, music and video streaming - the amount we pay is fixed, irrespective of usage. Of course it's not described as a standing charge, but in essence it's the same thing.

Incorporating standing charges into the unit rate has some regressive consequences
- owners of second homes (typically well-off people) end up contributing relatively little to fixed costs;
- Low income households are likely to be over-represented amongst high energy consumers - with poorly insulated rental properties, inefficient heating and appliances that they are unable to change.

The same is true of supermarkets and petrol stations... however, I then have the choice of which to use. If a supermarket charged £5 for entry, they'd lose customers, worse, if a supermarket totted up your bill and then added £5 on top for unspecified extras, they'd lose customers.

There is no way that services where the cost of a product is not restricted by availability but defined by the transport mechanism (such as broadband, telcommunications or streaming) can be compared with products where there is an item cost for the product being supplied - this is a battle that has been lost by the suppliers of broadband.

There is a requirement for energy supply to all households and even the gas supply network has expanded over past years - not because of a fixed charge, but to gain custom. The argument that removing the standing charge would be regressive is poppycock..... the amount gained by charging those who use little energy is easily offset by the sponge of an unregulated fixed charge ripping off ALL customers. If a charge is applicable at all, it should be regulated and equal across ALL suppliers - because ALL suppliers face the same network costs..... it should not be a toothless recommendation which suppliers can ignore in an attempt to gain extra income.

Of course, there is a simpler way to stop the rip off..... necessary utilities should not be in the private sector, so that profit is not a factor. Privatised utilities are merely a continuous game between the companies and the regulator - if the companies had the customer's interest at heart, regulation would be unnecessary.... insted we all pay extra for the poacher and the gamekeeper, thanks to privatization.

[pabenny]

The same is true of supermarkets and petrol stations... however, I then have the choice of which to use.

And that's the difference. Energy and water infrastructure is a natural monopoly. Customers cannot choose their network operator.

There is no way that services where the cost of a product is not restricted by availability but defined by the transport mechanism (such as broadband, telcommunications or streaming) can be compared with products where there is an item cost for the product being supplied - this is a battle that has been lost by the suppliers of broadband.

I differ - economically, they are the same. The distinction is that the marginal cost of a call or of data transmission is approximately zero, whereas there clearly is a marginal cost for energy.

... an unregulated fixed charge...

The standing charge is made up of a Use of System charge from the network operators - this is regulated. And other charges imposed by government (either directly or via Ofgem/Ofwat) - climate change levy, subsidies for certain consumers, costs for supplier failures. I agree that these other charges are opaque.

[macliam]

The same is true of supermarkets and petrol stations... however, I then have the choice of which to use.

And that's the difference. Energy and water infrastructure is a natural monopoly. Customers cannot choose their network operator.

There is no way that services where the cost of a product is not restricted by availability but defined by the transport mechanism (such as broadband, telcommunications or streaming) can be compared with products where there is an item cost for the product being supplied - this is a battle that has been lost by the suppliers of broadband.

I differ - economically, they are the same. The distinction is that the marginal cost of a call or of data transmission is approximately zero, whereas there clearly is a marginal cost for energy.

... an unregulated fixed charge...

The standing charge is made up of a Use of System charge from the network operators - this is regulated. And other charges imposed by government (either directly or via Ofgem/Ofwat) - climate change levy, subsidies for certain consumers, costs for supplier failures. I agree that these other charges are opaque.

I agree - no monoplies should be allowed, natural or otherwise, at best they distort the market, at worst they are a license to print money. However, to argue that there is no difference between marginal cost and actual, variable cost of limited resource is dancing on the head of a pin. They are not comparable. An "opaque" standing charge, even where elements within in it are regulated, is an unregulated standing charge.

Ofgem/Ofwat ares NOT working for the good of consumers, they are just ticking boxes.

[pabenny]

I don't know what you are agreeing with when you say monopolies should not be allowed. A natural monopoly is one where it makes no practical or economic sense to be otherwise - such as a electricity cables and gas pipes to your door.

Where the monopoly providers are private sector companies, we have regulators to protect the interests of customers. That's all customers, from domestic to large commercial users. And future customers - whose interests include ensuring there is sufficient investment to ensure continuity and reliability of supply.

Whether the energy and water regulators go a good job is certainly up for debate. I do think that Ofgem have been insufficiently demanding on the financial durability of new entrants.

Marginal cost and variable cost are more or less equivalent terms. Not sure where anyone in this thread has suggested otherwise.

If being partly regulated and partly imposed by government makes standing charge unregulated, well, that' would not be my definition of unregulated.

[macliam]

Sorry, you are dancing.

Private companies in monopoly situations do not exist for the benefit of consumers.... they have no control over the supply other than a ridiculous "pseudo" market which has proved disastrous of late - the actual network maintenance and supply to the customer is carried out by a third party where there is no attempt at providing "choice". Water companies are even more ridiculous as they are nothing more than the privatized face of the old water boards, but now with even less scope for cooperation due to their market structure. The whole thing is a money pit where profits are taken from basic necessities for the benefit of shareholders and with no benefit to the consumer. In fact, the whole privatization scam was gerrymandered by restricting funding and disallowing access to the market for investment.... it is a failed experiment.

Regulators are only required because the privatized utilities do NOT do a good job, but they are left toothless and only exist as a means to insulate government, where the responsibility actually belongs. There is a continual battle between the regulator playing catch-up and the companies finding another way to boost profits at the cost to the consumer. This cat and mouse game is another "cost" that the consumer has added to their bill... faceless bureaucrats chasing sharp marketeers, paid for by the customer.

There is a difference between electricity, gas, water and other utilities and telephony or internet. The former have a unit cost for the saleable product, a need to extract or create a finite resource and deliver it to the market - a resource that has a defined unit cost. Then it has the cost of network transport and maintenance, and marketing added to result in the charge levied on the consumer. Telephony, internet and media delivery have a cost base made up of an overall cost of the network infrastructure and marketing, with a tiny proportion of an overall cost for product creation, which is not a unit cost, nor finite, nor dependent on the number of consumers. They are different products entirely.

As for your contention that having some regulated components within a "grey" overall charge somehow prevents that overall charge being described as unregulated.... it is clearly ludicrous. The companies can add however much they like to the suggested charge, over and above that which is "regulated". There is no control over these additional charges and no transparency...... so the overall charge is unregulated.

The whole privatized utilities market is a scam for the benefit of the investor at a cost to the consumer, built upon a fabricated requirement for independence and investment, which other countries have managed to meet without handing control to private companies. Isn't it odd that we have electricity supplied and trains run and parcels delivered by nationalized companies..... except that they are nationalized elsewhere!

[pabenny]

On standing charges

The price cap limits the rates a supplier can charge for their default tariffs. These include the standing charge and price for each kWh of electricity and gas (the units your bill is calculated from).

(from point (2) here: https://www.ofgem.gov.uk/information-co ... ffects-you)

Is capped by the regulator not the same thing as regulated?

[pabenny]

Private companies in monopoly situations do not exist for the benefit of consumers.... they have no control over the supply other than a ridiculous "pseudo" market which has proved disastrous of late - the actual network maintenance and supply to the customer is carried out by a third party where there is no attempt at providing "choice".

This seems to be conflating the natural monopoly of the distribution network with the competitive supply market. I can choose my supplier but all will use the same pipes and cables to supply my property - rather like, telecoms, where whoever I sign up with, the last mile and much of the global network is owned and operated by Openreach.

[macliam]

On standing charges

The price cap limits the rates a supplier can charge for their default tariffs. These include the standing charge and price for each kWh of electricity and gas (the units your bill is calculated from).

(from point (2) here: https://www.ofgem.gov.uk/information-co ... ffects-you)

Is capped by the regulator not the same thing as regulated?

If the actual charge, over and above the charge for the electricity consumed, varies between suppliers, then obviously it is not regulated. The components of this extra charge, whether regulated ot not, are not capped or controlled - but it is a monthly charge applied to the consumers bill. Whether this extra charge can be desribed as as standing charge or not is totally irrelevant.

Private companies in monopoly situations do not exist for the benefit of consumers.... they have no control over the supply other than a ridiculous "pseudo" market which has proved disastrous of late - the actual network maintenance and supply to the customer is carried out by a third party where there is no attempt at providing "choice".

This seems to be conflating the natural monopoly of the distribution network with the competitive supply market. I can choose my supplier but all will use the same pipes and cables to supply my property - rather like, telecoms, where whoever I sign up with, the last mile and much of the global network is owned and operated by Openreach.

No conflation.... the "competitive supply market" is a sham, corrupted by those "big boys" who buy and sell to themselves in order to set the price. This was the reason for new"independent" supply companies to be allowed, suggesting an alternative "free" market - except, of course, that the stupid regulatory system then allowed short-termist sharks to move in, sharks whose sole aim was to build market share in order to sell on these companies at vast profit to the original investors.... adding scam to sham. Now, most of these "new" suppliers have gone to the wall - leaving those same few who were the problem in the first place to survive. Another failed experiment.... the costs of which will be added to the consumer's bill for years to come.

Telecoms is a very different proposition, as I suspect you know. Apart from the negligible inherent unit cost of the product, delivery technology varies. Final delivery may be over Openreach copper or fibre, but it may also be via other operators in certain areas, or via cable or mobile signal. Even where the Openreach network is chosen as the final mile, infrastructure beyond the local exchange can be entirely independent - again the choice is with the supplier where they choose to make their play. So there is a degree of competition..... maybe not enough, but far more than with gas, electricity or water.

[pabenny]

On standing charges

The price cap limits the rates a supplier can charge for their default tariffs. These include the standing charge and price for each kWh of electricity and gas (the units your bill is calculated from).

(from point (2) here: https://www.ofgem.gov.uk/information-co ... ffects-you)

Is capped by the regulator not the same thing as regulated?

If the actual charge, over and above the charge for the electricity consumed, varies between suppliers, then obviously it is not regulated. The components of this extra charge, whether regulated ot not, are not capped or controlled - but it is a monthly charge applied to the consumers bill. Whether this extra charge can be desribed as as standing charge or not is totally irrelevant.

The charge varies between suppliers because
(a) the regulator sets a maximum rather than a fixed amount.
(b) there are regional variations arising from the historic regional electricity boards. These in turn reflect different geography - in London, many consumers, higher cost but more reliable underground cables compared with rural areas with fewer consumers and cheaper overground cables that are more vulnerable to weather etc).