Energy standing charges: Why regions pay 60% more than others

Standing charges on electricity bills will rise for everyone in April, but research has shown that customers in some regions will pay up to 60 per cent more per day than others.

The charges are expected to double in South Scotland, North Wales and the South west of England, while in London and the East of England they will increase by just under 60 per cent. 

Fuel poverty campaigners have written to regulator Ofgem urging it to reduce the charges, which it says are discriminatory.

The charges and are applied daily regardless of how much energy the customer uses, and are used to cover the cost of supplying energy to a home. 

Therefore they are often more expensive in rural areas, where the cost per home to the energy supplier is higher. 

They also cover costs related to the failure of energy suppliers, which has been commonplace in recent months. 

Campaign Group Fuel Poverty Action has suggested that the majority of extra funds collected in the latest standing charge rise will be used to this end. 

Standard charges are capped by the energy regulator on standard default tariffs, though this cap also varies by region. 

The rise in standing charges from 1 April will cost an average of £71 annually per household, with some residents in Wales, Merseyside and the Midlands paying an extra £80 a year. 

Energy bills as a whole have rocketed in recent months due to increases in the cost of natural gas, and will rise by 54 per cent when the price cap goes up on Friday. 

Given the increased cost to households, campaign group Fuel Poverty Action has said that the ‘injustice of the standing charge must urgently be addressed’.

The Fuel Poverty Action co-director, Ruth London, said: ‘Why has Ofgem decided to make the poorest customers pay for their bad decisions and for bad practice in the industry? This huge injustice must be urgently reversed.’ 

Its analysts suggest that £68 of the £75 increase in standing charges would be because of supplier failure, with vulnerable customers on prepayment meters or paying by cheque or cash left paying the highest standing charges.  

Ruth added: ‘Prepayment meters are another way that people with the least resources – and often with the leakiest, most poorly insulated homes – are forced to pay the highest price for fuel.

‘These meters are often imposed without consent, cost more than direct debit, and have the effect of cutting people off supply. As prices increase, it is absolutely urgent to end such upside-down policies.’ 

Fuel Poverty Action is campaigning for ‘Energy for All’ – a new pricing structure which would give all households energy to cover their basic requirements for free, with the cost covered by a windfall tax.

In its letter to Ofgem, it wrote: ‘Fuel Poverty Action has long campaigned against the standing charge as regressive. 

‘With Energy For All, we are proposing to turn this unfair and carbon-friendly structure on its head: instead of paying an exorbitant standing charge for simply connecting to the system, everyone would be given a free energy allowance to cover the basics of heating, cooking and lighting, taking account of their needs related to their age, health, and housing. 

‘This means that poorer consumers are protected, and have the security to meet basic needs.’

It continued: ‘We realise that such a change in pricing structure requires a lot of working out, and we ask you to begin now to consider how it can be designed and brought into effect.

‘But in the meantime, the injustice of the standing charge must urgently be addressed.’

National Grid calls for local pricing per unit of energy 

While Fuel Poverty Action is arguing for regional variations in standing charges to be reduced, the National Grid is calling for wholesale electricity to be traded at local prices that vary from town to town.

This, it said, could reduce the cost of energy in the UK because it would reduce the National Grid’s reliance on expensive power plants to get energy to the most in-demand areas. 

The company said that a radical change was needed because Britain’s national electricity market ‘if left unchanged will impose excessive costs to consumers’. 

Big power plants can sell electricity on the national market, even if there are not enough cables to take that power to where there is higher demand – forcing cheaper or more environmentally- conscious providers in remote places to shut up shop.

This is forcing National Grid’s control room to rely on expensive gas power plants to supply energy to high-demand areas, whilst still paying renewable energy suppliers to switch off instead when the network can’t cope. 

The National Grid Electricity System Operator warned last week that keeping supply and demand in balance across the nation was ‘becoming more challenging’ and was resulting in ‘dramatic and rising costs for consumers’. 

These ‘constraint costs’ are expected to hit £2.3billion a year by 2026 without market reform, after hitting £1.2billion in 2021. 

The National Grid said it would encourage energy-intensive industries to be located near wind farms to take advantage of cheap wholesale prices. 

This could reduce household energy bills in remote areas near these renewable energy suppliers. 

However, the move could be controversial, as differing bills across the country could be seen as a ‘postcode energy tax’.    

A Government spokesperson said: ‘We continue to look at various options to ensure our electricity grid is running as cheaply and efficiently as possible, but no decisions have been made on any reforms.’

Ofgem said that ‘any changes to locational pricing would be complex and need careful consideration’.