What is a Standing Charge on Your Energy Bill?
In addition to your gas and electricity costs, you’ll find a standing charge on most gas and electricity bills. What exactly does your standing charge cover and should you switch to an energy tariff with no standing charge? Read on for all the answers to these questions and more.
Standing charges explained
A standing charge is a fixed daily cost on energy bills which customers are expected to pay, regardless of how much gas or electricity they use. Think of it as being similar to a phone line rental charge, only for your energy supply.
- Keeping your home connected to the energy network
- Maintenance to the energy network, wires and pipes
- Carrying out meter readings
- Government initiatives and schemes aimed at helping vulnerable households and reducing CO2 emissions.
Standing charges are always listed at a daily unit rate on your energy bill.[block:energy_tariffs_content2]
How is my standing charge calculated?
Since Ofgem's Retail Market Review in 2010, the energy watchdog has tried to create a fairer and more transparent market for consumers, attempting to limit the amount of profit that can be made by energy suppliers, distribution and transmission networks.
Because they are natural monopolies, without any restrictions in place, distribution and transmission networks could charge what they wanted and suppliers would have no choice but to agree. This would then result in huge increases for customers.
As such, Ofgem introduced the RIIO Model, (Revenue = Incentive + Innovation + Outputs). This set a percentage that could be taken from consumer energy bills and given to the distribution and transmission networks. To make this more transparent, these costs now have to be expressed as a ‘standing charge’ in pence per day format.
How much is the typical standing charge?
Do I have to pay standing charges on an empty property?The same flat daily standing charge always applies, no matter how much energy you use. Even if the property is a holiday home that is empty for part of the year, you’ll still be expected to pay a standing charge.
Standing charges can vary significantly depending on your energy supplier, tariff, method of payment and the region you live in. Generally speaking, they can range from 10p to 80p per day for electricity and 5p to 60p for a gas connection.
How can I pay less in standing charges?
One of the easiest ways to bring down your standing charges is by paying for your energy using a monthly direct debit. By doing this, your supplier will not have to cover the cost of processing monthly card payments or chasing up unpaid bills. These savings are then passed on to the customer through reduced standing charges.
|Payment method||Gas standing charge||Electricity standing charge||Annual total|
|On receipt of bill||30.65p per day||28.19p per day||£181.73|
|Monthly direct debit||26.07p per day||23.72p per day||£214.77|
Are there any tariffs without standing charges?
Although all energy plans must carry a standing charge, you may have noticed that some tariffs will offer a 0p standing charge. This can be viewed as either a positive or negative, depending on your personal circumstances.
Should I switch to a tariff with a 0p standing charge?
If you have a property that is uninhabited for the majority of the year, switching to a tariff with a 0p standing charge could be something to look into, as you will only pay for the energy you use.
However, as the standing charge is set at 0p, the unit rate is typically much higher, so you should first consider this before jumping at the chance of not paying a standing charge.
Getting the best value tariff
When shopping around for a new energy supplier, you should always factor in the daily standing charge in addition to the cost of energy per unit.
Here at Selectra, our team of energy experts compare each tariff by unit rate, standing charge and any exit fees, so you can be sure you’re getting the best deal for your home.