The Warm This Winter coalition published its third Tariff Watch report on 24 January 2024, produced with Future Energy Associates, examining the electricity network costs recovered through household standing charges1. The report says it has uncovered 14 obscure charges passed onto bills through the Ofgem price cap, and that electricity standing charges have surged 119 per cent since winter 2020/21, accounting for £194 a year per household1.
Among the charges identified is "Line Losses", the energy lost while transmitting electricity around the network. The report says customers are charged a set amount for this rather than the cost of the electricity actually lost1. It also states that network operators forecast budgets in advance, and that under complex rules an operator that overestimates costs returns only a portion of the leftover budget to customers and keeps the rest1. Between 2015 and 2022, the report says, these operators spent £933 million less than they forecast, but gave only around half of that money back to customers1.
On tariffs, the report says more products are on the market but few are worth switching to, and that two groups continue to lose out: households on standard credit terms, subject to a 6.2 per cent premium, and those on Economy 7 tariffs1. It cites one EDF overnight tariff aimed at electric vehicle owners offering an average nighttime unit rate of 8.00 pence per kWh across all distribution network operator regions1. The report does not set out how the £194 figure is calculated, and no independent confirmation of the 14 charges or the £933 million underspend is given in the published material1.
"There must be a review into how we have arrived at so many covert charges and Ofgem must improve the transparency in the calculation of how our standing charges are arrived at."
Fiona Waters of the Warm This Winter campaign said bills are still forecast to remain well above 2021 levels for the rest of the year, and that the grid upgrades needed to bring electricity costs down are not being delivered1.
Why it matters for households
Standing charges are the fixed daily amount a household pays whatever it uses, so they bear directly on standing charges on energy bills and on the gap between a household's usage and what it pays. A 119 per cent rise in the electricity standing charge since winter 2020/21, as the report puts it, is money that cannot be recovered by using less, which is why the report frames the £194 annual figure as a cost carried by every household1. The report's argument that network operators keep part of any underspend goes to how the energy price cap is set and what sits inside it, and it is the basis for the calls for reform of standing charges. For a household weighing a fixed deal against the cap, the report's point is that unit rates alone do not show the whole cost, since standing charges and conditions vary by tariff1. The report also notes that the price cap applies in Great Britain; the separate Northern Ireland market is covered in energy bills in Northern Ireland.
What happens next
The report calls for a review into how the charges arose, improved transparency from Ofgem in how standing charges are calculated, and a full audit of what has been charged, what has been spent and what is owed back to bill payers1. No date has been reported for any Ofgem response or for the audit.
Sources1 cited
- Tariff Watch: are our standing charges being inflated?, warmthiswinter.org.uk