A MAP reveals a postcode lottery of a ‘sneaky’ energy charge that means some areas pay up to £91 more than others.
Energy bills will rise from £1,738 to £1,849 per year under the new price cap from April 1, announced today by Ofgem.
It’s a blow to 22million households on standard variable tariffs which are subject to the price cap, with average bills rising £111 a year.
The exact amount more you pay will depend on usage though, as the cap applies the cost per kilowatt-hour (kWh) of gas and electricity,
Another factor affecting how much you pay is the area you live.
All households are billed a standing charge – a fixed daily fee simply for being connected to the energy grid – and this rate is different across the country.
The average daily standing charge is falling for the majority of people and will drop on average from 92.62p to 86.47p.
This fee covers operational costs, such as maintaining the network of wires, pipes, and cables needed to deliver power to your home. It also includes staffing and office maintenance expenses.
But in the small print of Ofgem’s announcement it’s revealed that in three of 14 areas this charge will rise.
These regional differences reflect the varying costs of transporting energy to and within each area.
Higher standing charges disproportionately impact lower-usage households.
That’s because they pay a larger percentage of their total bill for the fixed daily fee, and this amount can’t be reduced through cutting back on energy usage.
Households in London will see their annual standing charge rise from £268.49 to £299.93 a year – up by £20.44 (7.61%), and the biggest increase of any area.
In North Wales and Merseyside, the annual standing charge will increase from £364.23 to £373.87 – a rise of £9.64 (2.65%).
Meanwhile, households in North West England will experience a more modest increase, with their combined standing charge rising by just £1.02 per year
Standing charges will decrease in eleven other regions from April 1.
This means a proportion of their bill will fall regardless of usage.
Cut your standing charge
FIVE million households opt to settle their energy bills through bank card, standing order or cheque — and they shoulder higher costs for standing charges.
It costs more because energy suppliers need to recoup the administrative costs associated with these types of payments.
These households will face an annual standing charge of £354.67, compared to £315.62 for those paying via direct debit.
Switching to direct debit will reduce your standing charge — and unit rates, too.
Where are standing charges falling?
The largest saving will be felt by households in the Southern England region, where the total annual standing charge will fall from £348.83 to £282.84.
This represents a substantial saving of £65.99 a year, or a 18.92% reduction.
This means that Southern England now has the lowest annual standing charge,
It’s a £91 difference between that and the most expensive charge of £337.88 per year in Northern England.
Similarly, households in the South Western Region will enjoy a notable reduction, with their annual standing charge dropping from £363.18 to £316.53 – a saving of £46.65 a year, or a 12.84% reduction.
In South Wales, households will benefit from an annual saving of £41.32, as the total standing charge falls from £350.11 to £308.79 a year, equating to an 11.8% reduction.
Meanwhile, residents in the Northern England region will experience a similarly significant decrease, with their total annual standing charge reduced from £378.94 to £337.88.
This change translates to a saving of £41.06 a year, or 10.84% reduction.
The Midlands will also see a considerable drop in costs, with the total annual standing charge falling from £347.74 to £313.24, resulting in a saving of £34.49 a year, or a 9.92% reduction.
In the Eastern Region, households will see the most modest reduction, with the total annual standing charge decreasing from £300.29 to £296.09 a year.
This equates to a saving of £4.20 a year, or a 1.4% reduction, offering only minimal relief.
Richard Neudegg, director of regulation at Uswitch.com, said: “Standing charges cover fixed costs suppliers face, including metering and the infrastructure to get energy to homes including pylons and cables.
“These costs can vary across regions, and so this is reflected in the standing charges set by the price cap.
“Because of how different tariffs balance between standing charges and unit rates, it’s important to run a comparison because different tariffs can be better for you depending on where you live and how much energy you use.”
Can I avoid the standing charge?
MOST suppliers slap you with the charge, but there is one exception.
Utilita, which only serves prepayment meter customers, has ditched it altogether.
Instead, the company integrates the cost into its gas and electricity rates.
Utilita operates a two-rate system. The first rate, which is slightly higher, covers standing charge costs.
Once 2kWh is consumed (and standing charge costs are covered), customers automatically switch to a cheaper rate for the rest of the day.
But this alternative might not suit everyone, particularly those who do not want to prepay for their energy.
According to industry association Energy UK and watchdog Ofgem, eliminating the standing charge altogether isn’t a straightforward solution.
A spokesperson for Energy UK said: “If you were to switch these costs to the ‘per unit’ charges, then those customers disadvantaged by the current system, such as low usage households, would benefit.
“But other customers, who might be more reliant on energy or have a less well-insulated home, could end up paying significantly more.”
CHANGE ON THE HORIZON
Millions of households will be able to access “no standing charge” energy tariffs at all suppliers from this winter.
Low energy users, those with prepayment meters and those with second homes who don’t use their heating or electricity very often are most likely to benefit from the new tariffs.
The energy regulator Ofgem plans to keep the option of having a standing charge, which is good for low-income families in poorly insulated homes or those who rely on medical equipment.
Charlotte Friel, from Ofgem, said last week: “We’re looking closely at how these tariffs will work in practice, but everyone will need to carefully consider which option best suits their needs.
“The costs included in the standing charge ultimately have to be paid. But while they may not save everyone money, they will give people a choice, and greater control over their bills.”
The regulator first announced the shake-up to energy rules in December last year but today it confirmed firms will have to offer the tariffs to customers in time for winter.
It also announced a consultation on how the new tariffs would work.
Martin Lewis said the plans were “progress”.
He added: “Standing charges are by far the most complained-about part of an energy bill.
“They’re a moral hazard that disincentivises lower users from cutting their bills, and leaves many older people, who only use gas for heating in the winter, still paying for it every day in summer.”
However, he pointed out that there is a “big hole” under the current plan as customers will have to opt in.
Richard Neudegg from Uswitch.com welcomed the change but said “the devil will be in the detail”.
He added: “Consumers can take action now to reduce what they pay for their energy.
“There are a range of fixed deals on the market, which can help households beat the January cap and the predicted price rise in April, and often come with lower standing charges than the cap.”
What energy bill help is available?
There's a number of different ways to get help paying your energy bills if you're struggling to get by.
If you fall into debt, you can always approach your supplier to see if they can put you on a repayment plan before putting you on a prepayment meter.
This involves paying off what you owe in instalments over a set period.
If your supplier offers you a repayment plan you don’t think you can afford, speak to them again to see if you can negotiate a better deal.
Several energy firms have schemes available to customers struggling to cover their bills.
But eligibility criteria vary depending on the supplier and the amount you can get depends on your financial circumstances.
For example, British Gas or Scottish Gas customers struggling to pay their energy bills can get grants worth up to £2,000.
British Gas also offers help via its British Gas Energy Trust and Individuals Family Fund.
You don’t need to be a British Gas customer to apply for the second fund.
EDF, E.ON, Octopus Energy and Scottish Power all offer grants to struggling customers too.
Thousands of vulnerable households are missing out on extra help and protections by not signing up to the Priority Services Register (PSR).
The service helps support vulnerable households, such as those who are elderly or ill.
Some of the perks include being given advance warning of blackouts, free gas safety checks and extra support if you’re struggling.
Get in touch with your energy firm to see if you can apply.
