No standing charge energy explained

Energy bills in the UK typically include a fixed daily fee known as a standing charge. This charge covers essential costs regardless of how much energy you use. For many households, these charges can feel like an unavoidable burden, prompting a search for greater control over household expenses. This article explains the concept of no standing charge tariffs, addresses common questions, and explores how they compare to standard energy plans.

Managing your energy bills should be clear and easy to understand. While Fuse Energy does not currently offer a no standing charge tariff, our approach aligns with the desire for control and transparency by providing clear pricing and tools to manage overall energy costs effectively. Click here to switch to Fuse Energy today.

What is an energy standing charge?

An energy standing charge is a fixed daily fee that appears on your electricity and gas bills. Unlike unit rates, which fluctuate with your consumption, the standing charge is applied every day, regardless of whether you use any energy.

Understanding the fixed daily fee

This daily charge is designed to cover the fixed costs associated with providing your energy supply. These are not costs directly related to the amount of electricity or gas you consume, but rather the operational expenses that suppliers incur to maintain the energy infrastructure and deliver services.

Why standing charges exist

Standing charges exist to cover a range of essential operational costs for energy suppliers and the wider energy network. These include the maintenance and upgrade of the National Grid's wires and pipes, meter reading and maintenance, and administrative costs such as billing and customer service. They also contribute to government schemes, such as those supporting vulnerable households or promoting renewable energy. Without standing charges, these fixed costs would need to be absorbed into higher unit rates, potentially making energy disproportionately expensive for high-usage customers.

How standing charges impact your bill

The standing charge forms a baseline cost on your energy bill. This means that even if you were to use no electricity or gas for a day, you would still incur these fixed costs. For households with very low or intermittent energy consumption, these fixed daily fees can represent a significant portion of their overall bill, making them feel less in control of their spending.

No standing charge tariffs: an overview

No standing charge tariffs are energy plans designed to eliminate the fixed daily fee, offering an alternative billing structure for consumers. While less common than standard tariffs, they cater to specific energy usage patterns.

How they work

With a no standing charge tariff, you only pay for the energy you actually consume. There is no daily fixed fee. To compensate for the absence of this charge, suppliers typically set higher unit rates for electricity and/or gas. This means that while your daily bill will not have a fixed component, the cost per kilowatt-hour (kWh) you use will be greater than on a standard tariff.

Key differences from standard tariffs

The primary difference lies in the cost structure. Standard tariffs divide your bill into two main components: a fixed daily standing charge and a variable unit rate per kWh. No standing charge tariffs remove the fixed daily fee entirely, consolidating all costs into a higher unit rate. This distinction is crucial for understanding how your total bill will be calculated and whether such a tariff aligns with your energy habits.

Availability in the UK market

No standing charge tariffs are available in the UK, but they are not offered by all suppliers and are generally less prevalent than tariffs that include a daily standing charge. Their availability can also vary by region and meter type. Consumers often need to actively seek out these specific tariffs as they are not always widely advertised.

Advantages and disadvantages of no standing charge tariffs

Choosing a no standing charge tariff can offer benefits for certain households, but it also comes with trade-offs, primarily in the form of higher unit rates.

Potential benefits for low energy users

For households with very low or intermittent energy consumption, a no standing charge tariff can be financially advantageous. If you are away from home frequently, have a holiday home, or are simply very frugal with your energy use, avoiding the daily fixed charge means you only pay when you switch on an appliance or turn on the heating. This can lead to lower overall costs compared to a standard tariff where you would still pay the standing charge every day, regardless of usage.

The trade-off: higher unit rates

The main trade-off with no standing charge tariffs is the higher unit rate for electricity and gas. Energy suppliers need to recover their fixed costs, and if they do not do so through a daily standing charge, they must do it by increasing the price per kWh. This means that if your energy consumption is moderate to high, the elevated unit rates could quickly outweigh the savings from not paying a standing charge, potentially leading to a higher overall bill.

Impact on overall energy costs

The impact on your overall energy costs depends entirely on your consumption patterns. For the average UK home, which uses around 2,500 kWh of electricity and 9,500 kWh of gas per year1, a no standing charge tariff might not be the cheapest option. If your usage is above average, the higher unit rates will likely result in a more expensive total bill. Conversely, if your usage is significantly below average, you could see savings. It is crucial to calculate your total estimated cost based on your actual usage before making a switch.

Is a no standing charge tariff right for you?

Deciding whether a no standing charge tariff is suitable requires a careful assessment of your household's energy habits and financial priorities. It is not a one-size-fits-all solution.

Assessing your energy consumption patterns

The first step is to understand how much energy you typically use. Review your past energy bills to get an accurate picture of your monthly and annual electricity and gas consumption in kWh. Consider if your usage is consistent or if there are periods of very low consumption, such as extended holidays. Households with minimal energy demands are the prime candidates for these tariffs.

Factors to consider before switching

Before switching, consider the following:

• Your actual usage: As noted, higher unit rates mean these tariffs are only cost-effective for genuinely low users.
• Future energy needs: Are you planning any changes that might increase your energy consumption, such as purchasing an electric vehicle or installing new appliances like an air source heat pump?
• Payment method: Some tariffs might have different rates based on how you pay (e.g., Direct Debit versus prepayment).
• Regional variations: Standing charges and unit rates can vary by region, so compare offers specific to your postcode.

Scenarios where it makes financial sense

A no standing charge tariff typically makes financial sense in scenarios such as:

• Holiday homes or properties left vacant for long periods: You avoid paying a daily charge when the property is empty.
• Very low energy consumption: If your household uses significantly less energy than the average, the savings from avoiding the standing charge can outweigh the higher unit rates.
• Seasonal usage: If you only use a property for a few months a year, these tariffs can be beneficial during the off-season.

Finding and comparing no standing charge tariffs

While less common, no standing charge tariffs can be found if you know where to look and how to compare them effectively.

Where to look for these tariffs

Energy comparison websites are usually the best starting point for finding no standing charge tariffs. Many allow you to filter results based on whether a standing charge is included. You may also need to check directly with individual energy suppliers, as not all tariffs are listed on comparison sites. Be aware that these tariffs might not always be prominently advertised.

Essential comparison points

When comparing tariffs, look beyond just the "no standing charge" label. Focus on:

• Unit rates: These will be higher, so compare the pence per kWh for both electricity and gas carefully.
• Estimated annual cost: Most comparison tools will provide an estimated annual cost based on your declared usage. This is the most important figure for a true comparison.
• Contract length and exit fees: Check if the tariff is fixed or variable, and if there are any penalties for leaving early.
• Customer service and reviews: Consider the supplier's reputation for service.

Tips for an informed decision

To make an informed decision:

1. Know your usage: Have your annual kWh consumption figures ready.
2. Use comparison tools: Input your details accurately to get personalised quotes.
3. Read the small print: Understand all terms and conditions, especially regarding unit rates and any potential hidden fees.
4. Calculate total cost: Do not just look at the unit rate; calculate the total estimated cost based on your usage to see if it is truly cheaper.

The future of energy and fixed charges

The energy landscape is evolving, and with it, the conversation around fixed charges and how consumers interact with their energy supply.

Challenging the scarcity mindset in energy

For decades, the energy industry has operated under a "scarcity mindset," encouraging consumers to "use less" due to perceived limitations in supply. This narrative has contributed to the feeling of powerlessness many experience with their energy bills, where fixed charges are seen as an unavoidable cost of a scarce resource. Fuse Energy challenges this by envisioning a future where energy is so abundant that fixed charges become less relevant, empowering customers to use more without fear.

How Fuse Energy empowers customer control

The desire for no standing charge tariffs stems from a fundamental need for greater control and transparency over energy bills. While Fuse Energy does not currently offer a no standing charge tariff, its approach aligns with this desire by providing transparent pricing and tools to manage overall energy costs effectively. Fuse's intuitive app, for example, offers real-time usage data, allowing customers to understand and manage their consumption with unprecedented clarity. This focus on transparency and control empowers customers to make informed decisions about their energy use.

Moving towards a more abundant energy future

Fuse Energy is actively rebuilding the energy system from scratch to deliver cheaper, cleaner energy. This long-term vision aims to reduce the underlying costs that standing charges currently cover. By focusing on innovation and efficiency, Fuse is working towards a future where energy is abundant, making the concept of fixed daily charges less impactful and giving customers more freedom and capability. Choosing Fuse is presented as a 'power play' - a move that shifts the balance of power into the customer's hands, giving them greater capability and control over their energy.

Managing your energy bills should be simple and transparent. Fuse Energy offers clear pricing and tools to help you understand and control your energy usage. Our 24/7 human support team is always on hand to assist you. Switch to Fuse Energy today and experience a modern approach to energy. Click here to get started. You can also learn more about our mission to build a future with power to play with by clicking here.

References

1. Ofgem. Decision for Typical Domestic Consumption Values 2023