(9 April 2020) I have just gone through the irritating process of switching energy suppliers, sparking off a number of thoughts.
When a supplier phones or accosts me in the street they always claim to reduce my bill.
They want to know who my current supplier is and then they make up a figure to save me money. However, they (and I have had argument with the street people about this) refuse to tell me how much they are actually charging. It is quite simple- there is a per kilowatt hour cost and a daily standing charge. This is what one needs to know but they won’t tell me.
It is like someone telling me they can save on my supermarket bill by asking me who I shop with without telling me what they charge for apples.
You can find these out if you bother to delve into the depths of a company’s website.
I realised then that the energy market is one from the list of The Bad Things we are lumbered with from Thatcherism.
There are now over 60 companies who “supply” i.e. just bill you, for energy. This complication is bad enough but there are also over 75 companies who offer an energy broking service or switching service to help one through this unnecessary maze.
While I am sure all the individuals who work for these companies are decent human beings and are kind to their pets, a sane and organised society would not need all these- they are an example from the list of Totally Pointless and Unnecessary Occupations.
Energy Board -In practical terms there has to be an organisation that gets the gas and electricity to your home- all the others are pointless. We could, for example, as we live in a democracy (so the government works for us) have a body for each region. Thus, in London we could have the London Energy Board, open, transparent and with some elected representation. Instead London is controlled by EDF a French company for example and in Scotland, Scottish Power is obviously Spanish owned.
Unfair Pricing- We are all aware of climate change and the need to reduce energy consumption. Yet our current system, as well as being almost incomprehensible, discriminates against poorer households.
The best deals come from using direct debits, however, estimating conservatively, about a third of the population live in poor households with low and / or irregular income and cannot set up direct debits. So, they are charged extra for monthly billing or- even more if they have to have a pay meter.
Then there is the standing charge, quite wicked because it is fixed irrespective of usage so that those who use less pay a higher unit rate. It is a regressive charging system.
I did some sums- just for electricity though the same principle would apply to gas. I assume that the Kilowatt pe hour (KWH) rate is 15p. The daily standing charge is 30p (all the companies quote fractions of pennies as it makes it far more difficult to work out with mental arithmetic) and according to OFGEM (a regulator who probably do a good job but would not be needed under democratic control) a typical household uses 4,000 kwh a year.
So, for this household, adding on the standing charge and working out the unit rate, this average household pay 18p for each unit.
A poorer household, using half this amount pay 20p a unit.
A prosperous household – perhaps with an electric jacuzzi, use double the average and pay 16p a unit thus paying 20% less for what they buy.
The justification for the standing charge is that it covers fixed costs of providing the supply- meter, holes in road, pipes etc. Nevertheless, as users are also billed for what is used there is no actual justification in it being so high.
I took my sums and boosted the KWH rate to 17p and reduced the annual standing charge to a modest £12 pa.
This working out keeps all at an actual rate of 17p per unit (the average paid by households using 8,000, 4,000,3,000 and 2,000 collectively) although the bottom group still average 18p, the rest 17p but, significantly only the household with the most consumption pays more (£62.50), the others pay increasingly less with the poorest saving £57.50 pa.
(I show the sums at the end of this piece).
So, the first part of my Practical Manifesto for a Slightly Better Future is Reduce the Standing Charge to a Minimal Figure.
But, as the TV shopping channels say, there is more.
If we want to be an inclusive society, we should recognise that all should have access to basic utilities.
I wondered therefore about Making a Certain Quantity of Energy Free.
I did a sum assuming that all households got 570 free units each year. (an odd figure but for the example this generates as much revenue as the current model -actually £4 more)
I put the unit rate up to 20p.
Calculating this way means that the average price of a unit increases along with consumption, a feature that can only encourage energy saving.
On this model, comparing it with the current example above, the average household get a tiny reduction, the poorest still save over £100 a year (which they would possibly spend on energy) and those who consume the most pay £188 more. Further those who consume the most pay an average unit price of 19p while those who use the least only average 15p.
Practical? Easily – once details are worked out give this would apply both to gas and electricity so consideration would be given to allow for single fuel households and I do not think second homes should be eligible for example. There could also be some recognition of the number of people in a household.
Perhaps we should start a campaign.
The sums (spreadsheet available on request)
| CURRENT EXAMPLE | |||||
| Unit Consumption per year | Unit cost | Annual Unit costs | Annual Standing Charge (30p per day) | Annual Bill | Average unit cost |
| 8,000 | £ 0.15 | £ 1,200.00 | £ 109.50 | £ 1,309.50 | £ 0.16 |
| 4,000 | £ 0.15 | £ 600.00 | £ 109.50 | £ 709.50 | £ 0.18 |
| 3,000 | £ 0.15 | £ 450.00 | £ 109.50 | £ 559.50 | £ 0.19 |
| 2,000 | £ 0.15 | £ 300.00 | £ 109.50 | £ 409.50 | £ 0.20 |
| (total revenue) | £ 2,988.00 |
| Unit Consumption per year | Unit cost | Annual Unit costs | Annual Standing Charge (30p per day) | Annual Bill | Average unit cost | Difference |
| 8,000 | £ 0.17 | £ 1,360.00 | £ 12.00 | £ 1,372.00 | £ 0.17 | £ 62.50 |
| 4,000 | £ 0.17 | £ 680.00 | £ 12.00 | £ 692.00 | £ 0.17 | -£ 17.50 |
| 3,000 | £ 0.17 | £ 510.00 | £ 12.00 | £ 522.00 | £ 0.17 | -£ 37.50 |
| 2,000 | £ 0.17 | £ 340.00 | £ 12.00 | £ 352.00 | £ 0.18 | -£ 57.50 |
| (total revenue) | £ 2,938.00 |
| Unit Consumption per year | No Cost Units | Paid Units | Unit cost | Annual Unit costs | Annual Standing Charge | Annual Bill | Average unit cost | Diff from current model |
| 8,000 | 570 | 7,430 | £ 0.20 | £ 1,486.00 | £ 12.00 | £ 1,498.00 | £ 0.19 | £ 188.50 |
| 4,000 | 570 | 3,430 | £ 0.20 | £ 686.00 | £ 12.00 | £ 698.00 | £ 0.17 | -£ 11.50 |
| 3,000 | 570 | 2,430 | £ 0.20 | £ 486.00 | £ 12.00 | £ 498.00 | £ 0.17 | -£ 61.50 |
| 2,000 | 570 | 1,430 | £ 0.20 | £ 286.00 | £ 12.00 | £ 298.00 | £ 0.15 | -£ 111.50 |
| (total revenue) | £ 2,992.00 |
Thanks for reading-here’s a couple of kittens
The kids who accost you on the ‘phone or on the streets pushing you to switch suppliers are generally young people who are working for commission only. They have been fed a few lines by their masters and rattle it off at you in a convincing manner at a break neck speed that you cannot really comprehend. I expect many are taken in. Some years ago I was sick and tired of one or other of the big six suppliers feeding me lines to persuade me their deal was best (I expect by post in those days). I decided I had had enough and went to a comparison site.
There I found all the blustering baloney of the big six, with luscious offers. I also note a number of smaller suppliers who were more modest in their bosting. I chose Ovo and have been happy ever since. It is done online. There are a few options and we choose a slightly more expensive one to for a good environmental reason I can’t remember. They pay interest on any excess payment and tell you in advance if your payments are likely to be too low in the coming year. If you haven’t decided yet have a look at their offer.
Energy Board: I remember the days of the electric, gas and water boards. How straight forward it was.
Making a Certain Quantity of Energy Free? Here is another idea. As you say we are a democracy and in order that we live we need energy. Let the government pay a standing charge on behalf of everyone and the users only pay for what they use. Having established that it would be a short step to consider a minimum quantity of energy to all households, as one had with free school milk to all school kids, to ensure they got a basic requirement. After all in the recent political campaigns the parties were blathering on about free internet. What is more important, having warmth at home or internet?
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