If you’re away from home for large parts of the year, the standing charge on your energy bill is an expense you could really do without – comparing energy tariffs without standard charge fees could help cut your bills.
The standing charge on your energy bill is the amount you pay each month to cover the cost of physically supplying gas and electricity to your home and keeping it connected to the energy network.
Standing charges have been included on all energy bills since Ofgem’s Retail Market Review(RMR) suggested all energy plans should follow the same price structure, to make it easier for customers to compare energy tariffs and switch to a better deal.
These charges work in much the same way as your telephone and broadband line rental costs, and will be listed on your energy bill as a daily, flat unit rate.
Each energy supplier sets its own standing charge rate, even though they’re no longer obliged to since Ofgem removed this condition last year, following recommendations from the Competition and Markets Authority (CMA)
The standing charge for electricity can be anywhere between 5p and 60p per day, while the standing charge for gas is from 10p to 80p per day, both of which can add a considerable amount to your energy bills.
If you’re energy supplier imposes a standing charge, you have to pay it, but there are a few energy companies that offer tariffs with no standing charge. Of the Big Six, only npower offers an electricity plan with no standing charge, while Ebico and Utilia are among a handful of smaller no standing charge energy companies.
The main advantage of a no standing charge tariff is that you only pay for the energy you use – so if you aren’t using gas or electricity for long periods, you won’t be charged a penny. If a standing charge is included, you’ll pay a daily fee for gas and electricity, even if you never use it.
Another advantage of a tariff with no standing charge is that the unit cost – which is often higher than on tariffs with a standing charge – is often reduced after a certain amount of gas and electricity has been used, which could be ideal if you own more than one property.
You might assume that no standing charge tariffs are a cheaper option as do away with the daily fee, but because these tariffs charge a higher unit price for gas and electricity, you might actually end up paying more each month, particularly if you’re a medium-to-high use energy customer.
If you’d rather not paying a standing charge for electricity or gas, you need to work out exactly how much you’ll save by switching to a tariff that does away with this fee – although you’ll save on the daily charges, higher unit prices mean you might still end up paying more for your energy, particularly if you often have the heating on, and regularly run appliances like washing machines and dryers.
In general, tariffs with high standing charges usually have lower unit rates for gas and electricity, while those with no standing charge come with higher unit costs.
So it all depends upon your circumstances – if you use a lot of energy, it probably makes sense to go for a tariff that has lower unit prices. If, on the other hand, you don’t use a lot of energy, say your property is empty for extended periods of time (around nine months or more each year), it’s worth considering a plan with no standing charge.