Tag: Standing Charges

Energy firms’ profits surge as households left in the cold

Weeks of autumn profit announcements by energy firms have come at the same time as data from the Warm This Winter campaign found that over a third (38%) of people from vulnerable households think they won’t or may not be able to afford to put the heating on at all this winter.

Among the recent announcements were National Grid, which posted profits of hundreds of millions of pounds in their distribution and transmission businesses. SSE also declared  £335m profits in similar parts of its company.

A large part of these profits come from the firms’ role as Distribution Network Operators (DNO) for electricity, which customers pay for through Standing Charges. In practice, it means that these firms can vary the cost of bills for people across different regions it provides electricity to.

For example, in the East Midlands, National Grid customers have the cheapest energy in the UK, but households it serves in south west England are paying £75 more every year in standing charges.

Ofgem has now announced an investigation into Standing Charges and a spokesperson for the End Fuel Poverty Coalition commented:

“The announcement of a Standing Charges review is a welcome step forward. Recent Warm This Winter Tariff Watch reports have highlighted how we need much more transparency in how our energy bills are calculated and the factors that go into calculating what is seen as a fair tariff.”

Another firm which benefits from Standing Charges is Scottish Power which is both an energy distributor and a supplier to households. Its Madrid-based parent company Iberdrola posted profits of 3.4bn Euros for the first nine months of 2023.

The supplier, which was previously named and shamed by Ministers as the worst culprit for forcibly installing prepayment meters, was recently granted 124 warrants for forcible PPMs in a move that has sparked concern among campaigners and politicians.

Jonathan Bean from Fuel Poverty Action, said:

“Firms are celebrating bumper profits whilst energy firms continue their plotting to restart the abhorrent process of breaking into homes to install prepayment meters. 

“It’s yet another example of firms profiting from misery.”

As research for Warm This Winter found that among those badly affected by the energy bills crisis are pregnant mothers and young families, all aspects of the energy industry have enjoyed a profits bonanza.

BP announced £2.7bn profit and Shell reported over £5bn profits.

Shell was recently offered 10 of the new 27 oil and gas licences in the North Sea by the Government. However, an audit of production data by analysts at Uplift found that across the hundreds of licences offered by UK governments since 2010, just 16 days of new gas has been delivered to the grid – half of which was sent to the Netherlands.

Equally, Norwegian firm Equinor’s profits continued to soar – up to £6.6bn according to the latest results. The company will also enjoy a tax break from the UK Government for its controversial Rosebank field.

Reporters at Bloomberg concluded that this field won’t begin pumping oil and gas until at least 2026, and it isn’t large enough to have an impact on the security of UK energy supply or prices

Fi Waters, spokesperson for the Warm This Winter said:

“These profits are shocking as 38% of vulnerable households say they cannot afford to put the heating on at all this winter. That’s pregnant women, the elderly, families with young kids and people with long term illness.

“The Government must step in and provide a consistent Help to Repay scheme for households in energy debt and an Emergency Energy Tariff guarantee which is available to all vulnerable households, regardless of supplier.”

The Emergency Energy Tariff would use the existing Energy Price Guarantee mechanism to fix the unit costs and standing charges for vulnerable groups at a lower level. Campaigners have suggested that this is fixed at the levels of energy bills in winter 2020/21, which would see eligible households’ monthly energy bills reduced by approximately £87 a month from current levels – a saving of around 46%.

Proposals for such a move are backed by 83% of the public and the initial research to inform the development of the Emergency Energy Tariff and targeting of support was undertaken by the University of Oxford’s Environmental Change Institute and Cambridge Architectural Research.

Dr Tina Fawcett, Associate Professor, University of Oxford:

“Our research has helped identify how to effectively target vital support to households most at risk this winter. To avoid future energy bill crises, locally we need more investment in energy efficiency and energy advice, and nationally we must rapidly reduce our dependence on fossil fuels.”

The public can sign the petition supporting an Emergency Energy Tariff online: https://www.warmthiswinter.org.uk/get-involved/emergency-energy-tariff-petition

Ofgem criticised for standing charge decision

Campaigners have written to Ofgem criticising the “gross injustice” of the current energy bills standing charges regime.

Standing charges make up a portion of the energy bill which every household user pays, regardless of how much energy they actually use.

Last week, Ofgem confirmed that the cost of market failures (e.g. energy firms collapsing) would continue to be recouped from consumers through the standing charges.

The decision comes just weeks after Ofgem confirmed an “inhumane” increase in energy bills will take place in January 2023 as well as this October. Ofgem are also now facing the prospect of legal action against its decisions following a notice of action from the Good Law Project last week.

Now Fuel Poverty Action and Disabled People Against Cuts have together written to Ofgem CEO Jonathan Brierley about present standing charges, including loading the cost of failed suppliers onto this part of people’s bills.

The letter states:

It is appalling that yet again Ofgem is punishing low income customers for its own failed regulation and the upside down priorities of the energy industry.  … This is consistent with the blinkered approach that has led you to give “too much benefit to companies at the expense of consumers”, in the words of  Christine Farnish, the Ofgem director who resigned recently.

Ofgem has claimed that high standing charges are the only way to protect high users, some of whom are people with health needs for electricity, e.g. for electrical medical equipment.

But the two groups suggest that Ofgem’s obligation towards vulnerable customers is being abused as an excuse for policies that impoverish and endanger thousands of people, including many who are disabled people. 

They name instead several alternative ways to protect people with high energy needs – without impoverishing vast numbers of low income customers. 

With Fuel Poverty Action’s proposal of Energy For All (e4a) each household would be entitled, free, to enough energy to cover basic needs, but people would pay a higher tariff for what they use above that amount. This would offer much needed security to all – including those who need more because of their health, disabilities, housing conditions, or family size. It would be paid for by the higher per-unit tariff on excess use, by windfall taxes and by ending the millions of pounds now poured daily into fossil fuel subsidies. 

Other options listed  include extensions of the Warm Home Discount, social tariffs, better disability benefits, and good safe insulation for vulnerable customers.  And they say that companies that cannot fulfil their purpose of providing the energy people need at a cost they can afford, could – and must – be brought back into public hands.

Ruth London from Fuel Poverty Action commented: 

Instead of looking at real, proportionate, workable changes to the current upside down pricing framework, Ofgem has chosen to continue hitting low income users harder than affluent neighbours. The standing charge means that however much they cut down their usage many people will never be able to pay their bills.

Paula Peters of DPAC says:

I’m a low energy user because I am terrified to switch it on and worrying about costs all the time. It’s making me permanently anxious as it is all of us. Last winter I was in a lot of pain with a cold house.  I needed NHS intervention: a steroid injection and a Nebuliser at A & E.