Energy prepay cap... but "your prices are going up"

[hubner]

http://www.bbc.co.uk/news/business-38891010

Energy prepay cap to save customers £80, announces Ofgem

Four million customers on prepayment energy meters are expected to save around £80 a year after a price cap was announced by energy regulator Ofgem.

The temporary price cap, which comes into effect in April, was one of the measures recommended by the Competition and Market Authority after its two-year investigation of the energy market.

The levels of the cap vary for gas and electricity by meter type and region.

It will be updated every six months and is expected to stay until 2020.

OK; current Npower electricity prepayment prices:
standing charge: 11.5p per day or £42 per year
unit rate: 16.66p per kWh

One year low usage: 870 units + standing charge = £187

New price with the cap:
standing charge: 28.76p per day or £105 per year
unit rate: 13.33p per kWh

One year low usage: 870 units + standing charge = £221

That's an increase of £34; just over 18%!

And the standing charge is going up two and a half times. I think standing charges are a massive con.

Npowers gives 2 reasons for the price increase:

1, the prepayment price cap...which limits ...the cost of electricity and gas you'll pay
2, to bring prepayment prices into line with other electricity tariffs within the Cap limits

I'm not sure what the second means, apart from they have to reduce the the unit rate because of the cap but they will jack up the standing charge to keep the overall price the same or more.

[hubner]

I just got a letter with new electricity prices:

Unit rate - 14.5p
standing charge - 30.5p

That's £110 standing charge per year for not even using any electricity!

It seems households which use low amounts of energy are paying for the price cap which only benefits high usage households. The "cap save customers £80" looks good in headlines without actually any effect on the energy rip off cartel.

[Quisling]

Not defending the energy co’s here but by way of background:

Energy supplies have massive unavoidable costs even if their customers use zero energy, hence they use standing charges. For example:
Costs to hold and comply with the requirements of the supply license.
Costs for delivery of FIT, social obligations etc (for larger suppliers mostly - with >50000 customers.
Balancing and settlement charges to the grid operator
Transmission use of system charges
Distribution use of system charges
Meter operator charges
Meter asset maintainer chargers
Data collector charges
Etc.

In principle a standing charge is entirely reasonable, as domestic customers have no obligation to use a minimum offtake. In practice, the balance between standing charge and unit rate may not be favourable to everyone. But there are currently some 70 suppliers out there so if you don’t like the one you have....

[Jasmine]

In principle a standing charge is entirely reasonable, as domestic customers have no obligation to use a minimum offtake. In practice, the balance between standing charge and unit rate may not be favourable to everyone. But there are currently some 70 suppliers out there so if you don’t like the one you have....

This is where having information from a smart meter becomes beneficial.  If you actually know how much energy you use per day/week, then you can make better informed choices about which subscriber to go with (and which tariff to use if you have a choice).  There is a particular point at which it makes sense to pay more per unit, to push the standing charge down.

[Thor]

A no standing charge tariff can make sense if the premises are frequently unoccupied.  Ebico is one supplier which offers such a tariff.