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Understanding standing charges

Blog
Sam Johnson
10 Jul 2024

Energy is a complex world and to add further fuel to the fire we have ‘another’ element of our bill to confuse matters … Standing Charges! These charges are often overlooked yet is a pivotal component that make up your final bill.

Fluctuating prices within the wholesale energy market has seen unprecedented changes in recent years and standing charges have steadily contributed to the impact of increased final costs. Understanding these charges is crucial for your organization when you are aiming to manage and reduce your energy expenses.

Let us explore the ‘what’s’ ,‘whys’ and ‘how’s…

What is a Standing Charge?

A standing charge is a ‘non-commodity’ daily amount you must pay for energy, this covers all the costs of getting gas and electricity to your property by your supplier. This is a fixed daily amount per meter, no matter how much energy you use which is applied to your bill.

It is important to note that standing charges will differ between sites, dependent on the type of metering you have and where you are in the country.

Why do standing charges vary region to region?

Region to region charges vary due to the scale in which households are spread and how tricky it is for suppliers to get power or gas to your part of the country. For example, rural areas where parts of the country are vast in between households and organizations may incur different rates to an area that is denser. Resulting in fewer properties to split the cost.

Each DNO (electricity distribution network) combines their costs and splits them between everyone living in the area where they operate, which means each region’s standing charge varies slightly.

How do Standing Charges work and how are they calculated?

Your energy bill will include your standing charge and maybe listed as, ‘Standing and Metering Charges’ or listed as a description under ‘Fixed Charges’. This will differ between your gas and electricity billing!

When you sign up for an energy tariff the standing charge will be included in the cost illustration. You will also be able to see how much you will pay for your electricity or gas.
The standing charge is used to cover the costs of:

1. Using and maintaining the energy supply network that gets the gas and power to your organization via wires and pipelines required for physical transmission and distribution of energy.

2. Meter Reading Visits.

3. Government Support Schemes and initiatives.

4. Keeping your organization connected to the energy network.

5. Maintenance, upgrading, and expansion of networks and maintaining the National Grid.

Despite energy suppliers having the autonomy to set their own charges, they are regulated by Ofgem, which ensures that charges remain within reasonable limits.

Sam Johnson YPO

Author

Sam Johnson

Energy Officer

YPO

07552 318856

[email protected]

As Energy Officer, Sam supports the progress and execution of YPO's electricity and gas buying strategies and risk management tools against multiple flexible purchasing baskets. Using a defined strategy, Sam aims to optimise prices and reduce exposure to significant risks within the wholesale market. He achieves this by monitoring daily market conditions against seasonal normal demand within YPO's customer portfolio(s) - scoping opportunities into current and forward contract periods.