What is the standing charge on my energy bill?


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What is the standing charge on my energy bill?

If you’ve checked your energy bill and noticed a standing charge but are unsure what it is, you’re in the right place and you’re not alone. A lot of people frequently ask why there’s a standing charge, what it means and whether you have to pay it.

 

What is a standing charge?

The standing charge is a fee that most energy suppliers add to an energy bill. It’s a fee that is paid to them so that you can be provided with access to their gas and electricity. If you only made payments towards your gas and electricity usage, energy companies wouldn’t make any money to pay their staff or rent offices.

The standing charge generally covers the cost of keeping your home or business connected to an energy supply, conducting meter readings and other forms of maintenance. Each energy type will require a standing charge, therefore you may see two payments like this on each bill if you pay for both gas and electricity. These payments won’t change no matter what your energy usage.

On your bill, this fee won’t necessarily show as a ‘standing charge’. It may also be called ‘unit of daily usage’ or ‘daily unit rate’. The energy company can choose how much they want to charge, despite Ofgem proposing that there should be a cap on the amount. This cap was never finalised and so there still isn’t one. Energy suppliers might charge anywhere from 5p to 60p per day on average for electricity and 10p to 80p per day for gas, even if you don’t use any energy that day. However, the rate could also be more or less than this.

If an energy company doesn’t require a standing charge, it will still appear on your bill but will show as £0.

 

Do all energy suppliers have a standing charge?

Some energy suppliers choose not to add standing charge to your monthly or yearly payments, however this isn’t very common. You may be thinking, ‘Why don’t I switch to avoid the standing charge?’. It makes sense to only pay for the energy you use without having to cover supply and maintenance fees too, right? Not necessarily.

For suppliers that don’t impose a standing charge, their electricity and gas costs are generally more expensive per unit. Therefore, don’t be fooled into thinking that you can automatically save money by not paying the daily unit rate. It’s likely that your bills will end up costing the same.

Switching to a tariff that doesn’t have a standing charge could be beneficial for people who own holiday homes or rent out business premises for a couple of months a year. These kinds of properties that may lie empty for a long time will only use a very small amount of energy, so it’s likely that you won’t mind paying a little more per unit.

When they’re empty, no energy is used and therefore you don’t pay for it. If these properties were on a tariff that did have a standing charge, you could pay up to £190 per year despite not using any energy. This is because you’re paying for the building to have a supply, even if it isn’t utilised.

For houses or businesses that require gas and electricity all year round, you wouldn’t save money by not paying the standing charge, so it’s best to continue to do so. You’re likely to find more competitive rates with suppliers that do ask for this fee.

 

Is there a standing charge for smart meters?

Smart meters, if you’re offered one, should be provided for free by your energy supplier. Having a smart meter will not increase the standing charge on your bill.

Your smart meter tells you how much gas and electricity you use in almost real time. So, for instance, if you turn the kettle on, the smart meter will show a temporary increase in the amount of electricity you’re using. Once the kettle’s boiled, the usage will come back down.

The meter will automatically factor in the standing charge cost. This means that the figure reflected on the screen will be the cost of the energy per unit and the daily rate unit. This is why, even if you weren’t to use any electricity all day, your meter might still note that you’ve spent a certain amount. For example, if the daily standing charge is 30p and you don’t use any electricity, after 10 hours the smart meter might show that you’ve spent £3. You’re continuing to pay to be connected to the energy supply even if you use nothing.

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