It’s on your energy bill, but what is it? Some tariffs don’t have one, but what’s the catch? We look at the mysterious world of the standing charge.
It's on your energy bills - gas and electric - and causes many a householder to shake their heads and ask: just what is a standing charge?
Why do energy suppliers use standing charges?
Basically, standing charges are fixed costs associated with providing your energy supply such as meter reading, maintenance, the cost of keeping your home connected to the network and pass-through costs - fees paid to other companies who operate and maintain parts of the electricity network.
And in the case of gas, a standing charge will also cover any emergency gas supplies.
A standing charge also includes passing on to you the cost of government initiatives such as carbon reduction commitments and supporting vulnerable households.
For any tariff with a standing charge, you will pay that daily charge but your energy usage is priced at a single unit rate, regardless of how much (or little) energy you consume, making it easier to understand how much you're actually paying.
What if my tariff doesn't have a standing charge?
If your energy supplier doesn't add a standing charge to your bill, you will pay two different rates for the gas and/or electricity you use. Known as a "two tier tariff," you will be charged a higher price for the first set number of units of energy you use up to a level set by the energy company. Once you have reached this level, the price per unit will drop slightly.
For example, with British Gas, you might pay 2.5 pence per unit for the first 1400 units used each quarter, and 1.5 pence for each unit used thereafter.
This is because the energy supplier recoups the standing charge in the early part of your billing period (monthly, quarterly) with a cut-off point where you've consumed enough energy to ensure the supplier has clawed back all the expenses inherent in the standing charge.
Once this point has been reached and you've effectively paid the "invisible" standing charge to the supplier, the price of the unit drops.
Standing charge or no standing charge?
Some gas and electricity suppliers insist on you paying standing charges, while others allow you to choose whether you pay one.
As we've seen, tariffs with a standing charge mean you pay a flat rate charge for the supply as well as for the power you use.
Tariffs without a standing charge bundle the costs into the unit rate rather than it being a separate charge on your bill, so you pay extra for the first units you use until the standing charge is recouped then pay the same rate as everyone else.
If your house is going to be vacant for long periods of time, then a standing charge tariff is probably not suitable for you, as you would still be charged for your energy even though you are not actually using any.