Report reveals energy standing charge ‘postcode lottery’ in Wales

Emily Price

A new report has revealed the “postcode lottery” of standing charges being paid by households in Wales just to be connected to the energy grid.

A standing charge is a fixed daily amount households pay for energy, no matter how much they use – it is usually added on to a gas or electric bill.

The second Warm This Winter Tariff Watch report has found that households in north Wales pay the highest standing charges of £340 a year whilst London households pay the lowest in the UK at £252 a year.

For people living in south Wales, every household pays £310 a year (£58 more than London) just for being connected to the energy grid.

Household energy debt has now hit a five-year high of £216 ahead of the coming winter, with the number of homes already owing money to their provider up 11% on last year, according to a survey.

The average household debt is up 13% on the £190 seen at this time last year, while the number of homes that owe money to their supplier has risen from 2,800,000 to 3,200,000.

More than nine million households are reported to have no energy credit going into winter.

Bethan Sayed from Climate Cymru has warned urgent support from the Welsh and UK Government is needed this winter, especially given that the residents of north Wales are paying more for their energy bills than most places in the UK.

She said: “This is scandalous. Governments have been sleepwalking in to this winter, with no additional support announced, and with the new phase of the Welsh Government’s Warm Homes insulation programme not being initiated until next year! Where is the urgency?”

Households across Wales are also hit by higher unit rates of energy with electricity unit rates in north Wales at 28.91 pence per kilowatt hour (p/kwh) and 28.20p/kwh in south Wales.

Gas unit rates in north Wales are 7.08p/kwh and 7.21p/kwh in south Wales.

The lowest electricity unit rates are in Yorkshire (27.20p/kwh) and the lowest gas rates are in the East Midlands (6.94 p/kwh).

“Blow”

Energy bills in parts of Wales are on average £98 more expensive than parts of England with average bills in north Wales standing at £1,935 a year and in south Wales £1,900.

This compares with the East Midlands in England, where average bills are now £1,837.

Fi Waters, a spokesperson for the Warm This Winter campaign, said: “Where you live can add more to your energy bills. It is yet another blow to hard hit households as our Tariff Watch report reveals there is a postcode lottery because suppliers are passing on costs to customers through different regional standing charges.

“The Welsh and UK Governments needs to wake up to the fact that energy is now unaffordable for millions of households and act to bring down bills this winter and permanently.”

Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “Some of these differences in unit costs and standing charges may be seem minimal, but they all add up for people struggling in cold damp homes.

“In Wales, people are being priced out of being able to keep themselves warm because of these unjust regional variations in costs.

“As the first cold snap of autumn approaches and people see their energy bills at the same levels as last year, people will be dreading the onset of winter.”

Operating costs

In further blow to households, an analysis of firms’ operating costs found that energy firms may be spending almost as much on marketing, which includes sponsoring football teams, event venues and creating TV adverts as they do on operating customer contact centres.

Operating costs, which make up £242 (an average of 13%) of customers’ bills, also consist of central overheads, such as office rents and the cost of maintaining energy meters.

Ofgem allows energy firms to increase these costs with inflation (up 37.5% in six years, from £176 annually in April 2017 to £242 annually as of October 2023), however a recent report by the House of Commons Energy Security Committee of MPs called for operating costs to be stripped out of the standing charge altogether.

The report also reveals that suppliers are now expected to make an additional £140m in profit on the nation’s energy bills over the next 12 months, thanks to changes to the Ofgem price cap which came into force on 1 October.

The new rules mean that firms now make an average £64.70 profit per customer per year, up by £4.70 per customer.

The projected 12 month profits for all energy suppliers has hit £1.88bn, an increase of £140m from the previous Warm This Winter Tariff Watch report (an 8% increase). The predictions are in addition to any profits which firms have already made in 2023.

Campaigners have warned that with energy prices subject to change, customers should exercise extreme caution when thinking about switching and fixing.

For example, the report finds that there are now 337 fixed price tariffs that are more expensive than the current Ofgem price cap.

Tariffs

And the report also reveals a league table highlighting the exit fees some energy firms charge for leaving a tariff early.

Just one in twenty (6%) British Gas tariffs come with no exit fees – and the firm’s average exit fee is £62.

Among the other main suppliers, 12% of EONs tariffs have no exit fees, 14% of EDF and 15% of Ovo’s tariffs are free of exit fees. Ecotricity, Utility Warehouse, So Energy also had small proportions of their tariffs with zero exit fees.

Almost all tariffs for Good Energy, Octopus and Cooperative Energy come with no exit fees.

As unit costs have come down in recent months, but are expected to increase again in January 2024, the report reveals that customers could save money over the next 12 months if offered a “one year fixed” tariff with unit rates and standing charges below the current price cap.

Simon Francis, said: “Britain’s broken energy system continues to inflict misery on homes across the country with increased standing charges and profits hurting consumers while rewarding the energy firms.

“It’s galling to think that our energy bills are so high because energy firms spend as much on sponsoring Premier League football teams and expensive TV adverts as they do on customer service.

“But while households suffer, the UK Government sits on its hands and refuses to introduce tariff reforms which could bring down bills and help people stay warm this winter.

“Indeed, with the Prime Minister halting work to improve the energy efficiency of buildings, Britain’s households will be trapped in cold damp homes for years to come.”