The standing charge is an important but often overlooked part of your energy deal. The vast majority of energy tariffs will include a standing charge, typically ranging anywhere from around 5p up to 70p.
Most of us will actively look for a cheaper rate per unit of energy (KWh) when looking for a cheaper deal. This alone may not necessarily lead to a cheaper deal over a year. A typical standing charge of 10p per day would mean over £70 per year for gas and electricity. If your standing charge is 60p a day for both, you will be paying over £400 a year.
You can find how much you are currently paying by looking at your bill. Along with the KWh charge, you will find a daily sum. This is paid each and every day for as long as you remain contracted to your energy supplier.
What exactly is it?
A standing charge is a daily amount added to your gas and electricity bills. If your deal includes a standing charge, you are charged that daily rate regardless of how much energy you use. Whether that is 0KWh or 1000KWh per day, your standing charge will remain constant. It’s a good way for the energy suppliers to guarantee income but can provide a real sting to the customer.
The purpose of the standing charge is to help cover operator costs. This is for things like supplying the gas or electricity to your home, maintaining those supply lines and taking meter readings.
Do I have to pay a standing charge?
Although the vast majority of tariffs will include a daily standing charge, it is not always the case. Standing charge free tariffs are not as common but are available. As you might expect, there are advantages and disadvantages to the standing charge.
Advantages and disadvantages of paying a standard charge
Looking at only one aspect of an energy quote will not be enough to work out if you are getting a better deal. It is not uncommon for lower standing charge rates to lead onto higher price per unit costs. Although not always the case, the inverse is also often true. A higher daily rate equals a lower price per KWh of gas or electricity.
Personal circumstances will differ, and a deal that suits one person may not be the best for another.
Here are some of the advantages that apply to most people:
You will get a better rate on your unit price. Each KWh for gas and electricity is likely to be lower when paying a standard charge. This will differ between each supplier but in general, a higher daily charge will mean a lower KWh rate.
Higher and medium energy users usually find these deals to be the cheapest.
Disadvantages of paying a standing charge:
You might be paying a bill for an unoccupied building. Even if you are not using any gas or electricity, you will still pay the daily rate. This often affects holiday homes that are left dormant for large parts of the year. Savings made on lower KWh costs are cancelled out by higher standing charge costs. A property left empty for 8 months of the year is still paying 8 months’ worth of a daily standing charge.
If you are a low energy user, not paying a standing charge could significantly lower your bill. Although you will be paying a higher cost per KWh, you could be saving hundreds of pounds per year in daily fees.
Should I look to avoid a standing charge?
Separating the two pricing methods can be difficult, especially when trying to make sure you are on the best deal. You should be able to find your estimated annual usage from your current supplier and then add this to your standing charge over a year.
Looking at how you expect to use energy as well as the usage costs will help work out which deal is best for you. The quickest way to do this is through a price comparison site. Using online tools can help bundle all of this information together and provide an annual estimated cost. A comparison will provide the cheapest deal based on your expected usage patterns and make sure that you do not overpay for your energy.
A price comparison site is the easiest way to estimate all of the variables. Getting the best deal available is only a few clicks away.