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60 seconds on 'Zero standing charge' tariffs

Marcel | Edited by Steve N

Updated 21 Oct 2016

The death of zero standing charge tariffs has been exaggerated. If you only use gas or electricity occasionally – say, if you're not at home for a chunk of the year – a 'zero standing charge' tariff could slash your bills. Here's how to work out if and when it's right for you...

So, what is a standing charge? Energy bills work a bit like telephone bills. With phones, you pay line rental to have the line and then are billed for specific calls on top. With energy, the standing charge is the cost of having a gas and electricity supply – then you pay usage charges on top.

Therefore the standing charge is the fee you pay to your energy supplier simply because it gives you access to energy. It's paid at a flat rate – ranging from 10p-80p/day for gas and 5p-60p/day for electricity.

Right, but you're talking zero standing charges, so I presume I don't have to pay it? Yes... and no. According to rules introduced in 2013 to supposedly simplify tariffs, all new tariffs must have a standing charge – yet, ridiculously, this can be set to zero.

However, in its investigation into the energy market earlier this year, the Competition and Markets Authority recommended removing some of the rules introduced to simplify tariffs – including the one requiring all tariffs to have a standing charge. Energy regulator Ofgem has said it will remove this rule at the end of November.

One tariff that currently has standing charges set at zero is Ebico's Equipower and Equigas. For dual fuel, you can also choose Ebico's Equidual. It isn't a separate tariff as such, but is an option available via our Cheap Energy Club and comparison sites which combines Ebico's gas and electricity tariffs.

There are also a number of electricity-only and prepay tariffs which have zero standing charges.

Why would I pay a standing charge if I don't have to? Like anything else that has variable charges, it's about the interaction. So if you have no standing charge you may pay more for each unit you use – if you have a high standing charge, you may pay less for usage. So the key is finding the sweet spot depending on how much energy you use.

Yet for those it isn't right for, paying a standing charge can be a nightmare, as some found when their tariffs had standing charges added after Ofgem changed the regulations. Back then, MoneySaver John told us:

"My electricity bill will rise by more than 1,800%. That's not a typo. I'm told I must now pay a daily standing charge in addition to the tariff rate.

"My garage is remote from my house. It has electricity which I need intermittently. My annual bill is around £6/year but now I'll be forced to pay the standing charge plus the rate per kWh [kilowatt hour], taking the bill from £6 to around £110. I will be paying for something I never use. Thanks Ofgem, really acting in our interests here!"

Got it, so how low does my usage need to be to consider a zero standing charge tariff? This is a tricky one, but we can suggest a general guide:

As a rule of thumb...
If your home is empty for nine months or more per year, it's worth checking whether a zero standing charge tariff wins for you.

Again let's emphasise that we're saying to check – not that it will win for you. There are many other variables.

Likewise, if you only use a very small amount of energy year-round – say the bill is for a separate garage away from your house – then it's worth checking if a zero standing charge tariff is best.

So do I just pop onto a comparison site to find which is cheapest? Nooooo – it's not as simple as that. Be very careful using a comparison site. Most people just put their monthly usage in, but then the comparison site assumes in its calculations that you use this (seasonally adjusted) every month. But if you're looking at zero standing charges, you're likely to have variable usage over the course of the year – so the estimate will be way off.

OK, so how do I compare to see if it's right for me then? Don't worry, it's not too difficult. Our Cheap Energy Club allows you to filter to just look at zero standing charge tariffs to see which is cheapest for you. Yet the key is to enter your ANNUAL usage, preferably in kWh. If you can't and only have a monthly bill, you'll need to factor in how many months of the year you're at home.

For example, if you pay £100 a month when you're at home, but are only at home seven months a year, enter £700 as your annual bill. Do that and you should get a fair comparison.

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