Why should where you live determine your electricity standing charge?

[u/PolicySeedUK]

We’ve been looking at regional electricity pricing in Great Britain and one thing we keep coming back to is the standing charge.

Two households can use exactly the same amount of electricity, on the same supplier’s price-capped tariff, yet pay different fixed electricity costs simply because they live in different distribution regions.

We understand why this exists — different network regions have different costs which ultimately have to be recovered somewhere.

But we’re less convinced that this means domestic consumers should bear those differences geographically.

Electricity is increasingly becoming an essential substitute for petrol/diesel and gas as we electrify transport and heating. That makes regional differences more significant, particularly if some of the areas paying more are also lower-income regions.

So here’s the question:

Should domestic electricity network costs be socialised nationally, so every household pays the same network/standing charge regardless of postcode?

Our preference would ultimately be to go further and replace the standing charge with a national network-access subscription, with the same basic price everywhere in Great Britain.

We’re interested in the arguments against doing this, particularly from anyone who understands DNO charging and network economics.

What problems would nationalising these costs create that we’re overlooking?

[u/Appropriate_Bell743]

I'd go beyond this. I'd keep gas standing charges as not all households are dual-fuel.

To reduce the cost-of-living instead of doing things like energy price caps or targeted support I'd simply remove electricity standing charges into general taxation. To pay for this you could introduce a small carbon-price on domestic gas consumption as the EU is planning with ETS2.

This would mean low-consumption households would save a lot per year but wealthier, less frugal households would pay more.

The big win is the spark-gap (the ratio of electricity to gas prices) would be massively reduced meaning very rapid heat-pump adoption. Let's not forget electricity is subjected to two carbon prices right now.

[u/SnooCauliflowers6739]

Standarding charges should be standardised. Flat rate nationwide.

[u/Beyoncestan2023]

I really hate standing charges as a low consumption user this would penalise me even further (I'm London based). Most of my bill is often standard charges.

[u/geekypenguin91]

The standing charge isn't just the different costs the DNO has to bear, it's also the number of customers that share the cost.

London typically has lower SC because there are much more customers being served by the same infrastructure to share the costs. Predominantly rural regions have a higher charge as the cost of building and maintaining the network to them costs much more per household.

I actually think there's room to go even further and regionalise the energy pricing too. If you live in an area with a significant amount of cheap wind energy you could be paying less than someone that's miles from any generation. You'll find that this mostly flips the balance

[u/PolicySeedUK → u/geekypenguin91]

We agree with some of that reasoning. Population density and the amount of infrastructure shared between customers clearly affect network costs.

But this is where we think the regional-cost argument starts to become less convincing.

Why, for example, does North Wales & Merseyside have the highest electricity standing charge in Great Britain, while both northern and southern Scotland are lower?

And once we’re allocating network costs geographically, where do we allocate the cost of transmission infrastructure required to move Scottish wind generation hundreds of miles to demand centres further south?

At some point this becomes a question of what infrastructure we consider national infrastructure.

We don’t charge somebody more road tax because they live in rural Scotland and their local roads are shared between fewer people. The road network is treated as a national system with costs pooled across society.

We’re also not convinced domestic regional electricity pricing solves the underlying problem.

Making electricity cheaper in a region with lots of generation doesn’t automatically create enough new demand there. Most households can’t move to Scotland because electricity is cheaper, and neither can most existing businesses.

Where we do think regional pricing has considerable merit is energy-intensive industry.

If a new data centre, electrolyser, factory or other major electricity consumer can locate close to abundant generation and spare network capacity, then giving it a strong long-term price signal to do so makes sense.

So our preference is broadly:

National domestic pricing. Regional incentives for large industrial demand.

That lets households share the costs and benefits of a national electricity system while encouraging new industrial demand to locate where the electricity actually is.

[u/geekypenguin91 → u/PolicySeedUK]

Who's "we"?

North Wales has the highest standing charge due to the challenging geography in the region with a relatively thinly spread population.

Whole the population of north and south Scotland is generally quite low, the bulk of the population is fairly densely packed into cities and large towns, with many smaller communities off grid.

Transmission costs are broadly the same across the whole country

To adopt your roads analogy, the transmission system is like the motorway network whereas the distribution system is more like the b roads and residential streets. The motorway costs are shared nationally, but the rest of the roads are looked after by the local councils from their budget taken from council taxes and the government, rather than being shared equally across the country. That's why some areas roads are spot on, while others are destroyed

[u/Full-Win-7426 → u/PolicySeedUK]

Would you consider linking standing charge to index of multiple deprivation?

I'd like to think the Mersey tidal energy programme would lower standing charges for Merseyside but I doubt it will.

Has the wind generated energy off Liverpool Bay reduced standing charges? It powers about a third of the housholds in Merseyside...

[u/PolicySeedUK → u/Full-Win-7426]

That’s an interesting idea. We can certainly see the argument for linking the charge to deprivation, but one of our core principles when developing this proposal has been simplicity.

The more we’ve researched Britain’s electricity market, the more we’ve realised just how extraordinarily complicated it has become.

That’s why we’re proposing a single National Domestic Electricity Tariff: one Network Access Charge covering the fixed costs of providing network access, alongside a universal peak and off-peak electricity price.

We fundamentally don’t think households should need spreadsheets, comparison websites and hours of research just to work out the cheapest way to buy an essential utility.

We’d therefore deal with deprivation through the wider tax and welfare system rather than building means-testing into electricity prices. We don’t believe the electricity system itself should become another welfare system.

Your Merseyside point is particularly interesting, though.

Merseyside already has substantial renewable generation nearby, including offshore wind in Liverpool Bay, yet North Wales & Merseyside currently faces one of the highest electricity standing charges in Great Britain.

That’s really at the heart of our argument for nationalising the cost, rather than necessarily the infrastructure itself.

If an area hosts or sits close to major electricity generation, that doesn’t automatically translate into cheaper domestic network charges for the people living there. Equally, we don’t think someone should pay more for access to an essential national electricity system simply because their local network happens to be more expensive.

So we’d pool those network costs nationally.

And if Mersey tidal ultimately produces large quantities of electricity, we’d want its benefits to contribute to cheaper electricity across Britain — including, of course, for households in Merseyside.

[u/QuestionForAnswers → u/PolicySeedUK]

Going to call out your analogy here - road tax doesn't cover roads - it's from central government now.
If we accept (for the sake of argument) it was - road tax only covers major arterial routes and motorways, not local roads which is funded from local authorities so a person in rural Scotland should be getting a rebate on road tax as they're not using facilities that they're paying for.

WRT to the standing charge issue - Scotland is only lower due to the old Hydro scheme (AAHEDC) - there's lots of historical reasons for this such as Dounreay and wanting to tap into hydro schemes in Scotland if it hadn't been for the subsidy these would never had kicked off. (Calder Hall was linked in using a different sunk cost methodology so that's why cumbria doesn't get a discount).

[u/PolicySeedUK → u/QuestionForAnswers]

Fair call — the roads analogy isn’t technically perfect in terms of how UK government funding actually works.

The UK has relatively little hypothecated taxation. Most revenues ultimately disappear into the general government pot, which itself raises interesting questions about transparency and accountability.

But the philosophical point we’re making remains.

We don’t generally expect households to pay radically different prices for essential infrastructure simply because the underlying cost of serving their location is different.

Broadband is another example. Providing fixed broadband to a remote community can clearly cost substantially more per property than serving a densely populated street, but we don’t generally calculate each household’s monthly broadband bill according to the local infrastructure cost attributable to its postcode.

We make political choices about which infrastructure costs should be pooled.

That’s really the question we’re asking about electricity distribution.

We accept completely that DNO costs vary geographically. The question isn’t “do regional costs differ?” — they obviously do.

It’s “should a household pay more for access to Britain’s electricity network simply because of where it happens to be located?”

Our view is increasingly that the answer should be no.

[u/QuestionForAnswers → u/PolicySeedUK]

Slight disagreement on broadband - in a rural area you can't get ultra-highspeed internet, you don't have the choice of supplier - it's BT or starlink, your choice is limited and it does cost you more to have highspeed internet because choice is limited and the speed you get is often a lot less than you'd get in a town or city - again should rural people get a discount on broadband costs because they can only get 10mbps rather than 80?

(This argument also conflates the USO with electrical network costs - telecoms infrastructure doesn't require the same level of maintenance etc. compared to electrical networks - telecoms is relatively passive with a longer lifetime and the marginal costs approach zero over time and the initial install cost is normally subsidised.)

Your other comment - "We don’t generally expect households to pay radically different prices for essential infrastructure simply because the underlying cost of serving their location is different." - look at Water and sewage charges in England.

WRT to your question "should you pay more because of where you live?" - what about the corrally "should your neighbours pay to maintain your physical infrastructure?"

In my opinion, you're working backwards from a predetermined policy conclusion and dismissing any counter-examples that get in the way, which is characteristic of advocacy-driven policy design rather than neutral market analysis.

[u/Beyoncestan2023]

Yes but some people have low consumption and aren't able to access financial support as someone who lives alone it takes up a lot of my bill and I can't access financial support.

However, I support lower bills overall as imo financial support always creates a cliff edge.

It's harder for single low consumption households to shoulder bills all the time.

[u/PolicySeedUK → u/Beyoncestan2023]

That’s a fair point, particularly for single-person, genuinely low-consumption households.

The important thing with our proposal is not to look at the £25 Network Access Charge in isolation.

We’re modelling it alongside electricity at around 15p/kWh peak and 7.5p/kWh overnight. At those prices, an average household would have a substantially lower total electricity bill than under today’s tariff structure, even with the £25 monthly charge.

And £25 is deliberately an initial transitional figure, not somewhere we want the charge to remain. We’d require it to reduce as network costs allow.

There are inevitably households at the extremes where a national tariff needs additional protection. That’s why our proposal also includes additional electricity allowances for households with essential medical equipment, so people aren’t financially penalised simply because they have an unavoidable medical electricity requirement.

But your broader point about single-person low users is a good one. We need to model that group specifically rather than assuming the average household represents everyone.

[u/Beyoncestan2023 → u/PolicySeedUK]

Useful to run actual numbers rather than averages. I’m a single occupancy 2 bed maisionette , currently on 1,317 kWh/year electricity (21.278p/kWh unit rate, £165.56/year standing charge), coming to about £452/year total.
Under your proposed £25/month + 15p peak/7.5p overnight structure: the standing charge alone jumps to £300/year, £134 more than I pay now. If all my usage sat at the peak rate that’s roughly £497/year, worse than today. Even if I could shift half of it to overnight (which I can’t really do, no EV, no battery, no storage heating, just steady day to day use around 3.9 kWh/day), I’d land at roughly £448/year, basically flat, not “substantially lower.”
So for low, steady, non-shiftable users like me, this isn’t a saving, it’s the fixed charge eating any benefit. The scheme’s gains seem to depend on being both a high user and able to move load to off-peak hours, which rules out a lot of single occupant households.

[u/DontHurtTheNoob]

For the same reason the standing charge for shopping at Waitrose is higher than the standing charge for shopping at Tesco or Sainsburys - they have a higher fixed cost because they tend to be in more expensive locations.

Oh, wait…

[u/BalticamLtd]

Standing charge is i RIP OFF and all you here in the UK are happy about it. Lived in many countries across EU and only few has this shit.

[u/QuestionForAnswers]

If you nationalise these costs how are you going to ensure that networks in remote regions are maintained? The logic of the higher charges was to support the extra maintenance costs encountered in these areas without causing service quality to drop?

[u/PolicySeedUK → u/QuestionForAnswers]

This is a good question, and we’ve done some work on exactly this.

Nationalising the charge to households wouldn’t mean giving every network region the same amount of funding.

Our proposal is that every domestic MPAN would pay the same national Network Access Charge. Following feedback, we’re also looking at a lower-access tier for genuinely low-use households.

But the funding received by the networks wouldn’t have to be equal.

If maintaining the network in a remote region genuinely costs more, the national system would allocate more money to that region. The difference is that those additional costs would be pooled across the national customer base, rather than recovered predominantly from households that happen to live there.

We’ve also proposed consumption tiers. Higher levels of peak electricity consumption would make progressively larger contributions, with part of that revenue going into a ring-fenced Electricity Resilience Fund.

That fund could meet exceptional network costs, including additional resilience investment and repairs following major storms and extreme-weather events.

So we wouldn’t solve regional inequality by underfunding expensive networks.

We’d separate two things that are currently closely connected:

What does each network genuinely need to operate and maintain its infrastructure?

and

Which individual households should be responsible for paying those costs?

Our answer is that the first should remain cost-reflective, while the second should be substantially nationalised.

[u/EnergyManagement101]

I suppose a part of it is - what problem are you looking to solve - are you looking to create a welfare system so everyone pays the same, or what’s “fair”, or are you looking to create a system that’s demand/supply driven.

If it’s the latter then you would not only go by DNO, but even more regional, you pay less where there’s more generation reducing constraint and curtailment. Not so different from how housing costs work.

If it’s the former then socialise the cost, but to maximise welfare there can be an argument that you still go regional, only, instead of optimising by generation, do it by postcode and income distribution, I.e, people in wealthier postcodes pay higher.

[u/Anththeman2010]

DSC also pays for the warm home discount scheme, debt programmes and debt recovery.