49. The burden of the standing charge falls disproportionately on those who consume the least energy because it forms a large part of their total bills and means they pay the highest price overall for each unit of energy (see paragraph 34 above). These are generally low income households, who are also most likely to be on the SVTs and the poorest value tariffs generally and to be fuel poor and most in need of help with energy bills.
The CMA went further. In setting the PPM price cap for nil consumption at the average standing charge of the Big Six energy firms’ PPM tariffs it broke the standing charge down into its components. It stated that “the value of the price cap at nil consumption does not include, nor need to include, network costs since these are volume driven”63. It said that the network charging statements of the network companies defined ‘use of system’ charges to be nil at nil consumption64 . Thus it has been acknowledged that almost all (if not all) network costs should be recovered through the unit rate.
...
The benefits of a cap on the standing charge would also be further enhanced if the
Government withdrew value added tax (VAT), currently levied at 5% on all elements of
energy bills, from the standing charge. This would be on the basis that the standing
charge confers the ability to access a supply of energy, which is a necessity83
.There is a
belief that EU rules prevent this but that does not appear to be the case.
