Electricity meters
No choice for me
Because of my former Bankruptcy, I have to use a pre-paid meter, so my electricity comes at a premium price, paid (at least in theory) in advance. Against that, it is a very effective way of identifying where savings can be made. Even if I am given the option to pay for electricity in the normal way, I might not necessarily want to if the supplier behaves fairly, but my electricity supplier doesn't like me. I know this because in one of their letters to me, they said that if I tried to change supplier while still in debt, they would block me. At no stage have I ever suggested changing supplier, but that letter set me thinking that perhaps I ought to at least look into it.
Payment via cards
Coin-operated electricity meters were phased out in the eighties. When my electricity supplier originally installed a meter as a result of my Bankruptcy, I had to buy cards (in my case, twenty pounds' worth; I could buy less, but that would mean more frequent visits to the shop) that I inserted into a slot in the meter, then threw the cards away. These cards were never entirely satisfactory; it sometimes took several attempts to get the meter to read them. Still, this system avoided all the security problems that are associated with coin-operated meters. The card system was eventually replaced by a technically superior system, but one that has brought with it a different set of problems for me.
Payment via memory stick
Instead of buying cards, I was issued with a special type of memory stick that can only be used for feeding electricity meters. I take it to a shop equipped with a suitable computer terminal, together with some cash (again, twenty pounds is my chosen amount) to top up the memory stick. I then go back home and feed it into the meter. In principle, this is a good system. It avoids the problems that I had with the card system while also allowing my electricity supplier to adjust the price per unit. Whenever I top up the memory stick, the computer updates the price per unit. I don't ever know the price per unit, but I can tell what's going on to some extent by checking the meter reading periodically. Even if I don't check, I get a sense of it by the frequency of my visits to the shop to top up the meter.
When on the card-based meter, I only topped up the meter every three or four weeks and I was content with the system. Things have changed a lot since then, and not just because of the price rises that everybody else has suffered.
Debt repayment
When my new meter replaced the old card-based meter, I was told that I owed my electricity supplier about eighty pounds, although I wouldn't be asked to pay it all in one go as the new meter would be better because it offers better ways of adjusting the price per unit. At the time, I had no way of paying off the unexpected debt, so I didn't grumble too much. Soon afterwards, I was told that they'd adjust the meter so that I paid an extra five pounds per week for sixteen weeks.
I suppose that I could have written to my electricity supplier and explained that this was a bit steep, considering that I normally only spent six or seven pounds per week on electricity, but I decided instead to cut back on electricity consumption. I wasn't heating the home in winter anyway, but I decided to switch the hot water tank off except when I needed a bath. Previously, I'd kept the hot water permanently switched on. I knew that I was wasting some money by doing this, but I felt that it was worth it for the convenience. I may have cut back in other ways too, but switching off the hot water tank was the important decision. I still ended up feeding my meter more frequently, but not much more than I'd done on the old cards system, and nothing like as frequently as my electricity supplier expected. I noticed from the first subsequent quarterly statement that my debt came down a little, but not much. I figured that as long as it was going down, it wasn't anything to worry about.
More recently, my electricity supplier decided to push the price up again (over and above all the price increases that everybody else had to suffer in 2008) to try and recover the remaining debt at their desired rate of five pounds per week. I now use a microwave (acquired during 2008) for most of my cooking, which saves some money, but it's difficult to cut back any further.
Standing charges
For most things paid by meter, you pay for what you use and when the meter runs out, you need to put more money in. One problem that I've noticed is that the rate I pay for electricity is supposed to include a standing charge. So if I cut down on the amount of electricity that I use, the price per unit will go up to allow for the standing charge, irrespective of debts or other factors. In theory, this means that if I increase the amount of electricity that I use, the price per unit should go down. I don't think that would happen quickly so I'm now in a situation where I'm scared to start using more electricity even if I get a job after the alleged debt is cleared, because I'd be paying over the odds for it, but that's not the only problem.
Because I cut back severely on my electricity usage, I not only avoided paying the debt element of the electricity that I wasn't using, but I also wasn't paying the debt on that proportion of the standing charge. This is why my debt hardly changed and why my electricity supplier doesn't like me, so let's look at the problem.
Price per unit
In the example given, the figures quoted are not real, but illustrate the point I'm making. Suppose my standing charge is 3 pounds per week. For convenience, we'll forget kilowatts and assume that the unit is the amount of electricity that you can buy for 1 pound, and that this price is fixed for eternity. We know it isn't, but normal price changes only serve to confuse the issue.
If my electricity supplier expects me to buy 12 units, the meter will be set to charge 1.25 pounds per unit. So at the end of the week, they'd have expected me to spend 15 pounds, 12 of which are for the 12 units of electricity and 3 of which are for the standing charge. If I only buy 6 units instead of 12, I'll have spent 7.50 pounds, of which 3 are for the standing charge with the remaining 4.50 for the electricity. Now you can see the problem. There is a shortfall of 1.50 pounds. Spread over a long period, it adds up.
When my electricity supplier decides that they want me to pay another 5 pounds per week towards debt repayment, they recalculate it to include the standing charge. If I'm only using 6 units per week, they add 3 for the standing charge and 5 for the surcharge, making a total of 14. So I end up paying 11 pounds for my electricity, plus 3 for the standing charge, if I don't cut back further. Although some of this is for debt repayment, it doesn't look that way. It actually looks like I'm paying 2.33 pounds per unit, where I was once paying 1.25. Moreover, once the debt is sorted out, my electricity supplier doesn't switch the meter back to the 1.25 rate. As I'm only using 6 units, my electricity supplier will set a rate so that I pay 9 pounds per week. So I'll be put on 1.50, not 1.25.
So much for trying to economise on electricity to save Planet Earth. While I'm paying 1.25 or even 1.50 per unit, a family burning electricity like crazy may be paying 1.05 or 1.10 per unit, since the standing charge is only a small proportion of their total bill. If I get a job and decide to switch on the hot water tank permanently and to switch on the electric fire during the winter months, which would be ideal, I'll be paying at the higher rate. Eventually, my electricity supplier will realise this, but not before I've paid an exorbitant price for the electricity already used over a considerable period of time. It is therefore unlikely that I will ever revert to my former pattern of electricity usage as long as the price per unit includes a standing charge element.
Ideas for change
Standing charges should be outlawed. In a world that is increasingly environmentally conscious, they don't make sense. Suppliers will argue that some customers don't use enough electricity to be profitable without standing charges. While this would technically be true, it would be irrelevant. Those who use most electricity would pay more and would have an incentive to cut back. As long as the price per unit is set correctly, the supplier would still make the same overall profit but in a different way. It wouldn't matter that some individual customers are unprofitable, providing the law protects such customers.
If standing charges must be kept, electricity suppliers should be obliged to design meters so that the standing charges are separated from the actual electricity used. One way would be to have two separate meters, with the standing charge meter controlled by a timer and the main electricity meter controlled by usage, to make everything transparent and avoid the nonsense of suppliers trying to guess how much electricity each customer is likely to use. If these conditions were imposed, maybe electricity suppliers would decide to abolish standing charges anyway, at least for metered customers.
Meanwhile, a different system should be designed for debt repayment. If I have to pay 5 pounds per week for a set number of weeks, I'd rather pay cash than have the meter adjusted to a faster rate. As I explained earlier, the whole psychology is altered if the debt is built into the price per unit.
Price differentials
Finally, it's worth noting that metered customers pay a higher rate for electricity than normal customers, who have the option to cut their bills even further if they agree to pay by direct debit. The article I linked to is still as relevant now as it was in September 2006.
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