Electricity and gas tarriffs

[gobbledegeek]

Why do electricrity and gas companies charge a higher rate for the first x amount of units then charge less for the remainder? I'm assuming it's just a way of making more profit, but it doesn't encourage you to save gas or electricity. In these envioronmentally aware times they should be charging less for the intial units then hiking the price up if you use considerably more, or charge the same pence per unit for all units.

[Buenchico]

A bit of history might help here:

Most energy suppliers (both gas and electricity) used to charge the same price for each unit. However, because they have to supply and maintain the cables and pipes which go into your house, they added a 'standing charge' on top. (This was to cover the expenses that they had to meet even if you didn't use any power. It was equivalent to the 'line rental' element of a telephone bill). So, even if someone didn't use any gas or electricity at all, they would still have bills to pay because the standing charge was always present.

Consumer organisations (and groups who campaign on behalf of the poor or elderly) objected to this because, for example, it would mean that a pensioner who had to spend a great deal of time in hospital would still have to pay a disproportionately large bill for the very small amounts of gas and electricity which they used.

As a result of these pressures, the power companies changed to the present system. This means that anyone who doesn't use any gas or electricity (perhaps because they're in hospital) receives 'zero' bills. At the same time, it allows the power companies to effectively continue receiving the 'standing charge', from most of their customers, by spreading it across the first few hundred units used.

Chris

[gobbledegeek]

Sneaky!
Thanks for the informative reply Chris.