Question

How is the cheapest plan different from the standing offer? Why do energy providers offer so many plans in addition to the standing offer? If the government wants to make electricity more affordable, why can be done in terms of pricing?

Answer 1

Introduction

Electricity across different countries can be supplied to retail consumers through numerous plans which are devised by governments and other service providers and are usually an important consideration since a large part of consumer household incomes goes towards purchasing electricity and reaching the best plan and paying the best price is therefore important for consumers to know. Further the government as a producer also would want to benefit the society by keeping a check on the prices that people would end up paying for it since they actively want to help consumers in getting maximum value.

Case Specifics:-

How is the cheapest plan different from the standing offer? Why do energy providers offer so many plans in addition to the standing offer?

Plans in the energy sector can generally be divided into two parts which are Market Offers and Standing Offers. Standing offers refer to those plans which are government regulated energy deals and tend to charge way higher than market plans which are offered by market players and can be customized depending upon the nature of the consumer, their average demand patterns and other similar factors.

Out of the plans which are available under market plans, the cheapest one for each consumer could be the one which is best suited towards their demand pattern respectively.

The main reason for energy providers to have numerous plans in addition to the standing offer which is government regulated is that the needs and wants of consumers varies and therefore the plans offer better rates to those who want to purchase relatively lesser amount of electricity than paying a flat rate for the same. The customizable nature of demand of each consumer thus, serves as the true reason why energy providers offer many plans in addition to the standing offer respectively.

If the government wants to make electricity more affordable, what can be done in terms of pricing?

If the government wants to make electricity more affordable, the concepts of standing offers can be reduced or eliminated. The only benefit of which is that there is no restriction on entry and exit. Rather people can be given per unit concessions if they consumed lesser amount of electricity and allowing of custom market plans as per the needs of the consumers can help in making electricity affordable in nature which is in the best interest of the consumers respectively.

Please feel free to ask your doubts in the comments section if any.