To Cap or Not... more info and central discussion

randm

my first post! we have never switched tarrifs at all, buying gas-british gas and electric-southern electric, so the comparison sites are already showing me a saving of £232 if i take out dual fuel on the british gas click enery 5 tarriff.So is it still worth me getting a capped tarriff and how do i know what is a good price for one-the comparison sites show me getting a loss, but of course they are not predicting a price hike in the future.how do i choose. thanks:eek:

WestonDave

What is interesting is seeing the market work as it is expected to.

At noon today you could fix with British Gas until 2009 on dual fuel at 29% more than their variable rate. Now they have just announced a 25% increase in the variable rate - in other words all you were doing was signing up to their new rates. Any company worth its salt will factor expected rises into any fixed rates offered and believe me British Gas probably knows what it will be paying for gas for months to come never mind any market volatility as its all bought on forward contracts rather than spot rates. (if we get a cold winter they may come a bit unstuck as they'll need a bit more at spot rates but I guess they allow for that as well).

On the same basis British Gas are now offering to cap on level terms - i.e. no premium over todays rate - until 2011. Would they be doing that if they expect significant rate rises by 2011 - absolutely not. What that offer is signalling is that they expect on average market rates to stay around todays level for the next 3 years.

So what about the other 35% of the scarey 60% - well for a start if you scaremonger about at 60% rise and then put prices up 25% everyone is happy rather than the anger of an unexpected 25% rise.

However the other signal in the market is from EDF who are offering a cap to 2009 at 5% over todays variable rate. That to me suggests they expect in the shorter term of that rate offering that there will be a small increase. We know that is likely as Martin said to come in January at the earliest (note BG promised no more rises in 2008) which means that if they get 5% for a whole year its probably about the same as getting 10-15% for the chunk from January to September. We'd also expect some falls in spot rates once the weather warms up and demand for gas falls so maybe a 20% rise after Christmas is possible but remember EDF are expecting prices to be about 5% higher than now on average over the 12 months to next September (bearing in mind the lag in getting people onto that tariff). So if we are to see rises which equate to 60% over recent values they will not according to market experts at British Gas and EDF be sustained enough to see much more than an average 5% increase over the whole year. If we see 60% which I doubt as I think it was a mind game it will be relatively shortlived or British Gas and EDf are going to be losing a lot of money on those capped deals - are they that dumb?

1carminestocky

WestonDave wrote: »

What is interesting is seeing the market work as it is expected to.

At noon today you could fix with British Gas until 2009 on dual fuel at 29% more than their variable rate. Now they have just announced a 25% increase in the variable rate - in other words all you were doing was signing up to their new rates. Any company worth its salt will factor expected rises into any fixed rates offered and believe me British Gas probably knows what it will be paying for gas for months to come never mind any market volatility as its all bought on forward contracts rather than spot rates. (if we get a cold winter they may come a bit unstuck as they'll need a bit more at spot rates but I guess they allow for that as well).

On the same basis British Gas are now offering to cap on level terms - i.e. no premium over todays rate - until 2011. Would they be doing that if they expect significant rate rises by 2011 - absolutely not. What that offer is signalling is that they expect on average market rates to stay around todays level for the next 3 years.

So what about the other 35% of the scarey 60% - well for a start if you scaremonger about at 60% rise and then put prices up 25% everyone is happy rather than the anger of an unexpected 25% rise.

However the other signal in the market is from EDF who are offering a cap to 2009 at 5% over todays variable rate. That to me suggests they expect in the shorter term of that rate offering that there will be a small increase. We know that is likely as Martin said to come in January at the earliest (note BG promised no more rises in 2008) which means that if they get 5% for a whole year its probably about the same as getting 10-15% for the chunk from January to September. We'd also expect some falls in spot rates once the weather warms up and demand for gas falls so maybe a 20% rise after Christmas is possible but remember EDF are expecting prices to be about 5% higher than now on average over the 12 months to next September (bearing in mind the lag in getting people onto that tariff). So if we are to see rises which equate to 60% over recent values they will not according to market experts at British Gas and EDF be sustained enough to see much more than an average 5% increase over the whole year. If we see 60% which I doubt as I think it was a mind game it will be relatively shortlived or British Gas and EDf are going to be losing a lot of money on those capped deals - are they that dumb?

I made exactly the same point a week or so ago - it's called 'price conditioning' in the industry. I hope Martin hasn't fallen prey to it as well (I have as I've gone for Price Protection Dec 2009 with BG this morning but I believe have 7 days to consider my options). The energy comapnies are sharks, and should be treated with extreme scepticism IMO

jay_w_uk

It's a fine balance. I worked mine out and by capping I have added £100 a year to my bills. That's about 15-20% increase. I only really win if E-On's standard price goes up by around 3p per KWhs or more, which would have put my uncapped bill up by £150-£200.

mech_2

moncman wrote: »

Carrying on the thread of whether to cap or not....a lot of people seem to be (justifiably) confused.

More than one post I've seen says to fix will cost me xx% more than my current tariff so prices have to rise by xx before I break even.

Of course this is not quite true. If you fix/cap at xx% above your current rate then for every day/month you pay the enhanced rate you are out of pocket and the rise (if it comes) has to be larger or for longer to offset the difference.

If the rise is big and soon then all the fixers could be quids in. If it is smaller or stepped over a period there may be not much in it.

Put simply if your fixed rate is at a 30% premium (and you pay that premium right away) and the rise comes a month from now and is 35% then it will take 6 months of saving 5% to recoup the initial loss.

Well no, because it takes a month to switch anyway. Read what Martin said. It's also summer. Your energy usage is likely to be more than double in the winter, so the extra cost of one summer month would be less than 3 months over the winter (even if your percentages are realistic). These capped and fixed deals last much longer than that, so there's a definite benefit to be had.

jay_w_uk

Don't forget, you can use Clubcard points (and tehrefore deals) with E-On, so you're getting £10 back for every £2.50 on your bill!

Donna410

jay_w_uk wrote: »

Don't forget, you can use Clubcard points (and tehrefore deals) with E-On, so you're getting £10 back for every £2.50 on your bill!

£10?! how did you work that out?

lokiman

jay_w_uk wrote: »

I don't think anyone is questioning your motives - from a personal point of view it was your OTT anger on GMTV that annoyed me, in the context of perpetual scaremongering by the media.

You don't have to justify yourself, but when you start making out that people are wrong/stupid for not taking/questioning your advice, it's a little upsetting.

Keep up the good work, in the main it's obviously working.

Hardly OTT of Martin, given today's developments:

http://forums.moneysavingexpert.com/showthread.html?t=1064253

Quentin

jay_w_uk wrote: »

Don't forget, you can use Clubcard points (and tehrefore deals) with E-On, so you're getting £10 back for every £2.50 on your bill!

You would get the equivalent of 10p in clubcard deals for every £2.50 of your eon bill!

They give you 1 Tesco point per full pound on your bill.

(You cannot pay your bill with Tesco coupons!)

jay_w_uk

Donna410 wrote: »

£10?! how did you work that out?

Apologies, I meant for every £2.50 in tesco vouchers you earn