Energy prices to increase

wakeupalarm

If all these Government energy saving measures reduce our energy use by say 20%, won't this mean the energy companies receive 20% less in revenue and will therefore just increase prices by at least 20% to compensate?

We will be paying the same amount in bills but using less energy. I guess the profits will go to the energy companies.

DGJsaver

thats my point in the other thread

This isnt really dealing with the incessant rises is it...

[Deleted User]

and those of us who behaved prudently ie have savings and insulated will get ziltch, zero. Never mind that we have to keep dipping into savings now that we have retired

jd87

The cost of subsidising these energy saving measures will get passed onto the consumer, then on top of that we will have to pay more to make up for their reduced profits.

The government has failed us all again.

WestonDave

Don't confuse profits and revenue. For sure the energy companies will want to maintain profits, but at present what they get from selling £1 of energy is actually very low - less than 10p. Lets say for the sake of argument it is 10p.

They need to be able to go to their shareholders next year, and say we've still got 10p profit to pay you a dividend, but our customers have only bought 80% of the energy. The cost to them of the energy etc this year was 90p (£1 less the 10p profit). They are only going to be buying 80% of that so it will cost them 72p, to which they still need to add their 10p profit. Now the customer only pays out 82p instead of £1. The profit margin has gone from 10% to 12% but the customer is still paying out less.

In theory however another thing should happen. One reason why energy prices are so high is that there is a lot of demand for it, particularly with China and other developing countries wanting more. If developed countries start reducing their usage, this overheating demand will cool which will lead to underlying prices falling. It is possible therefore that there could be a double benefit as the 72p bit of the new price actually falls to say 65p.

I accept that insulation isn't the answer people were looking for and it probably won't help very many people at all this winter due to the time it takes to apply and get it fitted, but long term it does actually reduce the reliance we place on energy companies and therefore weakens their position.

(Sorry if this is a bit simplistic but its the best way I could think of to put the point across)

1carminestocky

Great minds and all that, lol!

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