'Gas and electricity prices: more rises to come? Predictions...' blog discussion

Former_MSE_Lawrence

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Read Martin's 'Gas and electricity prices: more rises to come? Predictions...' Blog.

Click reply to discuss below.

Mrs_Wossinge

All useful info, but I've still not found a satisfactory answer to my green electricity questions. (Not a criticism of Martin - I can't find the answers anywhere, from any source.) My two questions are:

Why has my electricity bill (on ScottishPower's H20 tariff) risen when it is matched by 100% hydro-electric generation? Unlike oil and gas, water doesn't suddenly cost more! I conclude that I must be subsidising the non-green methods of generation. Surely the answer to rising oil and gas prices is more renewables. Why is this not reflected in the price?

Why are there no green capped tariffs around? (Very happy to be corrected, but I've not found one yet.) The Scottish Power H20 tariff (on Economy 7) always comes up as the cheapest 'green' tariff for us. Although other providers are arguably more green (ie the companies don't deal with non-renewables at all), these are considerably more expensive. I'd love to cap, but don't want to compromise on the source of our electricity. Am I stuck with an uncapped rate?

Would Martin consider addressing these questions sometime, please? Meanwhile, can any other green moneysavers shed some (energy-efficient) light on my predicament?

RayG

one of the biggest subsidised methods of generation are wind farms. There would not be one windmill, if it wasn't subsidised.

Never_Know_My_Balance

I think actually the price of gas follows oil and the price of electricity follows gas.

With regards to the post on why the hydro tariff has increased, this is simple; the cost of your hyrdo energy hasn't increased (excluding assumptions on non energy costs) however the wholesale price has. Therefore the company kept your price the same they would have the lost opportunity of selling your energy back to the market at higher wholesale prices.

caffeinehit

Don't forget that the wholesale price of power is only a proportion of the total price of supplying electricity and gas - albeit a growing one. The cost of transporting the stuff has historically been around a third of the total cost with supply costs (billing, meter reading and so on) another quarter or so.

While these costs do change (due to investment needed in new pipework for instance) they're much more stable than the wholesale price and aren't likely to change by more than a few percent over the next year. So the impact of changes in the wholesale price is on bills is, at a guess, only half of what you've predicted.

I think there are some figures on the Ofgem website for the approximate percentage of your bill that's attributable to each part of the supply chain if you wanted to put together a more accurate model of potential price changes.

Andy_ArT_Trigg

What's always puzzled me is if the energy companies know or suspect prices will rise substantially, why would they offer fixed rates that would clearly undermine their future price rises?

WelshGandalf

- The wholesale cost of electricity is currently about 80-85% of the total cost. caffeinehit is right to say that historically it was a lot less than this, but the wholsesale cost of electricity is now 400% higher than it was 6 years ago. These other prices tend to increase at about 4 or 5% a year. The ofgem page you mention that breaks down the price is here - http://www.ofgem.gov.uk/Pages/MoreInformation.aspx?file=energy%20prices%20jan08.pdf&refer=Media/FactSheets - however note that wholesale prices are now 50% higher than in January.

- Mrs Wossinge - unfortunately your "green" tariff isn't that green - the Big Six suppliers advertise green tariffs, but they legally have to produce a certain amount of their electricity from green sources, so all they are doing is allocating green electricity that they have to produce anyway to you. If you really want to be green I suggest transferring to a company like Good Energy or Green Energy (though various criticisms can be levelled at these suppliers too)

- Andy_ArT_Trigg - companies can buy power in advance. If they have 10,000 customers singing up for a 2 year fixed deal, then they can go and buy a reasonable amount of electricity going forwards for 2 years at today's prices.

Current market prices are all over the place - it is hard to tell if they are going up or down in the medium-long term, however I would agree with Martin that the unprecedented price increases this year are not fully accounted for by recent price rises - so I would agree that there would be more price increases in January.

Andy_ArT_Trigg

Thanks WelshGandolf. So would you change to a fixed rate even though my price comparison site recommendations for the cheapest fixed rate deal to 2009 is an Increase of £412.71?

I currently spend around £700 per year on dual fuel

There is a fixed 'till 2010 deal with my current supplier also which shows as £435 more than current

WelshGandalf

Andy - I'd really have to refer you to Martin's article here, especially this bit....

the key question is 'how much surety do I want?' If peace of mind is important, as you're on a very tight budget, then a price cap would enable you to at least have surety of knowing the payments won’t rise. Better to end up having paid a wee bit more than be pushed over the brink.

I'm not on a capped price as I can afford not to be if prices increase. Both ways are a gamble - you could end up paying more or less on a fixed or non-fixed. So I would refer to the above advice from Martin first & foremost

I really don't want to try to predict the future electricity prices - they are far less predictable than, say, house prices. A fair bit of it is due to speculators and rumours and such. For example compared to 6 weeks ago, if you want to buy electricity for delivery at almost any point in the next 3 years it's actually a bit less, unless you want that electricity this winter, in which case it's about 20% more. This is due to mainly unfounded fears of brownouts/blackouts this winter (see here - http://news.bbc.co.uk/1/hi/sci/tech/7638564.stm) . That fear should subside as winter goes on so you would think that would reduce prices... but another fear may come along after that, so you really can't tell.

Andy_ArT_Trigg

Thanks WelshGandolf. I am also in a position where it wouldn't cause serious problems if prices rose and so I'd instinctively prefer to take a chance rather than have a self-imposed £435 price rise now.

I see the advice from martin and it is similar to the advice I give my web site users regarding breakdown insurance in that the only reason I believe it's worth taking out is if peace of mind is worth a lot of money to you, or if a big breakdown bill could cripple you because you never have savings and have little spare cash.

having said all that I'm not sure how long ago Martin wrote that quote. I'm sure it's highly relevant in normal times though these are anything but normal times.

andrewsmoneysaving

I've found most interesting, information which shows which sources that the Power companies get there energy from.

So for instance, since Scottish Power seems to source most energy from coal power stations, buying green energy from them probably isn't the cheapest option.

Personally, I have gone for Scottish Power Online Fixed 2009 which is a small premium which fixes prices until the end of October 2009.

For me this was the best compromise deal on the market - I was very suspicious of British Gas' Energy Click 5 because it was too low to be true, and sure enough it's now rocketed in price and ISN'T fixed in any way!