Curious question about gas and elec companies

re-rewind

taking this quote from the main site:

"When you switch, only the price really changes

The pipes, circuits and wires, safety coverage and gas and electricity flowing through the house are all the same. Only customer service, billing and, most importantly prices, change; the new supplier performs the switch; all you do is take a meter reading."


So unlike water, various companies can provide your gas and electric, but what i dont get, is how.

How can a company decide they own a particular portion of gas, and how do they start by owning it, because gas is just that 'gas' and it can't be separated, or is there one main company, and all these other companies like EON, British Gas etc are buying it all from one supplier and then supplying it to us at their own rate, in which case i don't suppose its possible but is it possible to go direct to the main supplier for your gas and get a cut rate and cut out the middle man.

this feels like a really stupid question but just wanting to know if anyone else has opinions on this

filmnoir

The Gas and Electiricty has its own unique system. At very high level it works like this:

Remember electricity cant be stored. Electric is bought and traded in Half Hour intervals. Your electricity supply works out accross all its customers how much electricity it needs for a half hour. For that half hour they go to the market and buy that much electricity for that half hour, through a trading mechanism from a Generator. The supplier pays the generator for the electric and when the time comes the generator generates the electric and passes it to the National Transmission System. (The very large over headlines). Your supplier then pays TuOS or Transmission Use of Service for using the lines. (National Grid) This then goes to Local Distributor who then tranports the electric through its cables to your meter. The supplier pays DuOS. (Distribution Use of Service). Now here is the fun part. What happens if there isnt enough electric and the suppliers customers use more electric than is bought?

Well National Grid monitor the electric used accross the whole Grid and if they see the dip, or going to dip they ask the generator to produce more.

Then the balancing takes place. Each suppllier submits its consumption for each of its customers based on actual reads or Annualised Advance or Estimates or Estimated Annualised Advance. As the mechanism knows how much electric was used in a region think of that as a whole cake. We know during that period that so much AA was used so cut abit away.We know how much was EAC so cut that away. This usually leaves some left unaccounted for. This is then distributed between the suppliers in that region based on how many supplies they supply in that region. This in essense is energy not paid for. So the mechanism says you suppliers didnt buy this energy but we produced and delivered it, the system genrating price is xxxx (Usually higher than buying it upfront). This is reconcilled after 14 months. So the energy used today will finally be reconcilled in 14 months time.

The whole mechanism is called the Balancing and Settlement Procedures administrated by Elexon.

http://www.elexon.co.uk/

Gas works in a similar purposes, however is reconciled daily. Gas suppliers and shippers by Gas from the Gas producers in how much they think is going to be needed. (Gas Forcasting) Its then transported by mains tranmission to then the local regions which is monitored up to the meter. The supplier submits the meter readings and it is reconciled. Did they buy enough or too little? If they bought too little they pay a higher price for the shortfall.

The Gas system is administrated by vaious gas codes and companies. Below are just two parts that govern the whole thing.
http://www.gasgovernance.com/
http://www.xoserve.com/

In short the gas and electric is always there for the consumer, (Unless in a disaster etc) and you dont get your own branded electric or gas particles But the system ensures with a good degree of accuracy every pays for what they use.

An intersting thing regarding the trading of electric, we are unique compared to the rest of europe at peak demands on the national grid that during the break in coronation street due to kettles. So if your a trader to make money like all trading is to buy generation at strategic points, hoping to be sold if demand needs it during that period to make profit at the reconcillation.

dannymccann

Far too early for all of that ^ lol

Very good run down of what happens though

filmnoir

re-rewind wrote: »

How can a company decide they own a particular portion of gas, and how do they start by owning it, because gas is just that 'gas' and it can't be separated, or is there one main company, and all these other companies like EON, British Gas etc are buying it all from one supplier and then supplying it to us at their own rate, in which case i don't suppose its possible but is it possible to go direct to the main supplier for your gas and get a cut rate and cut out the middle man.

Funnily enough this is what happening at least in Generation and why smaller electricity suppliers cant break through and keep aflot. A good proportion of electcitiy generators are owned by the parent company of the big six. Take recent nuclear deals for the future, EDF, EON, RWE (npower). They then buy and trade their porfolio with their preferred geneerator first. Dont forget the industry does regulate this and they are in essence seperate companies. However its harder for smaller companies outside the big six to get decent prices. This was highligted in the OFGEM probe in October.

So why cant you become a supplier and buy it direct from the Generator? Well you need a license and must be acredited to take part in the Balancing and Settlement Mechnism, which roughly to become accredited would be about £1million. Where bigger companies get round this (Very big users) is trade on someone elses licence, usually in agreement with one of the big six and get preferential prices as the buy direct and deal with all the needed administration rather than the supplier.

This happens more in the Gas Insdustry. One supplier (who wasn't a supplier, just trading of a suppliers license) went belly up a couple of years ago and BGAS became the supplier of last resort.

Gas again is similar, however the Gas is owned more by companies like BP and the Oil and Gas drilling companies rather than the big six.

filmnoir

re-rewind wrote: »

So unlike water, various companies can provide your gas and electric, but what i dont get, is how.

Dont hold your breath but theres talke to de-regulate the water industry! In Scotland you can pick the regional supplier or another but only in large users at the moment.

1carminestocky

Jack Dee's (very funny IMO) opinion on this very question...


http://www.youtube.com/watch?v=fjvcs0QGjCA

SwanJon

If it helps, think of it like a huge drink (was going to go with bath, but...)
The suppliers all pour the drink in, in proportion to how much they expect their customers to use, and the customers drink what they want from the communal pot.
This means that we all get a bit of green electric, a bit of nuclear etc no matter where our supplier buys it from.

1carminestocky

SwanJon wrote: »

If it helps, think of it like a huge drink (was going to go with bath, but...)
The suppliers all pour the drink in, in proportion to how much they expect their customers to use, and the customers drink what they want from the communal pot.
This means that we all get a bit of green electric, a bit of nuclear etc no matter where our supplier buys it from.

The way the energy companies extract the urine, a startlingly effective analogy

housebug

1carminestocky wrote: »

The way the energy companies extract the urine, a startlingly effective analogy

*snort*

Premier_2

re-rewind wrote: »

taking this quote from the main site:

"When you switch, only the price really changes

The pipes, circuits and wires, safety coverage and gas and electricity flowing through the house are all the same. Only customer service, billing and, most importantly prices, change; the new supplier performs the switch; all you do is take a meter reading."


So unlike water, various companies can provide your gas and electric, but what i dont get, is how.

How can a company decide they own a particular portion of gas, and how do they start by owning it, because gas is just that 'gas' and it can't be separated, or is there one main company, and all these other companies like EON, British Gas etc are buying it all from one supplier and then supplying it to us at their own rate, in which case i don't suppose its possible but is it possible to go direct to the main supplier for your gas and get a cut rate and cut out the middle man.

this feels like a really stupid question but just wanting to know if anyone else has opinions on this

Think of it like buying a tin of Heinz Baked Beans from your supermarket - even better having it delivered to your door.

You can buy them from Asda, Tesco, Sainsburys, Ocado (and other retailers)They all come in the same tins, they all have the same labels, they all contain the same contents, ... and possibly will all charge you a different price. You pay the bill depending on where you decided to buy the beans from.

Could you cut out the middleman and buy a tin and have it delivered to your door direct from Heinz for less?