MSE News: The big six energy suppliers say no price cuts

SwanJon

mech wrote: »

And I don't see what stops them selling their own electricity to themselves at below-market rates.

Unfortunately, regulation.
That was one of the main aims of competition - to break the link between regional suppliers and their customers - otherrwise those suppliers that are part of the same group as a distributor (i.e SSE, EDF, E-on) could also charge their sister companies less in their regions to distribute the electricity.

mech_2

SwanJon wrote: »

Unfortunately, regulation.
That was one of the main aims of competition - to break the link between regional suppliers and their customers - otherrwise those suppliers that are part of the same group as a distributor (i.e SSE, EDF, E-on) could also charge their sister companies less in their regions to distribute the electricity.

Yeah I thought that too, until I read this in Ofgem's latest pricing report:

Actual weighted average cost of electricity and gas could be different from this if companies purchase energy internally from their upstream generation businesses at a price different from the prevailing market price. Any margins made on energy bought below market prices would mean equivalently lower margins in the generation business. Ofgem has consulted on proposals to publish information on margins in retail supply businesses and generation business separately and this report does not intend to estimate suppliers' allocation of margins between the retail and wholesale markets.

So it appears Ofgem don't know to what extent it happens, don't rule it out from happening, and because they don't know to what extent it happens presumably they can't enforce any ban on the practice (if indeed there is one).

Cardew

mech wrote: »

Yeah I thought that too, until I read this in Ofgem's latest pricing report:

Actual weighted average cost of electricity and gas could be different from this if companies purchase energy internally from their upstream generation businesses at a price different from the prevailing market price. Any margins made on energy bought below market prices would mean equivalently lower margins in the generation business. Ofgem has consulted on proposals to publish information on margins in retail supply businesses and generation business separately and this report does not intend to estimate suppliers' allocation of margins between the retail and wholesale markets.

So it appears Ofgem don't know to what extent it happens, don't rule it out from happening, and because they don't know to what extent it happens presumably they can't enforce any ban on the practice (if indeed there is one).

I must admit that I am totally confused by the present situation on this subject.

It was always the declared intention on privatisation that there would be no cross-subsidy from parent generator to distribution network e.g.Centrica to BG), and indeed BG as the monopoly gas supplier were originally not allowed to compete fairly on price - ditto the regional electricty supplier.

However from the introduction of the click/websaver internet tariffs, BG have been at, or very close, to being the cheapest gas tariff.

At the time of privatisation scores of companies jumped on the energy distribution bandwagon. However they quickly found they couldn't make a profit, presumably because the generators wouldn't offer them favourable terms??

Many of the ones left are 'niche' suppliers that only exist by grace and favour of a Big 6 company(e.g Ebico, UW).

No idea how/where new suppliers like First Utility/OVO get their energy - presumably they have negotiated long tem contracts with a Big 6 company?

If those companies(and UW/Ebico etc) got too successful it doesn't stretch the imagination too far to envisage future favourable contracts not being available.

teddyco

Let's suppose a person lives in the country and they have land to put a large natural gas tank. Would it be possible and cost efficient to have one installed and then buy up a large quantity of natural gas during the cheap months to use during the winter?

Then that person wouldn't have to depend on the big 6 for their energy.

Cardew

Let's suppose a person lives in the country and they have land to put a large natural gas tank. Would it be possible and cost efficient to have one installed and then buy up a large quantity of natural gas during the cheap months to use during the winter?

This one is not being used!

SwanJon

Cardew wrote: »

No idea how/where new suppliers like First Utility/OVO get their energy - presumably they have negotiated long tem contracts with a Big 6 company?

I could just as easily not be - last I heard there were over 60 generating compnaies now in Britain - most of which are probably small, but others (like Drax) are not. Similarly Gas producers are not all suppliers too.

So new suppliers could buy direct from the generator/producer, pay the transmission & distribution companies (someof which are no longer linked to a supplier) and bill the customer with no input from a competitor.
Whether that becomes cost effective is a different matter.

Interesting to hear about the generating/supplier thing.
Thinking about it SSE reports Generation & supply as one unit......


PS - planning permission on one of those must be tricky.