Are we being ripped off...again?

NonGeographicalMan

So if the big six energy suppliers are now ripping us all off chronically as appears likely then why does a new supplier with vastly lower prices not now enter the marketplace and heavily undercut them?:mad:

Geoffo_M

NonGeographicalMan wrote: »

So if the big six energy suppliers are now ripping us all off chronically as appears likely then why does a new supplier with vastly lower prices not now enter the marketplace and heavily undercut them?:mad:

Don't we all wish that would happen

NonGeographicalMan

Geoffo_M wrote: »

Don't we all wish that would happen

Their current trick seems to be to induce customers to switch by offering time limited discounts on their variable tariffs that then evaporate after 12 months or so (eg Eon Save Online). The more devious amongst them also add in actual penalties for leaving if you don't stay for 6 or 12 months and/or have a once year discount for paying by direct debit that is only paid at the end of one year period.

This is before we even consider the quite unjustifed 6 week interval to swith an electricity or gas supply when there is no reason it cannot be switched same day as long as the customer provides then meter reading that coud then be backed up with a normal meter reading visiting within the next 7 days or whatever.

Both Ofcom and Ofgem seem to be content to preside over a regime of so called competition where 5 or 6 large companies initially land grab all the customers they can and then impose numerous penalties for moving early and/or at all (in the case of BT and its disgraceful 12 month rolling contracts to get the Evening and Weekend so called Free calls plan) that then make it impossible for customers to leave without losing out heavily financially when the company moves them on to a ripoff less competitive tariff or increased tariff price on their current tariff.:mad:

mech_2

NonGeographicalMan wrote: »

So if the big six energy suppliers are now ripping us all off chronically as appears likely then why does a new supplier with vastly lower prices not now enter the marketplace and heavily undercut them?:mad:

I don't think it's that easy to establish a utility company from scratch. And there are economies of scale to consider. Plus the 'Big 6' have their own electricity generation and some of them have gas production facilities as well. When they sell themselves energy below market rates they have an obvious advantage over a start-up.

But I don't actually think they are ripping us off chronically. At least not yet anyway. Much more energy is used in winter than in summer. So high margins make much less contribution to yearly profits now than they will in 3 months time. The question is how long will it take before they drop prices. I'm convinced they will have to at some point, but there really doesn't seem to be an incentive to do it immediately.

Incidentally I notice that Ofgem have settled on an 18 month hedging model now. A bit difficult for me to emulate because I can't find figures that run that far in advance. theice.com only publishes prices when there's actually been some trading activity for the futures in question and that's practically never for anything more than 6 to 8 months in advance.

1carminestocky

mech wrote: »

I don't think it's that easy to establish a utility company from scratch. And there are economies of scale to consider. Plus the 'Big 6' have their own electricity generation and some of them have gas production facilities as well. When they sell themselves energy below market rates they have an obvious advantage over a start-up.

But I don't actually think they are ripping us off chronically. At least not yet anyway. Much more energy is used in winter than in summer. So high margins make much less contribution to yearly profits now than they will in 3 months time. The question is how long will it take before they drop prices. I'm convinced they will have to at some point, but there really doesn't seem to be an incentive to do it immediately.

Incidentally I notice that Ofgem have settled on an 18 month hedging model now. A bit difficult for me to emulate because I can't find figures that run that far in advance. theice.com only publishes prices when there's actually been some trading activity for the futures in question and that's practically never for anything more than 6 to 8 months in advance.

Crikey, this is a seismic shift in your historical staunch defence of energy suppliers, including taking me to task several times in the past when I've had the temerity to suggest that energy suppliers were ripping us off. Now, you seem to be saying they ARE ripping us off...but not 'chronically' . At what juncture did it occur to you that, yes, they ARE ripping us off? Could you pinpoint an actual date in time or have you realised that you were actually wrong all along?

NonGeographicalMan

mech wrote: »

I don't think it's that easy to establish a utility company from scratch

It doesn't seem to have stopped Ovo Energy from just launching though does it?

See https://www.ovoenergy.com/about-us/our-business.html

However they seem to be trying to charge as much as they can possibly get away with and also have nasty penalties for leaving anything other than once a year.:eek::mad:

But I expect their high startup costs and the unfair competition they are up against from the big boys and no doubt sanctioned by Ofgem forces them to adopt this commercial model.

Also First Utility are new entrants to the energy sector too in the last couple of years. So it does not seem to be impossible to enter the sector. However many of the smaller players don't actually feed their own energy in to the distribution system and seem to buy it off the big boys. This is no doubt yet another reason they cannot easily undercut them (same problem as with BT Wholesale Line Rental prices).

mech_2

1carminestocky wrote: »

Crikey, this is a seismic shift in your historical staunch defence of energy suppliers, including taking me to task several times in the past when I've had the temerity to suggest that energy suppliers were ripping us off. Now, you seem to be saying they ARE ripping us off...but not 'chronically' . At what juncture did it occur to you that, yes, they ARE ripping us off? Could you pinpoint an actual date in time or have you realised that you were actually wrong all along?

Carmine, the wholesale prices change over time. I know you are unable to take a considered or measured view of anything, but if the facts change my viewpoint changes. There isn't any "all along" applicable.

mech_2

NonGeographicalMan wrote: »

It doesn't seem to have stopped Ovo Energy from just launching though does it?

See www.ovoenergy.com/about-us/our-business.html

However they seem to be trying to charge as much as they can possibly get away with and also have nasty penalties for leaving anything other than once a year.:eek::mad:

But I expect their high startup costs and the unfair competition they are up against from the big boys and no doubt sanctioned by Ofgem forces them to adopt this commercial model.

Yes, that's where the not being easy bit comes into play I suspect. I'll be pleasantly surprised if a new startup appears that can compete with the cheapest offerings from the Big 6.

Actually Ovo's prices are not that bad at my usage level (but not low enough for me to switch to them).

Also First Utility are new entrants to the energy sector too in the last couple of years. So it does not seem to be impossible to enter the sector. However many of the smaller players don't actually feed their own energy in to the distribution system and seem to buy it off the big boys. This is no doubt yet another reason they cannot easily undercut them (same problem as with BT Wholesale Line Rental prices).

First Utility have a unique selling point with their smart meters. That's always a help if you can't compete directly on price. I was almost tempted to switch to them at one point, but again there was a lock-in which put me off at the time. Then their prices changed.

The Big 6 may be making good margins for themselves right now, but cheaper alternatives seem as thin on the ground as price cuts.

1carminestocky

mech wrote: »

Carmine, the wholesale prices change over time. I know you are unable to take a considered or measured view of anything, but if the facts change my viewpoint changes. There isn't any "all along" applicable.

That's what I'm getting at - are you suggesting the energy suppliers have only just started ripping us off, albeit in your words 'not chronically'? If so, have you any idea when they started doing this and why? Or why they didn't do it before, as you've been claiming for the last couple of years I know you follow these things closely and know a lot about them (as you've claimed in the past) so I'm anxious to get a definitive answer as to when this all started. TIA.

Perelandra

mech wrote: »

But that's the point. The costs haven't stayed the same.

Please read my post-

I said, if prices remain as they had been in H1- I'm interested in today's position, with today's costs and today's prices.

In other words, given where we are "today", the amount that prices could be cut from "today's" position would still be very small, otherwise profit for 2009 could easily be 50% of 2008. There's a fine, fine line between profit and loss.


However, I'd be interested in knowing how much you think a bill would need to be inflated by in order for the energy companies to be "ripping you off" or "chronically ripping you off". £100? £150?