'Energy companies price hikes... they’re just doing their job!' blog discussion

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  • magyar wrote: »
    The problem is that the public simply doesn't understand the detailed explanation. There's technically no such thing as 'the wholesale price'.

    A utility will typically forward buy and forward sell electricity and gas. So a year ago, they might have bought 10% of the power they will need to supply tomorrow (30 Nov). Then six months ago, when the price has moved (up or down) they might have increased this to 25%. Then three months ago, this might be 75% and then within the last few days they will have been looking at weather forecasts, demands etc. and buying additional power to sell on so they can meet 100% of the demand. Even then they might have to buy/sell within the half-hour before energy is distributed.

    This process is known as hedging, and itself is part of a trading system called the balancing mechanism (which 'balances' supply with demand).

    So it's very, very hard to do a detailed comparison between Utility A and Utility B because they will all have different hedging strategies.

    Sure I do have a basic understanding of what you are saying - though I appreciate that the finer details can be more complex.
    The figures that did it for me though were the ones that showed the profit per head made by energy companies over a given period.
    I do appreciate that the wholesale prices fluctuate very frequently and that it would be impractical to change the price every time this happened. I also appreciate that as a capitalist venture, there is a need to err on the side of caution regarding ongoing profit margins/shareholder dividends.
    I do question whether such a service should have ever been put into the hands of those who need to profit. Same with water. A few years ago here in SE England, the companies started getting drought orders - the majority of which were not needed in the end. The water companies were quite prepared to put hundreds of thousands out of work and to ruin businesses that had taken many years to build just because they needed to pay shareholders instead of building reservoirs/aquafers.
    Mind you, in view of all the leaks, I'm mighty glad that Southern Water doesn't supply my gas :D .
  • Butti
    Butti Posts: 5,014 Forumite
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    I sympathise with Clarkypoos - I've just moved out of a rented house on a meter and I have never been so cold yet so consistantly paying out for heating.
    I got vented roof tiles put in the house I own a few years ago when I was worried about condensation - didn't think about the insulation at the time. My house is cold at the mo but not as cold as the one I left. It needs to be warmer before my lodger moves in ...so a nice man is coming round on Friday to survey my house, then they will come back before Christmas to fit 10.5 inches of insulation. It will cost me £99. Check with your local council for a scheme near you.
    Debt LBM (08/09) £11,641. DEBT FREE APRIL 2021.
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    'one day I will be rich and famous…for now I'll just have to settle for being poor and incredibly sexy'. Vimrod Member of MIKE'S :cool: MOB
  • magyar wrote: »
    In practice it wouldn't make sense to be able to switch supplier on a daily basis*, but I get your point - and totally agree with it - see my first post in this thread.

    * Actually I've often wondered whether there would be a gap in the market for a company which provided 'spot pricing', i.e. it literally bought on the day of delivery and sold it on to you. So during the summer you'd pay less and in the winter you'd pay more. In fact when we have smart metering, it would be theoretically possible to charge people different rates on a half-hourly basis, encouraging people to use electricity when it's cheapest (at night).

    You mean a gas and electricity version of Crown Services? :D

    Not having a pop. There's always room for a little humour.
  • backfoot
    backfoot Posts: 2,700 Forumite
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    The labels are used because the Privatised Model hasn't worked. If it had there would be many more Suppliers. We started with around 12 now down to six or seven effective companies. (if you include OVO.)

    My own list of bad experiences is lengthy and increasing. The shambles that is doorstep selling , the mass of misleading tariffs most of which are designed to trap, the appalling customer service and the development of anti competitive Terms and Conditions, to name but a few.(Where did all these Exit Penalties come from? Why are there back end discounts? ) Why are they allowed to put prices up for existing customers, yet undercut the essentially same product for new customers?

    Ofgem hopeless. Need say no more.Martin, everyone knows that.(Npower, prices etc.)

    Government. Too difficult for them to backtrack despite public opinion. Just look at your own poll on this?

    Evil. Not my choice of words but definately a broken system.
  • I live in the Western Isles, Scotland and my gas supplier is British/Scottish Gas..electricity Scottish and Southern. Tried switching duel fuel to e-on.. unfortunately I was informed that they could not supply gas to me as British/Scottish gas are the only suppliers in my area..the gas I receive is LPG and I am getting charged just as much for LPG as I am for ordinary Gas. The energy companies have you over a barrel one way or another! :(
  • Many of us - especially in rural areas- have no access to a gas pipeline because there are none in the locality, and therefore cannot benefit from the many discounts, offers, cashback etc which companies offer to dual fuel customers.
    Sounds like discrimination to me - but also makes 'choice' pretty academic, as there's little point in shopping around when electricity/single fuel prices vary so little.
    Best alternative is to generate your own, of course, and get paid for it!
  • davidgmmafan
    davidgmmafan Posts: 1,459 Forumite
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    "Look to see who you voted for, and then hold them to account for getting us all in this energy mess that we now find ourselves in.:"

    How precisely do you propose people do that when they say one thing prior to the election and do the opposite after? Ignoring the obvious tuition fees here's another example to consider. Prior t the election all parties had something to say about bank charges. The Lib Dems were the most vocal, and the Conservaties promised a referral to the competition commission (couldn't hurt since the PCA market ISN'T WORKING imo). What's happened since? Nothing.

    Regarding suppliers I must say I do find this constant carping about nationalisation somewhat pointless. People aren't comparing like for like. Lots of things cost less in the past, but not comparing them in real terms is useless.

    Would nationalisation stem the demand from the rapidly expanding economies across the world? No.
    Would the government have the money to do it? Probably no.
    Assuming they did would they have the money to build the new power stations etc that the UK needs? Not unless Merv fires up the printing presses again.
    Would tariffs be simpler? Yes, savy customers bills would increase I'd bet.

    I understand people's anger but its pointless comparing to some ideal world which may or may not have existed in the past. The comment which stood out to me above is the one which says we have some of the lowest PRICES but the highest bills. I can well believe this, the problem is how do you incentivise a landlord for example to make a property more efficient?
    Mixed Martial Arts is the greatest sport known to mankind and anyone who says it is 'a bar room brawl' has never trained in it and has no idea what they are talking about.
  • SnowMan
    SnowMan Posts: 3,358 Forumite
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    edited 3 December 2010 at 12:49AM
    backfoot wrote: »
    and the development of anti competitive Terms and Conditions, to name but a few.(Where did all these Exit Penalties come from? Why are there back end discounts? ) Why are they allowed to put prices up for existing customers, yet undercut the essentially same product for new customers?

    Some of the terms and conditions seem to be outrageous.

    An example is the one I am on the Southern Electric Go Direct 5 plan. There is a £50 exit penalty if you leave before 30/12/2011 and yet it is a variable tarriff as far as I can see so they can just arbitrarily increase the tarriff to an uncompetitive level forcing everyone to leave and make everyone pay £50. That can't be right. That has to be an unfair term in a consumer contract doesn't it and competely anti-competitive. So how have they been allowed to get away with that?

    I can understand an exit penalty for a fixed tarriff but for a variable tarriff, surely that can't be right? It makes a complete nonsense of being able to switch to a cheaper supplier.

    I sense from visiting comparison sites this exit penalty is the norm now for the best variable rate deals.

    Whose to blame, a mix of Ofgem and politicians perhaps, but I don't know enough to really comment
    I came, I saw, I melted
  • SnowMan wrote: »
    An example is the one I am on the Southern Electric Go Direct 5 plan. There is a £50 exit penalty if you leave before 30/12/2011 and yet it is a variable tarriff as far as I can see so they can just arbitrarily increase the tarriff to an uncompetitive level forcing everyone to leave and make everyone pay £50. That can't be right. That has to be an unfair term in a consumer contract doesn't it and competely anti-competitive. So how have they been allowed to get away with that?

    I can understand an exit penalty for a fixed tarriff but for a variable tarriff, surely that can't be right? It makes a complete nonsense of being able to switch to a cheaper supplier.

    The only thing i'll advise to that is ask to hear or get the legal script used for your Tariff, if it's a Variable Tariff then if you leave supplier then you'll have to pay a termination Fee if it says in the legal script that there is a termination fee if you change supplier but not tariff, ask to be put on the standard tariff, don't ask them to do it after arguing or they'll cotton on to what you'll do, but if you change to the standard Tariff you won't be locked in and when your tariff switches usually in two weeks you can then change supplier as your tariff no longer locks you into that supplier!!!

    Hope this helps!

    Viva La Revoluci!n
  • SnowMan
    SnowMan Posts: 3,358 Forumite
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    edited 3 December 2010 at 10:54AM
    The only thing i'll advise to that is ask to hear or get the legal script used for your Tariff, if it's a Variable Tariff then if you leave supplier then you'll have to pay a termination Fee if it says in the legal script that there is a termination fee if you change supplier but not tariff, ask to be put on the standard tariff, don't ask them to do it after arguing or they'll cotton on to what you'll do, but if you change to the standard Tariff you won't be locked in and when your tariff switches usually in two weeks you can then change supplier as your tariff no longer locks you into that supplier!!!

    Hope this helps!

    Viva La Revoluci!n

    Thanks for the advice. If they do put up the tarriff price then I certainly won't be taking it lying down. I think objectively getting a switch to the standard tarriff and then leaving would be the simplest way to avoid the £50, hadn't thought of that.

    However I will probably tackle it full on, and if they increase the tarriff, ask that the £50 is waived while I switch. I am interested in tackling the legality of what they are doing so while not objectively the best way out, that is what I will do. Haven't done the research but I reckon there is scope for challenging under the unfair terms in consumer contracts regulations. I suspect that they will back down quietly at some point on individual cases where people complain if that scenario happens.

    Their website says further terms and conditions apply but there are no obvious terms and conditions to look at! A further indication how opaque things are.


    The point I am trying to make is that the main features of the tarriff should be clearly explained and it should not be overcomplicated and opaque and there should not be an imbalance between the the two parties to the the contract as there is with this exit penalty for a variable contract. They can get out of the contract by increasing the price, but I can't get out of the contract without a penalty.


    Talking about pricing generally throughout the industry this could have been achieved by having standard contracts e.g. a variable tarriff with no exit penalties and a single unit price and a standing charge (none of this two units charged at different rates stuff which is similar but makes comparison more difficult) and a fixed rate tarriff where an exit penalty could be charged. The standard contract would not have an exit penalty.

    You could then get each supplier to clearly show what their unit charge and standing charge was and would be much easier to compare.

    There wouldn't be an obvious need for switching sites and all that un-necessary cost of running them which is effectively being passed back to consumers.

    There is competition with the simpler model which many see as good, but all the wasted effort and undesirable effects of confusing tarriffs and consumers ending up with the least efficient higher charging companies as a result of not realising who was cheapest would be stopped.

    At the moment is not necessarily the companies most efficient at supplying energy that thrive but more those that can hide their charges and sneak the unfairest terms into their contracts and that can get away with mis-selling best e.g. through door to door sales. And it is the most vulnerable in society who aren't able to assess the cheapest tarriff that take the full brunt. Not my idea of what competition should be about.

    In fact the standard terms suggested above is similar to what happened when the industry was privatised. However someone is responsible for the subsequent mess and complication in terms and charging that has resulted, that may be down to the regulators, it may be down to those who drafted the original legislation, or those who had the opportunity to change that original legislation.

    But Martin makes an interesting point not often voiced that it is not the energy companies who are to blame. I would tend to agree to an extent, when you let commercial companies free, to act as they want, they will get up to all sorts of undesirable mischief and that is what has happened here.
    I came, I saw, I melted
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