Wholesale costs actually rising?

JasX

Am I not right that these are actually very very cyclical (particularly in the UK with limited gas storage).

Basically they go up say 50% in the winter and down 50% when it gets warm again in the winter....

yet every year we get paaddle out the convenient half story that wholesale costs are up 50% in the last 6 months so need a bill hike.

Is there anywhere we can get at these wholesale prices and anyone analysed the non-cyclic moving average to see exactly how much more than cost rise + inflation our bills are really going up?

Suprised none of the media or even moneysaving sites ever seem to have looked into it (this week they seem more focused on proving payday loans are cheaper overdrafts ?!?!?)

JasX

EDIT: looking only at the expensive mid winter January prices on this site:

http://sshassociates.co.uk/nbp.aspx

would I be correct to suppose that midwinter prices as of Jan 2010 prices are/were

-30% at most more expensive than 2001
-no more expensive than they were in 2005
-half the price things were in 2006
-about 2/3 the price it was in 2009 ?

yet we're still seeing price rises? :mad:

its a complete scam!

Anyone got any better data supporting things one way or the other?

Pincher

http://www.ofgem.gov.uk/Media/PressRel/Documents1/Retail%20Market%2026%20November.pdf

Page 2 has a graph which is rather good.

There's an Ofgem enquiry to be completed in March.
I know, after the winter, when nobody cares, and then forgotten by October.

backfoot

Pincher wrote: »

http://www.ofgem.gov.uk/Media/PressRel/Documents1/Retail%20Market%2026%20November.pdf

Page 2 has a graph which is rather good.

There's an Ofgem enquiry to be completed in March.
I know, after the winter, when nobody cares, and then forgotten by October.

Help me this one mate.:)

On the graph,how do the lines add up?

Wholesale costs,other costs and VAT added together comes to a much bigger figure than the customer bill line.

Or if the wholesale costs are part of the other costs and VAT line,then the margin line doesn't track.

Je ne comprend pas.( Now I am with EDF.)

sofa-spud

backfoot wrote: »

Help me this one mate.:)

On the graph,how do the lines add up?

Wholesale costs,other costs and VAT added together comes to a much bigger figure than the customer bill line.

Or if the wholesale costs are part of the other costs and VAT line,then the margin line doesn't track.

Je ne comprend pas.( Now I am with EDF.)

As the Utilities have not been claiming rises (or declaring reductions...) in fixed & VAT costs this should be relatively uniform (i.e. no bumps in the line but it does show a general upward trend) throughout the graph. The fixed cost is added to the fluctuating energy cost to give the total cost. If you look at the point for Aug06 then it claims wholesale approx 600, other costs & VAT approx 300 to give 900 in total. Its an example of a stacked graph (although this would have be better presented as a histogram rather than line). Comprende vous?;) ( I *think* I do...)

Frankly, (IMHO)the graph is too generalized to be of that much use.
As you point out, the 'net margin' trace also suggests that IF this data is accurate, then there is another influence present that is not shown in the other traces.

backfoot

sofa-spud wrote: »

Frankly, (IMHO)the graph is too generalized to be of that much use.
The 'net margin' trace also suggests that IF this data is accurate, then there is another influence present that is not shown in the other traces.

That is what I thought. But then the line Vat and Other costs, should pick it up and be the balancing figure.

Looks like it don't balance to me. :eek:

Ich verstehe nichts. (shudders at the thought of Npower) _pale_

Pincher

I don't know. This is a press release, so there is probably an explanation of how they work it out in a proper report somewhere.
I'm guessing they assume some kind of hedging strategy when working out the Net Margin.

The Dark Blue line tracks the light blue line, so I assume it's Wholesale + Other costs + VAT.

It's all smoke and mirrors, since the utilities have traders playing the energy futures, it is entirely possible that they make their money on trading futures contracts, and show a loss on the retail side to claim poverty.

sofa-spud

backfoot wrote: »

Looks like it don't balance to me. :eek:

I suspect that is the idea behind presenting it as a simple stats graph, at first you thinks its clear, but when you look closer all sorts of questions arise...

backfoot wrote: »

Ich verstehe nichts.

Ich auch nicht:think:

backfoot wrote: »

(shudders at the thought of Npower) _pale_

Don't remind me...:rotfl:

backfoot

Still, whatever the graph is missing, we can be be comforted OFGEM understand it and know what they are doing.

:doh:

Pincher

JasX was asking whether retail customer price tracks wholesale price, which the graph shows that it does. If anything, it tracks too well. It's almost like Ofgem deliberately massaged the figures.

The aim for a producer and consumer engaged in hedging is to stabilise prices. If the aim of the utility company is to provide a stable retail price, we should see a flat customer price, DESPITE a fluctuating wholesale price. It is the role of the speculator to take the opposite hedge position, and profit from volatility.

If hedging was done for the benefit of the customer, and wholesale price rises, the futures contracts will yield gains which cancel out the need to increase retail price. When wholesale prices fall, the retail price stays the same, and the excess amount will pay for losses incurred from the contracts. The result is a relatively flat retail price.

The perfect correlation between retail price and wholesale price means the utilties are not hedging for the benefit of the customer.
They are keeping the gains made from volatility in their own pocket.
The customer is thrown to the wolves, and have to ride the ups and downs of the market.

So, we should not be asking for a retail price that follows the wholesale, because we want the utilities to use their hedge positions to stabilise prices. The reason this will not happen is because they make more money as speculators, whereas neutral positions only cost money, with no expected gain.

SwanJon

sofa-spud wrote: »

As the Utilities have not been claiming rises (or declaring reductions...) in fixed costs

But they have, investment in the network, storage, smart meters, climate bits and pieces, building power stations etc.

Not looked at the graph though - brain's turned off for the night.