David Cameron writes for MSE on his plans to help on energy bills

competitionscafe

Totality wrote: »

Am I the only one who does not seen why so much importance is being put on "quick, switch tariff!!!" EDIT: Actually on a website such as this I can see why (money saving obviously, and also to send people to the comparison websites).

The comparison sites pay a commission to moneysavingexpert for everyone who switches supplier via the links on this site - so it's a major revenue earner for the site.

Totality

competitionscafe wrote: »

The comparison sites pay a commission to moneysavingexpert for everyone who switches supplier via the links on this site - so it's a major revenue earner for the site.

That's what I said. I was just being subtle.

competitionscafe

"at the same time as bills are going up for consumers, some of these companies have been reporting record profits. They say that in 2008 the collective profit of the Big Six companies was around £6.6bn, in 2009 it was £8.2bn and 2010 £8.5bn. Not one of the bosses of the Big Six earn less than £1m in basic salary."
http://www.guardian.co.uk/politics/reality-check-with-polly-curtis/2011/oct/17/are-energy-price-hikes-inevitable

worbikeman

Recently several energy companies have been fined £millions by Ofgem, example:

http://www.bbc.co.uk/news/business-14303264

Where does this money go? If consumers have been ripped off then monies levied in fines should be re-imbursed to the customers who have been wronged - or spread amongst all customers as a discount on their bill. Otherwise it is the customer who picks up the tab anyway - as costs are simply passed on!

wozearly

jamesd wrote: »

Does that include things like required fuel mix changes, say from coal to gas or other, whether by fixed legislation or cap and trade schemes that make a method more expensive than it's underlying cost?

That's my understanding, but I don't work in the industry and don't have access to a more detailed breakdown of costs. Intuitively it looks about right because the numbers associated with changes to energy supply in favour of renewables are relatively small in comparison to the current costs of providing energy through the main three sources (coal, oil, gas).

As you mentioned separately, there is also an effect on wholesale costs of existing energy sources due to some of those changes, but again - I'm not enough of an expert on the carbon pricing scheme to understand how much of a direct effect on wholesale prices this has.

I do sympathise with the wider viewpoint that paying extra costs now to shift the fuel mix may incur additional costs, but that the long-term benefits 'should' result in greater savings in the future.

jamesd wrote: »

I agree that wholesale costs are likely to rise, in part because those aren't restricted to just the cost of fuel but include the effects of limits on fuel mix as well as outright subsidies. I think that the costs of some fuels will rise.

It'll be interesting to see what effect things like fracking have on natural gas supply and usage. that should greatly reduce the cost and increase the use of that fule, if it's not made uncompetitive in some way.

With my economist's hat on, changes that increase supply will lead to the cost of that particular fuel falling (or increasingly less quickly) in the short run.

However, its not necessarily possible to maximise the gains from this, because its limited by how much gas you can use - at a national level, how many power stations use gas (and what their current free capacity is) and at a household level by how possible it is to use more gas in place of electricity (not easy).

So if demand caps out (e.g. all gas power stations are at maximum output) then prices will stop falling as the suppliers of gas have no incentive to keep producing more and more if they have nowhere to sell it. They're more likely to extract less gas as a result - which is good in terms of increasing how long we can keep using the gas sources, but means we're still stuck with the more expensive energy generation methods.

Long-term, we could get round that by building more power stations using gas as a fuel - but those are big investment decisions lasting quite a few years, so its not a market that tends to respond very swiftly.

wozearly

worbikeman wrote: »

Recently several energy companies have been fined £millions by Ofgem, example:

http://www.bbc.co.uk/news/business-14303264

Where does this money go? If consumers have been ripped off then monies levied in fines should be re-imbursed to the customers who have been wronged - or spread amongst all customers as a discount on their bill. Otherwise it is the customer who picks up the tab anyway - as costs are simply passed on!

AFAIK, the money is passed on to the Treasury. So either we as a country have a bit more to spend than we did previously without needing to raise taxes, or the money could be redistributed to everyone in the UK equally as a tax rebate (don't hold your breath), or redistributed to customers based on how much they were personally wronged (really really don't hold your breath).

But yes, in the interim, there's nothing stopping the company passing the costs on to consumers to recoup any money paid out in fines. In a market with good competition this wouldn't be possible as raising prices would harm the company more than it would benefit them, so they'd have to take the hit out of their profits...but where competition isn't working particularly well, like the energy sector, it would be a very tempting method of getting the money back by tacking on a bit extra to the next round of price rises.

labp04

Maybe I'm just being naive but, as has already been suggested, surely a solution would be for a "People's Fuel Supplier" to be introduced by the Government. This "company" would compete with the open market and be charged by the government of the day to a) limit both the number of tariffs to an agreed maximum number and b) always charge the lowest price for gas and/or electricity.

I would still be interested in learning the percentage of shares bought by private individuals when the electricity and gas companies were sold and the current percentagesbut I digress. Sorry!

chris1973

Maybe I'm just being naive but, as has already been suggested, surely a solution would be for a "People's Fuel Supplier" to be introduced by the Government

Even simpler, it could just introduce a limit or cap as to how much an energy supplier can increase its prices by every year. France, Germany and Spain have adopted this policy and the majority of the suppliers over there are the same companies who supply energy over here.

Ok, in some of these countries, the energy price is slightly higher at the moment than in the UK, but thanks to the recent increases and probably more similar ones to come, that void is rapidly narrowing, and it wont be long before we overtake them and still face uncapped rises.

Changes also need to be made in to feed in tariff payments. There is something very flawed in a business model which pays a supplier over 40p to 'produce' something which it then sells back to other consumers for as little as 10p - 12p. The shortfall has to be made up somewhere.

wozearly

labp04 wrote: »

Maybe I'm just being naive but, as has already been suggested, surely a solution would be for a "People's Fuel Supplier" to be introduced by the Government. This "company" would compete with the open market and be charged by the government of the day to a) limit both the number of tariffs to an agreed maximum number and b) always charge the lowest price for gas and/or electricity.

I would still be interested in learning the percentage of shares bought by private individuals when the electricity and gas companies were sold and the current percentagesbut I digress. Sorry!

If it always charged the lowest prices, it would be likely to either put the other companies out of business, or effectively put itself out of business and require constant subsidy from the taxpayer to continue (as a number of former nationalised industries did).

Neither are necessarily desirable outcomes...

What would be interesting is to do something similar, but charge the company to be non-profit making (ie, profits would be returned to its customers via lowering prices the following year), rather than always being cheapest.

Then to avoid it suffering from the classic fate of most nationalised industries where there is no pressure to succeed, link bonuses of its employees to;

a) customer satisfaction with its customer service
b) the percentage of UK households with the company

...but remove all bonuses if the company loses money by year-end, and have them reduced on a sliding scale if the company passes over certain profit thresholds (ie, if they're too profitable, it hurts them).

Johnegg

Funny how nobody has mentioned the carbon floor price, announced in the Budget, this March. This is a TAX on your energy bill, which the Government are going to squander on wind turbines that function at a third of their stated capacity when they function at all. During the big freeze last year, most wind turbines consumed energy rather than produced it (for de-icing). So the Government are going to fleece poor Britons to pay for something that won't work, resulting in powercuts. Both Cameron and Huhne (minister for Energy and "Climate Change"!) are up to their necks in this one, so it's no wonder that they are busy trying to blame it on the power companies. Unfortunately too many people swallow their lies hook, line and sinker.