David Cameron & energy prices

grizzly1911

pqrdef wrote: »

What happened to Chris Huhne?

I was wondering that too after the Mitchell fiasco, Huhne didn't want to go either and had the full support of the PM;)

pqrdef

At the cabbage market.

Growers turn up, each with some number of cabbages, and each with his own sliding scale of determination to sell, depending on the price. Some need cash now. Others need a good price to pay the rent, but they can wait.

Buyers turn up, each with his own requirement for cabbages, some more price-elastic than others. Some really have to have cabbages, some can walk away if they don't like the price.

Haggling begins. Now, according to simple-minded Adam Smith economics, the markets settle on the single unique price at which the number of cabbages the sellers want to sell matches the number the buyers want to buy. That number changes hands and everybody goes away.

Not all happy though. Some sellers are happy because they got a better price than they would have settled for. Some buyers are chuffed because they paid less than they were willing to pay.

But other sellers are thwarted because they weren't prepared to sell at that price, and other buyers are empty-handed because they couldn't afford to buy at that price. And cabbages are still rotting in the warehouse.

So this free market wasn't all that successful really.

What's needed is segmentation. Find some way to separate people and stop the whole thing converging on a single price. If you get it right, you match the dear buyers with the dear sellers and the cheap buyers with the cheap sellers, and trade all the cabbages, and everybody is happy. Notwithstanding that the cabbages didn't all sell at the same price.

Meanwhile, somebody has been in the warehouse and switched the labels on all the boxes. Turns out this doesn't matter at all. If the cabbages are all the same, it doesn't matter if the cabbages you take away are not actually the ones grown by the farmer you bought them from.

This doesn't make it a false market. The haggling has still been for real. Because it's not about cabbages, it's about matching the financial needs and risks of the buyers and sellers. It's about them all having different investments and commitments and laying off their different bets.

In a buyers' market, a power company with a lot of committed customers is in a good position to beat the price down. But in a sellers' market, a company that's committed to supply too many customers is in a weak position, because it's got no choice but to buy.

It's this injection of commercial risk that puts some life into a market that would otherwise be dead, because the demand is pretty inelastic.

Presumably the idea is that firms with commercial risks can minimise their risk by keeping costs down, whereas firms in a risk-free environment have little incentive to stop their costs mushrooming.

In monopoly days, I seem to remember it being said that a third of an average bill was the cost of billing and collecting. The systems were horribly inefficient and nobody had an incentive to change. On the contrary, the boards liked people to pay quarterly in cash because it attracted footfall to their showrooms.

Billing and collecting is now down to pence for co-operative customers. On the other hand, customer acquisition costs are a lot higher.

What they'd really like to think of is a way of hanging on to customers who might switch, without making the same offer to those who won't. But loyalty incentives, although cheaper than buying new customers, are a loser when so many customers are loyal by default.

Maybe there's no answer. We need a benign state run by the sort of people who do voluntary work. But wherever there's money to be skimmed off, the most will get skimmed off by the most selfish.

drc

Kennyboy66 wrote: »

A tory government, yes a tory government making ludicrous interference in the free market.

The UK has the second lowest electricity prices in western europe (after France) and Cameron wants the state to set prices to get a few cheap headlines.

Its like 1970's all over again. What next ? a prices and income policy ?

He really is a rancid charlatan

I think you will find it is not a free market. Everything is rigged behind the scenes.

But I am all for cheaper prices, so if old Dave can do something about the current stupid energy prices then at least he is doing something rather than making vapid pledges like he usually does.

thor

Loughton_Monkey wrote: »

You only have to think about it for 5 minutes. Wind is the key driver to air movement, thermals, clouds, and ultimately rain. What happens if too much wind is staunched by turbines? Drought, miserable crop yields, no tree growth, and ultimately no possibility of oil & coal manufactured for future generations.

HAHAHA I don't know what what ideal you are trying to push BUT I can't believe you seriously think any of that anti-science quoted above is even slightly true.

GeorgeHowell

Underlying it all is that because of successive governments ducking the issue and avoiding the difficult decisions we are approaching an energy crisis. HMG badly needs the big energy companies to get us out of it. That will cost a lot of money which has to go on the bills. HMG will not upset these energy companies with tough measures -- it daren't. Playing around the edged with pricing structures, provision of information etc is as good as it's going to get. Until and unless someone comes up with a real breakthrough -- liking making petrol cheaply from air -- we are going to get screwed on energy prices for the foreseeable future.