MSE News: Energy bills to rise to pay for grid upgrades

Road_Hog

smala01 wrote: »

Here is an example of the in-day difference in price determined by time of day. Recently, the difference in only a magnitude of 6x but illustrates my point.

I'm afraid it doesn't, 6 & 1,000 are two completely different numbers.

And anyway, as you say, the companies purchase in advance at set contract prices, much as retail customers do. However, the trend has not been up, for several years and I doubt that the companies purchse more than 12 months forward.

So whilst you may be able to find one moment when there was a 1,000 difference in price, the financial reality is neither here nor there.

smala01

Road_Hog wrote: »

I'm afraid it doesn't, 6 & 1,000 are two completely different numbers.

And anyway, as you say, the companies purchase in advance at set contract prices, much as retail customers do. However, the trend has not been up, for several years and I doubt that the companies purchse more than 12 months forward.

So whilst you may be able to find one moment when there was a 1,000 difference in price, the financial reality is neither here nor there.

To recap:

1) Forward contracts of significant volumes start approx 3 years out. Prices are not linear to wholesale average prices for reasons i have given. This might advantage or disadvantage the consumer depending on success of the "hedge"

2) The "cost of sale" for energy companies is made up of significant other changes. The cost of providing a bill is astronomical. Then add the charge to pay the meter reader company, fix outages etc etc. There is significant inflation in these areas too.

Your point is that someone is profiting from the price rises. My point is that you are not factoring in all the aspects to the cost of sale.

This is proven by companies house lodged accounts that show a 5% profit margin.

Smala01

Dave_save

smala01 wrote: »

To recap:
The "cost of sale" for energy companies is made up of significant other changes. The cost of providing a bill is astronomical. Then add the charge to pay the meter reader company, fix outages etc etc. There is significant inflation in these areas too.
Smala01

I'm not sure whether you are agreeing, or not, that privatisation has failed. It's clear to all that there is no competition when you look at the small proportion of the consumer bill that these companies actually 'control'.

Seems to me it makes perfect sense, that where you have such a large proportion of the consumer costs being made up of wholseale energy costs, that you should look at other ways of rationalising.

I cannot see the point in having 6 call centres, 6 management teams, 6 bill paying systems, 6 of everything (plus the numerous little companies).... while adding little value, little innovation and merely adding the near standard 5% as profit.

The costs and services you list above were all there in the pre-privatisation era. We have the same infrastructure, same meters. I would have thought that release to the private sector would have brought innovation, more supply security, and yes, even competition to bear down on prices. It hasn't worked.

smala01

Dave_save wrote: »

I'm not sure whether you are agreeing, or not, that privatisation has failed. It's clear to all that there is no competition when you look at the small proportion of the consumer bill that these companies actually 'control'.

Seems to me it makes perfect sense, that where you have such a large proportion of the consumer costs being made up of wholseale energy costs, that you should look at other ways of rationalising.

I cannot see the point in having 6 call centres, 6 management teams, 6 bill paying systems, 6 of everything (plus the numerous little companies).... while adding little value, little innovation and merely adding the near standard 5% as profit.

The costs and services you list above were all there in the pre-privatisation era. We have the same infrastructure, same meters. I would have thought that release to the private sector would have brought innovation, more supply security, and yes, even competition to bear down on prices. It hasn't worked.

When we say competition is not working - what exactly do we expect?

We cannot expect competition to bring prices to below cost. There is no margin left for competition to erode. One could argue that the monopolistic position is because there is zero return for any other company to enter the market.

The duplication argument whilst valid to some degree, is offset by the fact that all 6 duplicated "companies" are working at capacity. A single company would need to be 6 times bigger as your user base remains constant. In my opinion and experience, the cost of duplication is outweighed by the elimination of "waste" through competition.

Lets also consider that post-privatization the full cost of the industry was passed to the consumer. In addition Green subsidies and Social initiatives were added to your bill (and are considerable). This cost was shifted from general taxation to the consumer (someone has to pay). Again competition cannot reduce these items.

Innovation requires investment. Investment requires higher revenue or subsidy. We cannot argue for lower bills whilst at the same time expecting high levels of investment.

Global energy prices will continue to climb as the developing world consumes more energy. The truth is initially new ways of generating electricity are expensive until the technology matures. Look at green energy... It will help stabilize prices in 5-10 years but at a higher price point than current. (as Oil / Coal costs accelerate past)

So has privatisation forced the industry to be efficient? - then yes i think it has. Are we at the mercy of world energy prices? Yes we are until our alternative sources come online (Nuclear & efficient renewable's). They will only ever form part of the mix, but at a certain price point provide a ceiling for price increases.

Smala01

grahamc2003

Road_Hog wrote: »

I'm afraid it doesn't, 6 & 1,000 are two completely different numbers.

And anyway, as you say, the companies purchase in advance at set contract prices, much as retail customers do. However, the trend has not been up, for several years and I doubt that the companies purchse more than 12 months forward.

So whilst you may be able to find one moment when there was a 1,000 difference in price, the financial reality is neither here nor there.

The SMP, or system marginal price, the price paid to all generators for the particular 1/2hr settlement period at the time, has a few times been zero, due to Nukes putting in bids at zero and the full demand being satisfied with no other generation necessary. So the ratio between the peak period price and the cheapest price paid is infinite. They've probably plugged that one from the Pool days.

Not sure why you think prices aren't settled in 1/2hr periods. In a few years, we'll all be charged in that manner - that's the main idea of smart meters.

bob_bank_spanker

Road_Hog wrote: »

I'm afraid it doesn't, 6 & 1,000 are two completely different numbers.

And anyway, as you say, the companies purchase in advance at set contract prices, much as retail customers do. However, the trend has not been up, for several years and I doubt that the companies purchse more than 12 months forward.

So whilst you may be able to find one moment when there was a 1,000 difference in price, the financial reality is neither here nor there.

Energy is priced differently every half hour. And, companies do purchase energy more than 12 months forward. I daily see the 36 month price curve for the company I work for, as I'm sure do many others on this forum.

May I suggest you do some research before rubbishing other users on here.

sasha.p

peeteepee wrote: »

It won't really be 'sorted', as you'll still need to pay a standing charge for the priviledge of having a gas pipe connected to your home. Even if you use no gas, you'll still have to pay the gas supplier. :mad:

not true you can have the pipe disconnected the gas company calls it being de energised I know because we have done it with brittish gas ok took them a few years to actually turn up to do it but we finally got the road dug up at the beginning of this year and their supply was cut and capped running into our home and don't be fooled into thinking a wood burning stove with a back boiler is cheaper to run your home because its not our central heating runs of our woodburning stove and our hot water off our large red gas bottles which screw in which also feeds our cooker unlesds your a tree surgeon like myself or able to source yr own wood or own your own forest that can produce you a sustainable supply its just as costly to run !the only downside we have is if we ever want to let or sell the property the tenant would have to live as we live

fred121

lardeedeedar wrote: »

do the gas and electricity companies pay bills for their consumption?

I don't mind contributing to upgrades and improvement EXCEPT when shareholders are making profit.

Why do we have to pay for upgrades when there is profit enough to pay 'investors'. WRONG WRONG WRONG

Utilities should be in public ownership. Full stop. They are not luxuries that wealthy people should profiteer from at the cost to others who are struggling to make payments. Its immoral.

Privatisation of utilities has failed. It has not made a competitive market place for consumers, its just another way for the general public to be had over by those vested with the power and control.

could not put it better myself!!!! agree with every word you said