Quota's

pzulba_2

Apologies if already covered (quick search didn't find subject)

Just had an interesting conversation with Scottish Power (Nichola) re my current Fixed Price Deal Energy Saver Jan 2014 - was trying to get a new fix but no joy at current prices

During course of conversation I mentioned rumours that SP were ending their current FP offer and she said YES their QUOTA was Full, didn't pull her on this at time (Derr) But am now wondering if this statement by her is correct i.e. they only offer so many Fixed Price deals and when the QUOTA is full that's it

If so that's not exactly an open offer that they always brag about i.e. go Fixed and avoid the Price rises

Any comments

iancrt

Imagine if I buy 10,000 tea bags at 1p. However because I bought so many tea bags there is now less on the market - so the price goes up to 3p each for everyone else (the tea bags don't even have to exist at this stage)
So you have to pay 3p a tea bag, but I offer you a fixed price of 2p a tea bag from January to October if you buy 50 a month - so you have bought 500 tea bags.
Great - I make 100% profit and you get cheap tea
However I can only do this for 20 people, because I only have 10,000 tea bags. Once I get to 20, my quota is full I have to close my offer.

That, in a simplified form, is how it works for electric & gas. That's why its so unstable price wise. Throw in random interference by rogue governments (like ed is threatening) and its even more volatile!

You cant regulate prices, but you can regulate demand to provide some stability.

pzulba_2

iancrt wrote: »

Imagine if I buy 10,000 tea bags at 1p. However because I bought so many tea bags there is now less on the market - so the price goes up to 3p each for everyone else (the tea bags don't even have to exist at this stage)
So you have to pay 3p a tea bag, but I offer you a fixed price of 2p a tea bag from January to October if you buy 50 a month - so you have bought 500 tea bags.
Great - I make 100% profit and you get cheap tea
However I can only do this for 20 people, because I only have 10,000 tea bags. Once I get to 20, my quota is full I have to close my offer.

That, in a simplified form, is how it works for electric & gas. That's why its so unstable price wise. Throw in random interference by rogue governments (like ed is threatening) and its even more volatile!

You cant regulate prices, but you can regulate demand to provide some stability.

Follow the argument, BUT the Utility companies are being disingenuous when they state that their Fixed Price deals offer a Fair crack of the whip for the average punter

pjread

where do they say they "offer a Fair crack of the whip for the average punter", or indicate any fixed tariff is going to be available to an unlimited number of people...?

All I've ever seen is a statement that a fixed tariff guarantees fixed per-unit costs etc until X date if you sign up.

To stretch iancrt's mbaaphor - they're effectively 'pre-paying' for the tea bags before they've been produced. While you might be able to get 10,000 tea bags @1p each to resell on this basis, depending on production capacity and the market for tea you might struggle to get 100,000 or 1,000,000 on the same basis without affecting the price. (granted, this could work in either direction if production is elastic, but it largely isn't for power...)

Pincher

That's why they state "Limited availability", because they bought energy contracts up to 18 months ahead, and the offer is based on a finite amount of contracts.

This means that you can have a good day (for us) when the traders think there will be a mild winter next year, so they dump the contracts, or just not buy them, so that a utility like E.On could buy them cheaper than normal. Put a whole bunch of the contracts together, more for winter to match expected consumption, and you have a FixOnline offer. Really good stuff, but E.On stopped doing them, which is why I'm with Scottish Power, who does.

This also means that you can have March 2015 fix be £5 cheaper than December 2014 fix, because collectively the contracts are slightly cheaper by chance.

Note that the utilities know exactly how much the energy costs within the typical 15 months fixed period, so they add the profit margin, and that's the price. With the three year fixes, they can still be certain of the cost for the first half, but it's a gamble where the wholesale prices will go during the second half, so they have to add a risk premium on top of the profit margin. This is why longer fixes are inherently more expensive.

Ten years ago, British Gas offered a five year fix, but totally underestimated the rate of increase. I did not take it, but I worked out I would have saved over £2,000 over those five years; having overpaid initially, as usual. They don't seem to be making that mistake these days, DAMN.

apt

That British Gas fix was glorious. Under 2p per kw/h for off-peak electricity and even at the start it was 3% cheaper than the standard tariff. Most tariffs are now three times that. The recent Pioneer Energy 24 month fix was maybe a mistake by the supplier at least for high gas users. High standing charge, but a unit price very close to 3p per kw/h.