MSE News: Energy firms told to pass on price cuts by the Government 2 June 2015 at 11:08AM in Energy 11 replies 1.6K views

Former_MSE_Paloma

Energy firms are facing increased pressure from the Government to pass on a fall in wholesale costs ...

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Energy firms told to pass on price cuts by the Government




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HUMBUG

Sorry but Energy supply to domestic consumers need to be renationalised. There is absolutely no way these companies will reduce their profiteering, and I doubt the Conservatives will put extreme pressure on them (for their own financial reasons).

D_M_E

IF they do pass on the price cuts, will they pass the cuts down to EVERYONE or will they just do as they did last time and ONLY reduce prices for consumers on their standard (expensive) tariffs?

Doc_N

Remember the Labour promise to freeze prices if elected?

Remember the reaction of the energy companies - to hold off reducing prices because of the risk of having them frozen?

All back to normal now - their Conservative friends are back in power again, so no need to do anything. Great! :rotfl:

Bark01

Doc_N wrote: »

Remember the reaction of the energy companies - to hold off reducing prices because of the risk of having them frozen?

Npower were the only supplier to make that claim, no one else did. Although anyone with any sense would agree with npower.

Gas wholesale is still falling but electricity non energy costs are rising so although gas should decrease by ~5% there is also the chance of a small electricity rise.

I'm fairly confident we'll see gas reduction announcements from the big 6 before the winter. However the industry will be waiting for the CMA investigation outcome (due in the next few weeks) before deciding what and when to do next.

[Deleted User]

Or the companies will cut the cost of gas and electricity but increase the standing charges to recoup the money.

I am always amazed at the massive variations in standing charges even from the same company. It is the same gas or electricity so how can a company say it costs more on one tariff than another? (ignoring green tariffs and such)

stator

I agree, standing charges should be fixed across all suppliers. They should take the fee charged by the local distribution company, eg £50, slap on £20 for operating the account and so all suppliers would charge £70 standing charge in that area.
It would make comparing tarrifs a whole lot easier too as you would only have to compare the kwh price.

Cardew

Last week SSE, the UK's second biggest supplier, reported a 39% increase in profits to £456.8 million for the year to 31 March, meaning it made an average of £69 from the supply of household electricity and gas – before tax and interest payments.

According to the published results to the year ending 31 March 2015 SSE made a profit of £664 million which was an increase of 26% on the previous year's profit of £446 million.

spiro

stator wrote: »

I agree, standing charges should be fixed across all suppliers. They should take the fee charged by the local distribution company, eg £50, slap on £20 for operating the account and so all suppliers would charge £70 standing charge in that area.
It would make comparing tarrifs a whole lot easier too as you would only have to compare the kwh price.

The fees charged by the DNO are in part based on what is consumed. You have also made no mention of metering charges, revenue protection costs, government green costs etc that all form part of the total cost.
The other point I would make is despite us having private companies providing this we have some of the cheapest energy prices in Europe. Think yourself lucky you are not in Spain were you pay a 5% tax on the bill and then they add 20% VAT on top of all of that.
I haven't seen the breakdown recently but the suppliers profit margin is less than the likes of Tesco etc.

stator

spiro wrote: »

The fees charged by the DNO are in part based on what is consumed. You have also made no mention of metering charges, revenue protection costs, government green costs etc that all form part of the total cost.

Everything else would be built into the unit price. It doesn't really matter what the standing charge is, if it's £50 or £100 as long as all providers are the same it would make switching a lot easier.

Bark01

Comparisons would undoubtedly be easier but pricing would be unfair with low users being subsidised by high users. A high user doesn’t necessarily have to be inefficient; another way to look at it would be a family home will probably use more energy than 1 bed flat. So looking at it another way removing the standing charge could lead to families subsidising single young profesionals.

Energy suppliers face fixed costs, these don’t vary with consumption. This is what standing charges are meant to cover. A portion of the fixed costs are fixed with all supplier being charged the same amount in each region, but they vary by region. Suppliers with a dominant position in cheaper regions face cheap fixed costs when spread over there whole portfolio. These costs also vary by month and year, so a short term fix may have a different averaged fixed cost to a long term fix.

Then of course there are the suppliers own fixed costs, these vary wildly for example suppliers based in the south will generally have higher opex costs than those based in the north due to building and labour costs. Some suppliers spend a lot on marketing others don’t. There is no fixed rule for what fixed costs should be included in prices and what shouldn’t.