MSE News: Prepaid energy bills to be capped

davidgmmafan

If it was the law that suppliers had to put their customers on the cheapest tariff all suppliers could just withdraw all but their standard tariff. As if by magic every customer is on the cheapest tariff.

Nobody is actually any better off, in fact the switchers who are engaged with the market are significantly worse off.

I also think the idea to allow comparison sites to pick and choose which tariffs they show is pants.

The thing we have to be very wary of is unintended consequences. The four tariff approach has failed. It effectively ended social and some other tariffs.

Therefore any action needs to be carefully examined to ensure it doesn't make things worse. The adoption of petrol forecourt style pricing. People understand this. Standing charges are confusing and pointless.

Now that I've presented some robust arguments perhaps you or someone else could present a robust argument in favour of standing charges. I have yet to hear a convincing one. Suppliers have fixed overheads but so do petrol stations and shops. They manage ok to present a price per unit.

backfoot

davidgmmafan wrote: »

Nobody is actually any better off, in fact the switchers who are engaged with the market are significantly worse off.

Of course many would be better off by a huge amount. I explained how prices would be monitored but you gave a feeble excuse re Ofgem.

The rub is that you are afraid of losing out on your deemed benefit from being an active switcher, rather than adopting a fairer system of energy charging

The differential between some Suppliers lowest tariff and the so called 'standard' is absolutely shameful and pure exploitation.

davidgmmafan

You don't anything about me so don't pretend you do.

I dislike simple solutions unless they work. Where does the money come from for these vast savings?

It is a bit like when people stil l rail against prepayment prices being higher when the facts are that they cost more to run.

Companies promote direct debit an online billing because it saves them money. Where does the money come from for lower prices for everyone? It is like when you look at the headline figure profits for a power supplier. It looks like a huge amount but if you divide it by the number of customers they have it works out to a pretty miniscule sum per person.

You say the Ofgem excuse is feeble. I say Ofgem IS feeble and I struggle to see how anyone can put their trust in them.

davidgmmafan

It is worth pointing pointing out that there is an issue around cheapest tariff or best tariff. My current supplier has two competitive tairffs, both of which are fixed. The longer fixed rate costs more.

Prices could go up or down but I can only guess at this. If I take the fixed rate there might be a more competitive variable tariff later, or prices might go up and I could be quids in.

What is the companies liability if their guess is wrong? I suspect this is one of the reasons why Cameron has quietly dropped this. There are just too many difficulties with it.

We need to do as much as possible to simply the energy market, for a lot of people it is a confusopoly. If we are going to have price controls or ban certain tariffs then we seem to be moving away from competition.

I mean that's a method but I'm not sure it will work...

backfoot

A fixed price contract is a hedge by a customer against future price changes and provides a largely pre-defined income stream for the Supplier. They will have advance purchased most of those supplies so will be able to set a retail price with some certainty of a profit margin.Fixed price contracts are very relevant to the competitive market and are often the best offers around targeted at the switching customer.

My point concerns the default position of standard tariff prices which are variable rate and are so far distant from the market leading prices.There is no way that payment by DD, accounts for such a differential.

If everyone switched, which is the competitive intention then there would have to be a rise in price for the current switchers.That is where the 'money' comes from.At the moment the Government allows a large body of customers to subsidise lower prices for those that are active purchasers of the same product, which is energy supply.

For an essential commodity, this subsidy/differential is so large it can only be seen as a failure of the overall system. There comes a point when something needs to happen to correct this inequality.

It is also unfair that new entrants to the market have to compete at the low end of prices while the big 6 have a body of customers who pay over the odds to shelter their proftability. That really isn't competition on a level playing field.

The proposal is totally workable and the market can still remain competitive between suppliers. The difference is that more customers gain the benefits.

davidgmmafan

"It is also unfair that new entrants to the market have to compete at the low end of prices while the big 6 have a body of customers who pay over the odds to shelter their proftability. That really isn't competition on a level playing field."

Firstly I thank you for being less personal and sticking to explaining your position. I think we both want to improve the market, we just disagree about how to do it. I agree with the point above this is a massive issue, though arguably it allows smaller suppliers to undercut the big six if prices are falling, it also handicaps them in that they don't have these sticky customers whos revenue to count in.

The difficulty in your position, and MSE also seems to be of the same view as me, is that if you decrease the differential the switchers get less people will switch. If competition and switching is the answer I can't see how decreasing that will help.

I propose banning standing charges and allowing a single price per unit. I know there are concerns about this impacting low users but the bottom line is people understand this.

If they can understand and see at a glance which supplier is cheaper this makes it far mor likely they will switch and lessens the power of the confusopoly which is at work here.

I would love to eat my words but I really struggle so see Ofgem as part of any effective solution. I do feel this could do with a fresh pair of eyes and some new ideas.

Consumerist

Just a quick thought.

If 70% of the market is paying £300 pa too much then the mean overpayment is £210.

So, if everybody switches, does that mean that current switchers will pay another £210 pa to fund the £90 pa savings by the so-called "stickies"?

backfoot

If the new entrants can compete at the -£300 level, the 'actives' would use them. The big 6 would have to raise prices but they would not be able to go to £210 because of competition.

The monoliths would then have to keep prices at efficient levels ,trim costs or exit the market.

Reducing input costs may then be passed on much more quickly than is currently the case.

SummerFun

I see the Co-op are making hay whilst the sun shines, applying a 6% increase to those customers supplied via a PPM compared to a 3% rise to those with credit meters (and on their standard variable rate tariff)

http://www.bbc.co.uk/news/business-37248158

Will these mean they will reduce the prices again come April 2017 to be within the cap? Or does the cap apply to prices in force at April 2017?

Either way, the Co-Op will get a nice little earner over the winter period, when energy use is considerably higher.


Sounds like that sounds the official end of Summer for me. It's been a breeze! Maybe see you again next summer. Missing you all already!