Future Cap Prediction - Ouch.

Sea_Shell

But if they don't issue predictions, and it all actually does go that way, there would be cries of "why didn't you warn us!"

I'd rather plan for the worst and then it turns out to be not so bad, rather than plod on thinking everything will be OK.

With some prior warning, then maybe people will be able to budget ahead for an increase (OK so maybe not all of it, but some of it).   

Although that does have the impact on the wider economy if consumers decide, based on the reports of "doom", that they'd better save that £20 rather than spend it now.   That then causes it's own problems.

Come April we'll no doubt be clobbered with Council Tax rises too.   So best pencil +5% for that in your budgets too!!

[Deleted User]

The accounting period for the calculations that go into the mix for the April 2022 cap started in Aug. The new cap will be announced in early February. The Cap looks backwards not forwards. Yes, we can all try to kid ourselves that this is a temporary blip but two things are a given: one, the cost of wholesale energy now and, two, the cost of supplier failures. I don’t believe that analysts are suggesting that they have produced a definitive Cap figure. What they do not know as yet is how far wholesale prices might go, and how many supplier failures there might be, and how many SoLR claims there will be.

The one prediction that is a 100% safe bet is that the Cap in April will rise significantly.

tghe-retford

I was reading how the BBC and Sky are reporting this, forget £400, their analysts are now hinting at the prospect of up to £800, up to £2,000 a year at least for the cap (and fixed tariffs will be higher) as they have taken into account the collapse of numerous suppliers too. And that's now in addition to the 3.6% at least, or is it 5% increase in Council Tax? Plus food inflation, more tax rises, the 1.5% National Insurance rise and price rises elsewhere. Inevitably, wage freezes for the public sector, wage cuts to save your job (unless you're a truck driver), more apprenticeships taken on at a lower wage and the introduction of automation and outsourcing will replace workers and cuts to welfare are coming - never mind the end of the Universal Credit uplift.

Maybe that's what Boris meant by "levelling up" - we're levelling up your expenditure but not mentioning that we will be levelling down your income.

The media likes doom and gloom predictions. Doom and gloom sells papers, gets eyes on screens and ears to radios. I bet you can remember the name of a few individuals in the last couple of years who made doomsday predictions to get the public to support restrictions on their lives (that turned out to be false every single time). It's causing confusion and fear in the public. These two things were also used to ensure compliance from the public to adhere to restrictions on their lives, which will also be needed to have us meet zero carbon targets. Until everyone starts buying wood burners anyway.

The_Green_Hornet

           

tghe-retford

The_Green_Hornet said:

           

What if I was to tell you that it's not about whether the predictions are correct or not?

Sea_Shell

[Deleted User] said:

The accounting period for the calculations that go into the mix for the April 2022 cap started in Aug. The new cap will be announced in early February. The Cap looks backwards not forwards. Yes, we can all try to kid ourselves that this is a temporary blip but two things are a given: one, the cost of wholesale energy now and, two, the cost of supplier failures. I don’t believe that analysts are suggesting that they have produced a definitive Cap figure. What they do not know as yet is how far wholesale prices might go, and how many supplier failures there might be, and how many SoLR claims there will be.

The one prediction that is a 100% safe bet is that the Cap in April will rise significantly.

As we KNOW what the prices have done between August and now, what will the prices have to do between now and February, so that the price cap will not have to significantly rise in April 22.   Fall back off a cliff, back to pre August levels?

Is it based on an average for the period?  

If so, maths would tell us what the price cap would be, even if prices did fall back from NOW to August levels.   Better brains than mine can no doubt make a good stab at that average price!

brewerdave

I can confidently predict that for me - Council Tax increase + Energy bills increase >> State pension increase  !!   

[Deleted User]

Sea_Shell said:

Dolor said:

The accounting period for the calculations that go into the mix for the April 2022 cap started in Aug. The new cap will be announced in early February. The Cap looks backwards not forwards. Yes, we can all try to kid ourselves that this is a temporary blip but two things are a given: one, the cost of wholesale energy now and, two, the cost of supplier failures. I don’t believe that analysts are suggesting that they have produced a definitive Cap figure. What they do not know as yet is how far wholesale prices might go, and how many supplier failures there might be, and how many SoLR claims there will be.

The one prediction that is a 100% safe bet is that the Cap in April will rise significantly.

As we KNOW what the prices have done between August and now, what will the prices have to do between now and February, so that the price cap will not have to significantly rise in April 22.   Fall back off a cliff, back to pre August levels?

Is it based on an average for the period?  

If so, maths would tell us what the price cap would be, even if prices did fall back from NOW to August levels.   Better brains than mine can no doubt make a good stab at that average price!

All the detail is laid out in this link. It is a very complex set of calculations which for the April 2022 Cap started on the 1st August this year.

https://www.ofgem.gov.uk/sites/default/files/docs/2018/11/appendix_4_-_wholesale_costs.pdf

To put some meat on the bones, the wholesale price of gas on the 31st January 2020 was 1.906p/kWh and on the 31st July was 3.5p/kWh. The Cap rose by £137 at the beginning of this month.

The wholesale price on the 1st August wax 3.5p/kWh and today the wholesale price is 7.915p/kWh (yesterday it was 9.283p/kWh). Today’s wholesale gas price equates to a retail price of c.10.1p/kWh.

Suppliers who are SoLR’s will seek to recover the costs that they have incurred taking in customers from failed suppliers. Ofgem will seek to recover any unpaid Green taxes from suppliers and thus consumers All these at thrown into the Cap mix.

Even if gas wholesale prices reduced by 50% overnight, I think that we can all be confident that the Cap will rise in April to cover the extraordinary costs of failed suppliers.

wittynamegoeshere

Putting BBC and newspaper panic aside, to try and put a positive spin on the situation, the really good news is that we're all protected by the capped price until April, after the cold weather will be over.

Beyond April it won't make much difference until the following winter, based on October 2022's capped price, by which time absolutely nobody can possibly predict what will happen and hopefully most of the losses from this winter's mess will either have been repaid or written off by the government.

There's absolutely no point in panicking about something that's a complete unknown.  The sky might fall down before next October for all anyone knows.

The_Green_Hornet

tghe-retford said:

The_Green_Hornet said:

           

What if I was to tell you that it's not about whether the predictions are correct or not?

What if I was to tell you I fixed for 2 years in the Summer?