Is the energy price cap worth it in the long run?

alsa1

We’ve seen a huge number of suppliers collapse, and many more are anticipated. By and large they blame the energy price cap for accelerating their closure. 

In the short term it is cushioning many consumers from immediate price rises. Recently it was reported that without the cap a variable dual fuel would be something like £1600 per annum instead of the current £1217.

However it is also known that the SoLR process is eventually going to apply a levy across all consumers for the companies that took on stranded customers. I have seen unsourced figures of £500 per account that the SoLR takes on.

So eventually the cap will cost us, not only in lost competition, but we’ll have to pay through the levy. Is the cap then worth the bother?

[Deleted User]

Personally, I think that it will end up costing us more. It does though allow the Government to claim that it has been protecting consumers. April 2022 could be a difficult month for many people as increased NI; increased energy prices, and higher Council Tax all come home to roost at the same time.

wittynamegoeshere

Deleted_User said:

To make a positive suggestion: instead of putting the costs of this glut of SoLRs on future energy prices, it could be recovered by means of a windfall tax on companies profiting from high gas prices. The costs of extracting gas haven't gone up like its price has, so that means fortuitously high profits for some.

That sounds like a good idea but, presuming you can only charge UK suppliers, this would put them at a disadvantage against the imported competition so could lead to their demise even sooner than will already happen.

Some, or possibly all, of the failed suppliers so far have not been due to the cap - they've failed as they provided fixed price tariffs that they didn't hedge against or have the money to subsidise.  My supplier Symbio was charging me 13p a unit, 38% less than the cap anyway.  They were contractually obliged to supply their customers with these low prices for up to a year or more ahead, so the cap didn't affect them anyway.

Personally, I think the whole system has been exposed as the sham it is.  Are we really going to carry on with the same system and have all the same performance the next time the price rises?

Verdigris

I suppose those of us who have been switching for years will probably come out better than evens, but for every winner there will always be losers.

I think money/resources would be better directed "energy education", so that more people can make informed choices about their energy use, and into seriously tackling the woeful thermal efficiency of much of our housing stock.

Cardew

With regard to the energy companies going bust, the problem has been that Ofgem has granted a licence to anyone with a PC in their spare bedroom - well not quite, but you get the drift.

Unless they could 'buy forward' to cover the prices they offer customers, they are just gambling. I wonder how many directors have wound up their companies whilst still in profit, but knowing that the Energy Price Cap will mean inevitable lossess.

payless

If a company wound up “whilst in profit”  but effectively pulling out of existing contracts that should leave the door open for claims by those impacted “ as creditors”

jimjames

Cardew said:

Unless they could 'buy forward' to cover the prices they offer customers, they are just gambling. I wonder how many directors have wound up their companies whilst still in profit, but knowing that the Energy Price Cap will mean inevitable lossess.

Or like Avro they might not be in profit in the company itself but have taken enough money out in other ways to be in profit and are only down on the £100 they put in when the company was setup.

alsa1

Verdigris said:

I suppose those of us who have been switching for years will probably come out better than evens, but for every winner there will always be losers.

I think money/resources would be better directed "energy education", so that more people can make informed choices about their energy use, and into seriously tackling the woeful thermal efficiency of much of our housing stock.

I agree, until I started reading the forum recently I had no idea how the cap actually worked. The SoLR levy is also shrouded in mystery, even though we will all pay for it next year, no one in the media seems to be referencing it. 

Talking to people about the recent crisis, it doesn’t even seem that many will change anything either. The consensus was that the increase ‘wasn’t too bad for now’ and if costs go up in April again, they’ll see what they could do then. 

QrizB

Cardew said:

With regard to the energy companies going bust, the problem has been that Ofgem has granted a licence to anyone with a PC in their spare bedroom - well not quite, but you get the drift.

Unless they could 'buy forward' to cover the prices they offer customers, they are just gambling. I wonder how many directors have wound up their companies whilst still in profit, but knowing that the Energy Price Cap will mean inevitable lossess.

I would like to think this is why Ofgem was asking for financial information from suppliers earlier in the year (see for example this order they made against Symbio in August, regarding non-response to a request made in May). Of course that horse had long since bolted the stable.

Cardew

payless said:

If a company wound up “whilst in profit”  but effectively pulling out of existing contracts that should leave the door open for claims by those impacted “ as creditors”

Correct. However these directors are not stupid!

Surely you have read of directors - for all sorts of firms, not just energy -  paying themselves huge salaries and bonuses before the firm becomes insolvent.

Thrugelmir

jimjames said:

Cardew said:

Unless they could 'buy forward' to cover the prices they offer customers, they are just gambling. I wonder how many directors have wound up their companies whilst still in profit, but knowing that the Energy Price Cap will mean inevitable lossess.

Or like Avro they might not be in profit in the company itself but have taken enough money out in other ways to be in profit and are only down on the £100 they put in when the company was setup.

Those that have "extracted" money will be investigatated.