What should the unit prices be to cover wholesale prices?

Sea_Shell

Latest post on FB by ML...

"And here it is in numbers (I'm sorry)...

For someone on TYPICAL USE (use more it'll be higher, less lower) then here are the gas & electricity prices... 

Cheapest fix 1yr-ish ago: c. £900/yr

Current price cap: £1,277/yr

Strongly predicted 1 Apr cap: c.£1,925/yr

Crystal ball predicted 1 Oct cap c.£2,240/yr

Current cheapest fix: £2,250/yr"


That October cap looks horrendous!!  Not sure how that's been estimated.

QrizB

Sea_Shell said:

Latest post on FB by ML...

"And here it is in numbers (I'm sorry)...

Strongly predicted 1 Apr cap: c.£1,925/yr

Crystal ball predicted 1 Oct cap c.£2,240/yr

Current cheapest fix: £2,250/yr"

That October cap looks horrendous!!  Not sure how that's been estimated.

My current crystall-ball-gazing cap forecast for April (not October) is £2137, FWIW.

markin

Spies .....

 @@Spies Could you Edit the first post and add a link to the latest and most important post, so new users can easily find the info.

https://forums.moneysavingexpert.com/discussion/comment/78903593/#Comment_78903593

QrizB

It's the 1st of February which means it's the shortest month of the year, the last month of the winter quarter and the Ofgem pricing reference period for the April cap is over; we're now into the October cap reference period. So what are the scores on the doors?

January started well, with relatively cheap energy due to depressed demand over the holiday period. Sadly this didn't last and for most of the month prices were similar to November (but not quite as extreme as December was).

I'm continuing to take the average monthly day-ahead electricity prices from Drax and the daily gas prices from Guy Lipman.

• August - gas 3.71p/kWh, electricity 10.6p/kWh
  
• September - gas 5.19p/kWh, electricity 17.7p/kWh
  
• October - gas 6.85p/kWh, electricity 16.4p/kWh
  
• November - gas 6.68p/kWh,  electricity 18.4p/kWh
  
• December- gas 9.36 p/kWh,  electricity 22.6 p/kWh
• January - gas 6.87p/kWh,  electricity 18.6p/kWh

Putting it all together, the average wholesale price for the 6-month period was 6.45p/kWh for gas and 17.4p/kWh for electricity; an increase of 4.25p/kWh for gas and 10.4p/kWh for electricity on the prices used when calculating the current cap.

The retail price cap would therefore be around 8.6p/kWh for gas and 31.9p/kWh for electricity.

What does this mean for the £1277 headline cap? I'll update that next.

QrizB

Here is my revised estimate of the headline Ofgem cap - currently £1277 per year. This is the number that gets bandied about by the press (and our own Martin Lewis) and is an average of the regional prices paid by Ofgem's average dual-fuel, DD-paying consumer using 12000kWh of gas and 2900kWh of electricity per year.

This is based on historical data table from this Ofgem page then revised to reflect the current expectations. In roughly decreasing order (but with VAT last):

1. Wholesale costs. This is the big change. In Oct 21 these were £528. If wholesale gas is 6.45p/kWh and electricity is 17.4p/kWh, the cost of (12000 + 2900)kWh rises to £1279 (+£751).
2. Network costs. In Oct 21 these were £268. This is where SoLR costs usually show up so I'm increasing this to £320 (+£52).
3. Operating costs. In Oct 21 these were £204. Historically they've risen gently so I've used £205 (+£1).
4. Policy costs. In Oct 21 these were £159. These might fall in 2022 (as the green levy falls) but if the WHD is expanded they might just as easily rise. I've kept them at £159.
5. EBIT. In Oct 21 this was £23 and I'm keeping it at £23.
6. DD payment allowance. In Oct 21 this was £12 and I'm keeping it at £12.
7. Headroom allowance. In Oct 21 this was £14 and I'm keeping it at £14.
8. Adjustment allowance. In Oct 21 this was £9 and I'm keeping it at £9.
9. VAT. VAT in Oct 21 totalled £61; on my revised numbers it totals £101 (+£40).

What does that give as a headline Ofgem cap figure for April 22? £2122. An increase of £844, +66%, two-thirds more. Almost all of this is down to the increase in wholesale energy, everything else I've added total £53+VAT.

Hold tight, everyone, there's a rough ride ahead.

QrizB

Of course, all this could be completely wrong; I'm just a random person on the internet, after all. I've tried to explain where my numbers come from; you can check them yourself and, if you disagree, I'd like to know why.

In particular, I don't have access to the same wholesale pricing models as Ofgem (they pay for theirs, I copy mine from the internet) and so I could be out. Also I don't have any real insight into how all the other factors - network costs, operating costs, policy costs etc. - might change; I've had to guess.

Saying "but the government won't permit it" is a different argument and that comes down to politics, not maths.

So I *will* be wrong, possibly by a tiny bit, possibly by a lot. And we'll find out how wrong next week.

Sea_Shell

As scary as those numbers are, I'm rooting for you to be right!!

GingerTim

Ouch! (and ever more glad I fixed for three years in July, what dumb luck that was)

Fairzo

GingerTim said:

Ouch! (and ever more glad I fixed for three years in July, what dumb luck that was)

Same here (well, August), and that was through gritted teeth at the time as the rates were significantly higher than previous fix.

Thanks to @QrizB for work on the numbers.

GingerTim

Fairzo said:

GingerTim said:

Ouch! (and ever more glad I fixed for three years in July, what dumb luck that was)

Same here (well, August), and that was through gritted teeth at the time as the rates were significantly higher than previous fix.

Thanks to @QrizB for work on the numbers.

Likewise - teeth grinding was only slightly lessened by a couple of hundred quid cashback from EDF.