What should the unit prices be to cover wholesale prices?

Sea_Shell

Just thinking out loud again...


At the moment, non DD payment is x% more expensive than DD.   Will this have been calculated based on the "actual" additional costs (on a stable customer base), or a "best guess" % of customers paying this way.

Could that mean that the rush towards "payment on receipt of bill" that I'm reading about, (as a backlash against too high DDs) actually become even more expensive than DD tariffs.

Is there a chance that OFGEM might sign off a bigger differential in the capped tariffs to compensate increased costs for suppliers, if their assumptions of % payment methods get skewed?

Could people be making a (bigger) rod for their own backs by rebelling against DD?

Thoughts?

Mstty

@Sea_Shell

https://www.ofgem.gov.uk/check-if-energy-price-cap-affects-you

So as I read the link and the screenshot below no not paying by DD will never affect the price cap but it could mean energy companies don't build up a cash reserve for purchasing which could lead to rubbish fixed rates...maybe

victor2

Sea_Shell said:

Just thinking out loud again...


At the moment, non DD payment is x% more expensive than DD.   Will this have been calculated based on the "actual" additional costs (on a stable customer base), or a "best guess" % of customers paying this way.

Could that mean that the rush towards "payment on receipt of bill" that I'm reading about, (as a backlash against too high DDs) actually become even more expensive than DD tariffs.

Is there a chance that OFGEM might sign off a bigger differential in the capped tariffs to compensate increased costs for suppliers, if their assumptions of % payment methods get skewed?

Could people be making a (bigger) rod for their own backs by rebelling against DD?

Thoughts?

Interesting thoughts!

With many suppliers having moved to monthly DDs in advance, you could argue that they have a financial benefit to the supplier, over paying on receipt of bill, so it would make sense to increase the rates on such accounts. The days of DD accounts being in credit for 6 months and debit for the other six seem to have pretty much gone now, so such accounts probably do help the supplier's cashflow more than payment on receipt of bill.

As someone who does carefully monitor my payments and balances, adjusting them where necessary, I would support getting a lower rate than those who insist on paying for their utilities only after they have actually used them. As things stand, I quite like building up credit in the summer to see me through the winter, but equally, I could build up that credit in my own bank account rather than pay it in advance to the supplier. Even more work for me though - and a temptation if I need extra cash for Christmas!

Spies

Wholesale prices these last few days have been very low, is this purely because of renewables producing a good chunk of our demand or for some other reason? 

pochase

Mstty said:

@Sea_Shell

https://www.ofgem.gov.uk/check-if-energy-price-cap-affects-you

So as I read the link and the screenshot below no not paying by DD will never affect the price cap but it could mean energy companies don't build up a cash reserve for purchasing which could lead to rubbish fixed rates...maybe

There are different price Caps depending how you pay. Direct debit. prepay, other (Cash/Cheque etc)

pochase

victor2 said:

Sea_Shell said:

Just thinking out loud again...


At the moment, non DD payment is x% more expensive than DD.   Will this have been calculated based on the "actual" additional costs (on a stable customer base), or a "best guess" % of customers paying this way.

Could that mean that the rush towards "payment on receipt of bill" that I'm reading about, (as a backlash against too high DDs) actually become even more expensive than DD tariffs.

Is there a chance that OFGEM might sign off a bigger differential in the capped tariffs to compensate increased costs for suppliers, if their assumptions of % payment methods get skewed?

Could people be making a (bigger) rod for their own backs by rebelling against DD?

Thoughts?

Interesting thoughts!

With many suppliers having moved to monthly DDs in advance, you could argue that they have a financial benefit to the supplier, over paying on receipt of bill, so it would make sense to increase the rates on such accounts. The days of DD accounts being in credit for 6 months and debit for the other six seem to have pretty much gone now, so such accounts probably do help the supplier's cashflow more than payment on receipt of bill.

As someone who does carefully monitor my payments and balances, adjusting them where necessary, I would support getting a lower rate than those who insist on paying for their utilities only after they have actually used them. As things stand, I quite like building up credit in the summer to see me through the winter, but equally, I could build up that credit in my own bank account rather than pay it in advance to the supplier. Even more work for me though - and a temptation if I need extra cash for Christmas!

Paying by variable direct debit you get both, the better rate and you are paying an arrears. Of course you need still to budget and build up the money needed for the winter bills in your own bank account.

markin

Spies said:

Wholesale prices these last few days have been very low, is this purely because of renewables producing a good chunk of our demand or for some other reason? 

It would seems so, but then good wind seemed to have a less drastic effect between 17-24th April

 

 

michaels

No idea how those Drax on the day prices relate to the future level of the cap.  Comparing them to the last cap set period (Aug 21 - Jan 22) the average is currently higher but recently prices have been much lower than the winter peak.

RE DD va pay on receipt of the bill - I suspect the latter will lead to higher arrears which if they become defaults I think just adds to the standing charge for those who are still paying?

QrizB

Spies said:

Wholesale prices these last few days have been very low, is this purely because of renewables producing a good chunk of our demand or for some other reason? 

Spot gas prices are also low(er) at the moment. Europe in general is warmer and fears of shortages have eased, at least until the autumn.

pochase

michaels said:

RE DD va pay on receipt of the bill - I suspect the latter will lead to higher arrears which if they become defaults I think just adds to the standing charge for those who are still paying?

Arears should come out of the profit or generate a loss and should not be recovered by standing charges.
 The SOLR process is an exceptional as it was to protect the customer credits and covered the cost suppliers had taking on customers that they did not really want to have.