What should the unit prices be to cover wholesale prices?

QrizB

November is over and Zog is gone

<a moment's silence for Zog>

It must be time to update this thread. A quick reminder for anyone who doesn't want to wade through my previous posts:

• The October 2021 Ofgem cap was based on average wholesale energy prices from February to July 2021.
  
• The cap reflected gas at 2.2p/kWh (plus 1.9p/kWh for everything else) and electricity at 7p/kWh (plus 14p/kWh for everything else).
• The April 2022 cap is expected to be based on average prices from August 2021 to January 2022.

For simplicity I'm going to use the average monthly day-ahead electricity prices from Drax and the daily gas prices from Guy Lipman (because I can't find a more authoritative public source). See note below regarding these data sources. Here is the price data so far:

• 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 and January remain TBC

Based on the past 4 months, the average price of gas is 5.61p/kWh and electricity is 15.8p/kWh. If prices don't change significantly during December and January this suggests an April cap of:

• around 7.5p/kWh for gas;
• around 29.8p/kWh for electricity;
• a headline Ofgem cap price for an average dual-fuel consumer of ~£2000pa, compared to the current £1277pa.

I'll update this again in early January, once we have December's numbers.

Note: Looking back at the data for Feb-Jul 2021 which would have been used for the previous Ofgem cap, Drax's average electricity price is ~7p/kWh and Guy Lipman's average gas price is ~2.1p/kWh. A pretty close match to the official Ofgem model numbers.

Spies

Nearly 30p/kwh for leccy is going to be a rough time, at least it will be spring by then. 

Sea_Shell

Thanks again for doing the maths.   Scary, but we'll see how it actually all pans out in time, and what level of "intervention" there may be with either help for low income customers, or additional levies etc etc.

Although whichever way you slice and dice it, the only way is up!!   (for the foreseeable)

Sea_Shell

Just read this from the BBC - https://www.bbc.co.uk/news/business-59483411

"National Energy Action has predicted that this is likely to be a £550 a year increase for a typical standard tariff dual fuel customer."

"In October, Ofgem chief executive Jonathan Brearley told the BBC that the price cap was there to stop firms making unfair profits, but "legitimate costs have to be passed through".

He said it was too early to say how much the rise in April would be or whether Ofgem would have to review the price cap more frequently in future."

QrizB

As we're halfway through the month and gas prices are back in the news, a very quick bump-and-update for this thread. For December to date:

• Drax (14 days) has the average day-ahead electricity price as 20.9p/kWh
  
• Guy Lipman's data (15 days) has an average gas wholesale price of 8.54p/kWh

Both these are significantly higher than we've seen previously in this period (the highest previous were 18.4p for electricity in November, and 6.85p for gas in October). We might get a bit of a price dip if industrial demand falls over Christmas but my ~£2000pa guess from the 1st (a couple of posts upthread) might yet prove to be on the low side.

merchcon55

One also needs to add how larger energy costs will affect prices for most goods and services. Very simple example: you go to Tesco and everything there requires power - the lights - the refrigerators and freezers - the ovens for the baked goods - the heating for the building, etc. This is going to cost Tesco a lot more - and will simply be passed on to the customer in higher prices for all goods.

This is just one very small example. As a poster above said when trying to explain to his family - they had no interest. I suspect the HUGE majority of people have no idea what's to hit them come April. 

Western Europe has always been at the mercy of Russia - one could argue that up to now, we have been quite lucky - as Putin could have played this tactic many times before. I suspect he threatened many times before and - behind closed doors - Angela et al caved in.

This time though Putin not messing around with Ukraine - Soviet Union lost its empire - Ukraine was their India - the Jewel in the crown if you want to think of it that way. Now Putin wants it back - and short of starting WW3, very little the west can really do about it, as Ukraine is NOT part of NATO - and have no obligation to fight in defense of Ukraine. Putin is very smart and our Western leaders incredibly naive.

Sea_Shell

Bit of a maths question...

If "Gas & electricity usage is 36% higher in winter when compared to summer", what percentage of the annual usage is during winter? - "This is Money"



My brain hurts 🤯. Is it 2/3rds winter, 1/3rd summer... so 33 (36) percentage points.

Just trying to project a Oct 21 - Sep 22, taking into account the current cap, and then using a guesstimate for April.

MWT

Sea_Shell said:

Bit of a maths question...

If "Gas & electricity usage is 36% higher in winter when compared to summer", what percentage of the annual usage is during winter? - "This is Money"



My brain hurts 🤯. Is it 2/3rds winter, 1/3rd summer... so 33 (36) percentage points.

Just trying to project a Oct 21 - Sep 22, taking into account the current cap, and then using a guesstimate for April.

57.6% in winter, 42.4% summer based on that number...

Sea_Shell

MWT said:

Sea_Shell said:

Bit of a maths question...

If "Gas & electricity usage is 36% higher in winter when compared to summer", what percentage of the annual usage is during winter? - "This is Money"



My brain hurts 🤯. Is it 2/3rds winter, 1/3rd summer... so 33 (36) percentage points.

Just trying to project a Oct 21 - Sep 22, taking into account the current cap, and then using a guesstimate for April.

57.6% in winter, 42.4% summer based on that number...

That was my initial thought too, but it doesn't seem enough variation.  That's why I wondered if it should be percentage points.

I'm trying to help someone with their budget.

Personally, our dual fuel bill (historically) can vary between £30-£100

MWT

It is mathematically correct 57.6/42.4 = 1.36, but I too would question the initial premise, 36% more in winter doesn't come close to my differential.