Guide: What are the price cap unit rates? 9 February 2022 at 1:20PM in Energy 69 replies 8.6K views

bristolleedsfan

facade said:

ccluedo said:

Thanks for the info Chris.  I'd like to know why the daily standing charge increase is so much more for electricity than for gas if anyone could enlighten me pls

Most likely it is to recover the cost of transferring accounts to a Supplier of Last Resort when all those companies failed this year.

They stuck it on the standing charge for electric, to make it so everybody pays their "fair" share, as not everyone has gas, and putting it on unit rates would mean low users would pay less than is "fair".

According to Octopus SOLR costs split between G + E

bobby1999

How can it be a free market when private companies go bust and the cost is passed on to other energy customers ?

artyboy

bobby1999 said:

How can it be a free market when private companies go bust and the cost is passed on to other energy customers ?

I think one potential reform that should come out of this is a levy on energy companies to support the cost of failure within the industry - similar to the one levied on financial firms to fund the FSCS...

(the problem of course is how you then avoid getting that levy cost passed directly back to customers... )

[Deleted User]

artyboy said:

bobby1999 said:

How can it be a free market when private companies go bust and the cost is passed on to other energy customers ?

I think one potential reform that should come out of this is a tariff on energy companies to support the cost of failure within the industry - similar to the one levied on financial firms to fund the FSCS...

Which would just be part of operating costs (and therefore bills) anyway.

pochase

bobby1999 said:

How can it be a free market when private companies go bust and the cost is passed on to other energy customers ?

We are paying for the credit of the users of those who were with those companies. Without the help they would have lost the money. That is called solidarity.

The second component is to pay for suppliers to accept additional customers they did lose money on and for the additional administration cost to onboard those customers and sort out there credit they had with the former supplier.

Chrysalis

artyboy said:

bobby1999 said:

How can it be a free market when private companies go bust and the cost is passed on to other energy customers ?

I think one potential reform that should come out of this is a levy on energy companies to support the cost of failure within the industry - similar to the one levied on financial firms to fund the FSCS...

(the problem of course is how you then avoid getting that levy cost passed directly back to customers... )

You cant protect it from been passed on I think.

The credit balances either need to be capped at a low level and lost in the event of a company fail, or held in a way that they are protected such as an in a intermediate account or insured.  I expect the former is far cheaper.  Ofgem has at least admitted they got this one very wrong.

jrawle

Chrysalis said:

artyboy said:

bobby1999 said:

How can it be a free market when private companies go bust and the cost is passed on to other energy customers ?

I think one potential reform that should come out of this is a levy on energy companies to support the cost of failure within the industry - similar to the one levied on financial firms to fund the FSCS...

(the problem of course is how you then avoid getting that levy cost passed directly back to customers... )

You cant protect it from been passed on I think.

The credit balances either need to be capped at a low level and lost in the event of a company fail, or held in a way that they are protected such as an in a intermediate account or insured.  I expect the former is far cheaper.  Ofgem has at least admitted they got this one very wrong.

Or... just ban credit balances and have everyone pay for what they have used after they have been billed for it, as used to be the case (the only exception being people with poor credit, who would have a prepayment meter where the credit is on the meter and not held by the supplier until the energy has actually been used). Not only would this remove the issue of credit balances, it would also mean no more dodgy suppliers using credit balances to buy other customers' energy in a sort of Ponzi scheme.

An added bonus would be the removal of all the confusion where people think a fixed direct debit will cover all their usage. NS&I can then launch a new range of savings accounts called "Energy Savers" or something where people who have trouble budgeting can set up a direct debit to save a fixed amount each month which can cover their energy bills. This would be 100% backed by the government, like all NS&I, and they could also pay the customers some interest, rather than this going to the energy companies.

superkoopauk

double_dutchy said:

molerat said:

 There is also no unit price cap, just an inferred unit maximum price based on using the maximum daily charge so suppliers do have some leeway as long as they don't charge more than the standing charge cap and the total price. 

Hello molerat,

So, theoretically it's possible for a supplier to have a zero standing charge and therefore a higher unit rate.......but all the current SVRs seem to be set pretty much in line with the maximum SC - are you aware of any suppliers who are charging differently, i.e.  a standing charge significantly below the maximum allowed, and if so what would be the justification for doing that from their perspective?

No that is not possible.  The standing charge and unit rates are independently capped.

QrizB

superkoopauk said:

double_dutchy said:

So, theoretically it's possible for a supplier to have a zero standing charge and therefore a higher unit rate.......but all the current SVRs seem to be set pretty much in line with the maximum SC - are you aware of any suppliers who are charging differently, i.e.  a standing charge significantly below the maximum allowed, and if so what would be the justification for doing that from their perspective?

No that is not possible.  The standing charge and unit rates are independently capped.

On the contrary, it is entirely possible.

For example, with electricity the two components of the cap are a maximum cost for a customer using zero kWh (which caps the standing charge) and a maximum cost including standing charge for a customer using 3100kWh.

If  a supplier set a zero standing charge they could charge 1/3100th of the other value per kWh.

athonjon

Navrongo said:

I notice the average unit rates you quote are not the same as Ofgem (article "Check if the energy price cap affects you" - I'm not allowed to post links). Is this because you include VAT? That seems very sensible. If Ofgem want to show the rates net of VAT, they should make that clear that's what they're doing!

I also noticed that the rates between Ofgem and MSE vary. For most of my numbers (Southern region) it is a 5% difference, which does suggest VAT. But for Gas units it varies by just less than 1%. Anyone know why?