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

DerwentMailman

MSE_Chris said:

The energy price cap is misnamed – there’s no cap on how much you pay. If you use more energy, you'll pay more. The cap is on the standing charges and the unit rates for gas and electricity. Yet the cap is usually quoted as an annual figure, based on a typical amount of energy use (currently £1,277/year rising to £1,971/year in April).

But one of the questions we most often get asked is:

What are the price cap unit rates?

Click reply below to discuss. If you haven’t already, join the forum to reply.

I agree.  You just need to look through the ever-increasing number of posts with the same replies from many of the posters on this forum.  Personally I think that the words price cap should be replaced with tariff cap or (better still) energy rates cap.  I'd also like Ofgem to ditch the single figure for the price cap (using their Typical Domestic Consumption Values) with a more nuanced set of numbers for say low/medium/high users.

 

double_dutchy

athonjon said:

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?

The tables that Ofgem publish don't include VAT. 

Can you specify exactly where you get a 1% discrepancy?

athonjon

double_dutchy said:

athonjon said:

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?

The tables that Ofgem publish don't include VAT. 

Can you specify exactly where you get a 1% discrepancy?

So when I compared the Southern region caps (direct debit) on the MSE page with the Ofgem tables (other payment method), MSEs are 5% higher for Electricity (standing charge and units) and for the Gas standing charge, which obviously accounts for VAT. But the Gas units are just shy of 1% lower on the MSE page. For Southern/Gas/Units Ofgem states £1,800.12 for 12,000 kWh. So 180012 / 12000 = 15.001p per kWh. MSE states 14.88p per kWh. I wondered if it was a one-off error, but i tried it with the Gas unit figures for Northern and London regions and it's a similar difference.

t0rt0ise

athonjon said:

double_dutchy said:

athonjon said:

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?

The tables that Ofgem publish don't include VAT. 

Can you specify exactly where you get a 1% discrepancy?

So when I compared the Southern region caps (direct debit) on the MSE page with the Ofgem tables (other payment method), MSEs are 5% higher for Electricity (standing charge and units) and for the Gas standing charge, which obviously accounts for VAT. But the Gas units are just shy of 1% lower on the MSE page. For Southern/Gas/Units Ofgem states £1,800.12 for 12,000 kWh. So 180012 / 12000 = 15.001p per kWh. MSE states 14.88p per kWh. I wondered if it was a one-off error, but i tried it with the Gas unit figures for Northern and London regions and it's a similar difference.

The 12,000 column includes the standing charge. So minus the standing charge and then divide by 12,000.

athonjon

t0rt0ise said:

athonjon said:

double_dutchy said:

athonjon said:

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?

The tables that Ofgem publish don't include VAT. 

Can you specify exactly where you get a 1% discrepancy?

So when I compared the Southern region caps (direct debit) on the MSE page with the Ofgem tables (other payment method), MSEs are 5% higher for Electricity (standing charge and units) and for the Gas standing charge, which obviously accounts for VAT. But the Gas units are just shy of 1% lower on the MSE page. For Southern/Gas/Units Ofgem states £1,800.12 for 12,000 kWh. So 180012 / 12000 = 15.001p per kWh. MSE states 14.88p per kWh. I wondered if it was a one-off error, but i tried it with the Gas unit figures for Northern and London regions and it's a similar difference.

The 12,000 column includes the standing charge. So minus the standing charge and then divide by 12,000.

You're right - Makes sense now. Thanks!

superkoopauk

QrizB said:

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.

I don't think this is right.  My understanding is you take the two Ofgem points at 0 and 3100 and draw a line through them.  Then the suppliers tariff always needs to be under this line for any kWh value (the x axis) which wouldn't be the case with your proposal for any point past 3100 kWh usage.

QrizB

Your understanding is wrong.

superkoopauk

So QrizB let us take an example.  North West - Other Payment Method - Single-Rate Metering-Arrangement

Price cap from October at 0 kWh is £150.38, at 3100 kWh is £1,665.67.  You are saying if a supplier set their SVT standing charge at 0p per day for this region then they could price the unit rate @ 1665.67 * 100 / 3100 = 53.731ppkWh?  However if they set the standing charge @ £150.38 *100 / 365 = 41.2p a day then they could only price the unit rate @ (1665.67 - 150.38) * 100 / 3100 = 48.88ppkWh?

If so then you are saying suppliers have some freedom in tweaking the standing charge / unit rate relationship in which case the obvious question is why do all the suppliers always maximise the standing charge?

I thought the whole point of the Ofgem model was to separate the components that make up the wholesale and running costs and cap them independently?

QrizB

Yes.

See this rate card from Outfox The Market (complies with the current cap) as an example:

https://help.outfoxthemarket.co.uk/hc/en-gb/article_attachments/4405948977308/Fox_Standard_Elec.pdf

superkoopauk

See below from the standard licence conditions (gas).  This confirms that the level for any given consumption is solely determined by the Ofgem cap levels at 0 and average alone as is not related to the suppliers choice of standing charge.

Does this mean Outfox are not complaint....?

28AD.2 Unless a direction has been issued by the Authority pursuant to paragraph 28AD.31, in order to comply with paragraph 28AD.2, the licensee must ensure that for each of its Tariffs the aggregate Charges for Supply Activities applicable to any Relevant 28AD Customer at any consumption level (x kWh) in respect of a 28AD Charge Restriction Period do not exceed the Relevant Maximum Charge.

Determination of the Relevant Maximum Charge (d) For each Charge Restriction Period of length t months (denoted j), and for each of the 14 Charge Restriction Regions (denoted i), the Relevant Maximum Charge for a given level of consumption x shall be determined by reference to the Benchmark Maximum Charges applicable during a Charge Restriction Period at two Benchmark Annual Consumption Levels denoted below as nil and m, as follows: 𝑪𝒉𝒂𝒓𝒈𝒆𝑴𝒂𝒙(𝒙) = [𝑪𝒉𝒂𝒓𝒈𝒆𝑴𝒂𝒙𝒊,𝒋 (𝒏𝒊𝒍) × 𝒕 𝟏𝟐] + [ 𝑪𝒉𝒂𝒓𝒈𝒆𝑴𝒂𝒙𝒊,𝒋 (𝒎) − 𝑪𝒉𝒂𝒓𝒈𝒆𝑴𝒂𝒙𝒊,𝒋 (𝒏𝒊𝒍) 𝒎 × 𝒙] ChargeMax(m) and ChargeMax(nil) are defined as described in paragraph (e)