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MSE News: Energy price cap set to change every three months

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MSE_Andrew
MSE_Andrew Posts: 173 MSE Staff
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The energy price cap, which governs what most pay for their energy, is set to change every three months from October under plans announced by Ofgem today. The regulator also revealed it will make the 'market stabilisation charge' harsher. This is a charge levied on firms acquiring new customers with cheaper fixed deals, which will likely make it harder for suppliers to undercut the price cap.

Read the full story here: 
'Energy price cap set to change every three months and cheaper switchers' deals effectively kiboshed under new plans unveiled by Ofgem'

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  • Devonian_Rodders
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    The proposed changes to the price cap review will bring further pressures on those with limited income, and pensioners alike.
    The review proposed for July, will probably indicate a lower average, since energy will not be in demand at that time.
    As such. when pensions are calculated in September for the following year, the overall inflation rate will be lower, hence a lower settlement.   Over the years, this system has enabled Governments to reduce expenditure on pensions, whilst knowing that from October, inflation rises.  Not just coincidence !!
  • nameless_sir_ned
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    The Chief Executive of Ofgem, Jonathan Brearley, states that, "Our top priority is to protect customers..."
    If that is the case why is he putting the energy companies first? He should cancel any further price cap increases instead of pandering to the energy companies and their race for more "untaxed" profits. The price cap should then be reviewed annually with the specific aim of reducing the cap.
  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
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    edited 18 May 2022 at 9:34AM
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    Ofgem wants to ensure that there is protection for energy suppliers: the recent flood of failures has undoubtedly caused Ofgem a lot of reputational damage. I agree with ML that Ofgem will drive competition out of the market as a result of these proposed changes. That said, MoneySupermarket needs, in fairness, to declare an interest. Less competition will result in fewer tariff offers (or more matching tariffs); less switching and a consequent business loss for price comparison websites. I would argue that the latter is a good thing. By now there should be a single switching site paid for by energy suppliers.

    Moving to three month price caps is probably not a bad thing but I accept that the transition will throw up some unforeseen consequences: a bit like moving from weekly to monthly pay. Fewer suppliers would have gone bust last year had Ofgem brought in an emergency cap. That said, procrastination did allow the Government to ‘claim’ that it was protecting consumers whilst knowing that ultimately this protection would have to be paid for in the form of higher energy costs (eg; the massive increase in standing charges).
  • wild666
    wild666 Posts: 2,126 Forumite
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    The proposed changes to the price cap review will bring further pressures on those with limited income, and pensioners alike.
    The review proposed for July, will probably indicate a lower average, since energy will not be in demand at that time.
    As such. when pensions are calculated in September for the following year, the overall inflation rate will be lower, hence a lower settlement.   Over the years, this system has enabled Governments to reduce expenditure on pensions, whilst knowing that from October, inflation rises.  Not just coincidence !!
    That's what I've been telling people for decades. September the inflation rate falls, whether or not the true inflation rate in September, then increases in October back to what the August rate was or higher.
    Someone please tell me what money is
  • facade
    facade Posts: 7,066 Forumite
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    As such. when pensions are calculated in September for the following year, the overall inflation rate will be lower, hence a lower settlement.   Over the years, this system has enabled Governments to reduce expenditure on pensions, whilst knowing that from October, inflation rises.  Not just coincidence !!
    I thought Our Masters had fixed this by conveniently leaving everything that goes up out of the CPI, ( as well as using a geometric mean which biases towards the smaller numbers) and using CPI as the basis for setting pensions rather than that old fashioned useless RPI (which strangely "They" use as a a basis for increasing taxes that we pay them...)

    I want to go back to The Olden Days, when every single thing that I can think of was better.....

    (except air quality and Medical Science ;))
  • QrizB
    QrizB Posts: 13,822 Forumite
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    wild666 said:
    The proposed changes to the price cap review will bring further pressures on those with limited income, and pensioners alike.
    The review proposed for July, will probably indicate a lower average, since energy will not be in demand at that time.
    As such. when pensions are calculated in September for the following year, the overall inflation rate will be lower, hence a lower settlement.   Over the years, this system has enabled Governments to reduce expenditure on pensions, whilst knowing that from October, inflation rises.  Not just coincidence !!
    That's what I've been telling people for decades.
    And for all those decades you've been wrong. You can't manipulate a continuous series by choosing your sampling point in the way you describe.

    N. Hampshire, he/him. Octopus Go elec & Tracker gas / Shell BB / Lyca mobi. Ripple Kirk Hill member.
    2.72kWp PV facing SSW installed Jan 2012. 11 x 247w panels, 3.6kw inverter. 30MWh generated, long-term average 2.6 Os.
    Taking a break, hope to be back eventually.
    Ofgem cap table, Ofgem cap explainer. Economy 7 cap explainer. Gas vs E7 vs peak elec heating costs.
  • condoghost
    condoghost Posts: 91 Forumite
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    edited 19 May 2022 at 7:48AM
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    Secrecy of Ofgem Consultation

    Wow, Ofgem sure do know how to work the racket of keeping their 'consultation' below the radar!

    Their 'Consultation on changes to market stabilisation charge' was published with almost no fanfare at all on their website on 31 March 2022 https://www.ofgem.gov.uk/publications/consultation-changes-market-stabilisation-charge
    You have to read the body of its content to be informed 'we would consult for at least two weeks' whereas the on or before date set at 14 April 2022 was exactly two weeks!

    Their statement 'We welcome views from all stakeholders with an interest in the domestic retail energy supply market. We particularly welcome responses from energy suppliers, consumer groups and charities.' conveniently, perhaps intentionally, left out 'the public' - not seen as being 'welcome', neither 'generally' nor 'particularly'!
    The 'outcome' is published here https://www.ofgem.gov.uk/publications/decision-changes-market-stabilisation-charge

    The 'Price cap - Statutory consultation on changes to the wholesale methodology' published 16 May 2022 can be found here https://www.ofgem.gov.uk/publications/price-cap-statutory-consultation-changes-wholesale-methodology
    The closing date for response including 'the public' is 14 June 2022 so, please do 'respond' - Respond name Dan Norton Respond email pricecapchanges@ofgem.gov.uk

    Ofgem, whilst supposedly 'batting on the side of consumers', is now hand-cuffing us to our current supplier which, if it happens to be the likes of Scottish Power, has already purchased supplies for the Winter 2022/20223 at March/April 2022 peak prices.

    When 'wholesale prices' tumble, which they eventually will, any supplier buying at the lower price is faced with an 85% fee on their consumer tariff as a reward back to these inept suppliers such as Scottish Power which is not even a UK owned company!

    When we check-out these 'suppliers' it is amazing how so few are UK owned. I'm no 'nationalist' in real terms but if we are going to be ripped-off in this manner by such inept business acumen then at least place our monies into the pockets of UK-owned business >:)



  • Sea_Shell
    Sea_Shell Posts: 9,524 Forumite
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    from that document... https://www.ofgem.gov.uk/publications/decision-changes-market-stabilisation-charge

    Which the last section basically states:

    Cost to consumers

    6.26. As explained above, we consider that the interests of consumers are best served by pricing at the efficient level, given the adverse consequences for consumers of a regulatory framework that does not allow efficient costs to be recovered if prices were to fall suddenly and customers switched away from well-hedged suppliers. (As noted above, where efficient costs are high, it may be appropriate to take separate steps to protect vulnerable consumers.)

    6.27. However, the necessary consequence of changing the MSC parameters in the manner we have decided is that active consumers will receive reduced savings for a period after a fall in wholesale prices, while the existing hedge positions work through (pricing for inactive consumers on the price cap is unaffected). This is in effect a transfer of resources from active customers to suppliers to enable efficient costs of energy supply to be covered. 
    How's it going, AKA, Nutwatch? - 12 month spends to date = 2.38% of current retirement "pot" (as at end April 2024)
  • [Deleted User]
    [Deleted User] Posts: 0 Forumite
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    edited 19 May 2022 at 9:30AM
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    The proposed changes to the price cap review will bring further pressures on those with limited income, and pensioners alike.
    The review proposed for July, will probably indicate a lower average, since energy will not be in demand at that time.
    As such. when pensions are calculated in September for the following year, the overall inflation rate will be lower, hence a lower settlement.   Over the years, this system has enabled Governments to reduce expenditure on pensions, whilst knowing that from October, inflation rises.  Not just coincidence !!
    You may be correct in what you say but there is another problem that is going to affect pensioners reliant (partial or totally) on occupational pensions (as I am).  When my pension increases are calculated after the September inflation figures the maximum many, on such pensions, shall be receiving will be a 5% increase irrespective of what CPI and RPI are doing in September 2022.  None of the forecasts I see at the moment suggest it will be below 5% in September.  True the state pension should be based on the triple lock but we all know what happened for the 2022/23 increase.  I calculate that my expected expenditure for energy for the current tax year will end up being circa £1800+ (assuming another 30% rise in October - a mouth-watering 13% of my disposal income).  We are managing but have had to prioritise in other areas of spending to avoid going into long-term savings - we are fortunate to still have a safety net that should hopefully remain largely intact until my state pension kicks in in 2024.    


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