Energy price cap to rise to £2,800 in October: OFGEM Chief Exec

fergie_

DuranGirl said:

Big ouch. But Martin's email this week suggested my supplier's latest fix offer might be worth taking up, so I've done the sums and, in light of the Ofgem forecast, I've gone for it as it comes in at £700 lower than that (thanks Martin). Still makes my heart pound at the thought of where money's going to come from.

Have you factored in the extra amount you will be paying now for 5-6 months - compared to staying on the SVR?

Its definitely not an easy decision to make, but at least it gives you surety.

MWT

superkoopauk said:

QrizB said:

GingerTim said:

https://www.bbc.co.uk/news/business-61562657

The boss of the UK's energy regulator has warned that the energy price cap is expected to rise to around £2,800 in October.

I don't think anyone else has posted the link to where Ofgem have published the letter:

https://www.ofgem.gov.uk/publications/letter-jonathan-brearley-chancellor-and-secretary-state-business-energy-and-industrial-strategy-default-tariff-cap

It makes interesting reading.

Thanks for posting the link QrizB - interesting indeed!

Does appendix A give you any clues as to why the Ofgem prediction is so different from yours?  Looks like the majority of the increase is on wholesale costs - perhaps Ofgem are predicting a spike in wholesale costs in the next two months?

It is a bit of a reach to call it 'good news' but one thing you can see in the Appendix A numbers is that the standing charges are not likely to be going up proportionately this time, the majority of the increase will be on the kWh charge, so lower usage customers will not be hit as hard this time...

fergie_

Ultrasonic said:

fergie_ said:

Not when the ‘fixes’ already price in the expected future increases.

The market needs to be reset in a way that allows competition, but safe guards against company failures.

Well, there is some competition in the fixed tariff market. It's the SVTs where there is basically none.

Certainly not on Martin's 'Cheap' Energy Club. I'm offered nothing for gas and electric is more than the expected jump.

I appreciate some existing customers have been offered some decent deals, but they are no open to all - due to customer profiles and the amount it costs to 'poach' a customer.

Ultrasonic

fergie_ said:

Ultrasonic said:

fergie_ said:

Not when the ‘fixes’ already price in the expected future increases.

The market needs to be reset in a way that allows competition, but safe guards against company failures.

Well, there is some competition in the fixed tariff market. It's the SVTs where there is basically none.

Certainly not on Martin's 'Cheap' Energy Club. I'm offered nothing for gas and electric is more than the expected jump.

I appreciate some existing customers have been offered some decent deals, but they are no open to all - due to customer profiles and the amount it costs to 'poach' a customer.

Well, for me there ARE multiple options on CEC so I think this may vary with where people live.

When I checked a couple of days ago Scottish Power were giving me quotes for various fixed tariffs too. I didn't check other suppliers.

So for me at least there definitely is fixed rate competition.

Undisputedtruth

MattMattMattUK said:

Outlawing standing charges would be idiotic as it would mean that the network costs would need to be recouped elsewhere, so additional unit rates, it would also mean that medium and higher users would be subsiding lower users which makes no sense either. 

Outlawing standing charges will give the consumer the incentive to become more energy efficient while standing charge act as a disincentive.

The reality of the matter, network charges aren't really transparent as they vary according to regions. Some regions are more inefficient than others. Why are we paying for an inefficient network is beyond belief.

agentcain

MattMattMattUK said:

wrf12345 said:

Ofgem keeps saying it is looking after consumers but in reality it is making sure the energy companies can recover all the money they have lost in the past year or so, so even if the costs of electric and gas do not go up they will still let them raise rates. If consumers cut back on usage then even higher standing charges will be allowed to force low users to pay for previous losses.

Ofgem is looking after the consumers, otherwise there would be no cap. It has also been demonstrated that it is not in the consumer's interest for the suppliers to go bust, 1)because the majority of the costs of balances need to be recovered via the standing charge. The energy providers do not make a profit on the standing charge, it is there to cover fixed costs (network, base provision, SoLR, social etc.). 2)The higher standing charge is not used to force anyone to pay for previous losses, it is used to cover the cost of the new provider giving the SoLR customers their credit balances. It also does not penalise low users, it applies network costs to everyone, which is the fair way to do it, if people do not want to pay network costs then they need to not use the network.

wrf12345 said:

The energy companies want the government to give consumers free money to pay for this so that consumers do not realise the extent to which they are being ripped off, whereas the government should be encouraging low use by outlawing standing charges (which would give everyone a £250-360 boost) and perhaps using the bloated green taxes to reimburse the companies (and scaling that back once energy prices go down again).

The energy companies do not want a situation where customers are in debt, or defaulting on bills, that is expensive and difficult to deal with. The government has multiple ways to tackle that, or not, the choice is political. 3)It is likely that none of the energy providers will make a profit this financial year, they might make a small one next. 4)This crisis demonstrates exactly why we need a huge investment in non-fossil fuel energy, something which the green levy does. Outlawing standing charges would be idiotic as it would mean that the network costs would need to be recouped elsewhere, so additional unit rates, it would also mean that medium and higher users would be subsiding lower users which makes no sense either. 

wrf12345 said:

The industry is trying to panic the govn into giving consumers free money, no-one is standing up for the poor old consumer.

There is no such thing as free money, the "industry" is not trying to panic anyone, the Ofgem statement was only made because they were summoned to the HoC committee and told to make a statement that included their best guess of the October rise. 5)I am sure the industry does not want to be forced to sell below cost, no business would, but many energy suppliers accept that profit will be negligible for another year or two, they are aiming for survival. 

1) That would not have happened if suppliers weren't allowed access to the entirety of the customer's credit. Even better if that credit was staying in the customer's own bank account. No wait time to reclaim credit, no lost credit, no standing charge increase. Ofgem allowed this practice so ofgem is to blame.
You could argue that customers of failed suppliers are expected to be covered by more expensive tarrifs simply because the SOLR didn't factor in extra customers. But then again that price increase should be part of the KWh pricing, not the standing charge.

2) That's exactly what happened. Upon filing for bankruptcy, losses on the credits occur and the increase happens to cover those losses. 

3) Agreed and expected. They've been scoring profits all these years, they can take a loss.

4) No it doesn't. You're advocating an incomplete solution. The real solution is diversifying energy production with the option to immediately ramp up production using other fuels when the need arises. The UK should have more gas storage. The UK should not use so much gas for electricity production. The price of MWh should not be that greatly affected by the most expensive fuel that currently happens to be gas. The UK should not rely on a single source of gas import. All of this is the UK government's fault and its regulatory body, Ofgem.

5) The industry no, but utilities should not be run for profit to begin with, so this industry shouldn't even exist in its current form. Again, government's fault. Really doubtful if energy suppliers are aiming for survival when you're referring to the Big 6 suppliers. 

Ultrasonic

Undisputedtruth said:

MattMattMattUK said:

Outlawing standing charges would be idiotic as it would mean that the network costs would need to be recouped elsewhere, so additional unit rates, it would also mean that medium and higher users would be subsiding lower users which makes no sense either. 

Outlawing standing charges will give the consumer the incentive to become more energy efficient while standing charge act as a disincentive.

That's not true. Even with the current standing charges there is a very clear incentive for customers to use less energy - both financial and environmental. Yes if the standing charges were lower and the unit prices were higher you could argue that than financial incentives would be slightly greater, but they're far from inconsequential currently.

I think outlawing standing charges would make zero sense, both for the actual fixed costs to suppliers, and for the likes of green levies and covering costs of SOLR protection.

Effician

Undisputedtruth said:

MattMattMattUK said:

Outlawing standing charges would be idiotic as it would mean that the network costs would need to be recouped elsewhere, so additional unit rates, it would also mean that medium and higher users would be subsiding lower users which makes no sense either. 

Outlawing standing charges will give the consumer the incentive to become more energy efficient while standing charge act as a disincentive.

As a very low user i would use extra electric if there was no standing charge,  i've actually become more efficient with my energy because of it.

Ultrasonic

Effician said:

Undisputedtruth said:

MattMattMattUK said:

Outlawing standing charges would be idiotic as it would mean that the network costs would need to be recouped elsewhere, so additional unit rates, it would also mean that medium and higher users would be subsiding lower users which makes no sense either. 

Outlawing standing charges will give the consumer the incentive to become more energy efficient while standing charge act as a disincentive.

As a very low user i would use extra electric if there was no standing charge,  i've actually become more efficient with my energy because of it.

Sorry, I don't follow. Why would you use extra electricity if there was no standing charge?

Effician

Ultrasonic said:

Effician said:

Undisputedtruth said:

MattMattMattUK said:

Outlawing standing charges would be idiotic as it would mean that the network costs would need to be recouped elsewhere, so additional unit rates, it would also mean that medium and higher users would be subsiding lower users which makes no sense either. 

Outlawing standing charges will give the consumer the incentive to become more energy efficient while standing charge act as a disincentive.

As a very low user i would use extra electric if there was no standing charge,  i've actually become more efficient with my energy because of it.

Sorry, I don't follow. Why would you use extra electricity if there was no standing charge?

I work to a budget , not a kwh limit.  at the current svr  the aim is for £36/ month ( electric only) , whilst this is not too restricting an extra bit of electric would allow some extra options.

Edited to add, we do use a log burner for free heating .