Energy price cap to be reviewed at 3 months "to help consumer."

diystarter7

There was talk about this two weeks ago and it made me very angry.

How can the review at 3 months help the consumer as per Ofgem statements I think it was.

A price cap is a cap on prices and to help the consumer there is nothing there to stop the suppliers from reducing their
prices before the next review.

What stops the energy companies from raising their prices to the max is the review date. Therefore, more reviews mean higher energy prices for all of us.

The price of gas moves are a lot because of recent world events but it has been lower a lot lower even recently, so why do suppliers not lower the prices and then raise them to the max levels. Simple answer, they don't make as much money.

So it is a NO to more reviews per year as that gives suppliers more profits.

Look at petrol/diesel prices, as soon as the price of oil goes up, on the same day prices rise at the pumps. However, oil prices have been a lot lower in recent months and did we really see lower prices at price pumps, you know the answer.

Martin of MSE said something similar regarding energy price reviews that it does not help the consumer.

Should the government lead Ofgem etc to bang on about more reviews - demand an answer from them why the cap prices by the suppliers remain at the top end and why there is no competition between the suppliers

(The recent give away of our own tax money is more fuel to the fire of inflation)

victor2

A 3 monthly review doesn't help consumers one little bit. As you said @diystarter7, suppliers can drop their prices well below the cap if wholesale costs should fall, just to remain competitive. Suppliers need to have the resources to buy ahead at least 6 months to survive a capped selling price of that duration. Smaller suppliers than that should not be given a license by Ofgem - that might help consumers.

pochase

You got one point wrong here. Yes a supplier can decrease the rates whenever they want or not do so, but if the cap goes down they have to reduce their prices.

So yes, if the prices come down a three month cap review will help the consumer. And yes, if the prices increase and the cap rises it will not benefit the consumer, but who wants to see even more increased standing charges because more suppliers go bust. 

QrizB

diystarter7 said:

How can the review at 3 months help the consumer as per Ofgem statements I think it was.

A three-month review helps consumers if prices are falling; you must remember all the complaints in previous years about suppliers not passing on the benefits of price reductions? Here's an example from 2011 and here's another from 2015.

Of course a three-month review helps suppliers if prices are rising.

Astria

Think of whats already happened, if we already had the 3 month review in place, we wouldn't have been in the situation where energy companies were going bust because they had to sell power cheaper than they could buy it for, and we wouldn't be in the situation now where we are paying for the collapse of these companies through the standing charge.

If the wholesale price of energy comes down energy companies can reduce their prices but they are not required to. If the price cap comes down they are forced to.

So yes, we should of had this a year ago at the bare minimum. Yes, we would have been paying higher prices sooner, but the standing charge wouldn't be what it is now.

victor2

QrizB said:

diystarter7 said:

How can the review at 3 months help the consumer as per Ofgem statements I think it was.

A three-month review helps consumers if prices are falling; you must remember all the complaints in previous years about suppliers not passing on the benefits of price reductions? Here's an example from 2011 and here's another from 2015.

Of course a three-month review helps suppliers if prices are rising.

But isn't that what made so many of us shop around and go for attractive fixes?

Of course it isn't so simple for those who either don't understand their utility bills or don't have the ability to shop around - ie. not tech savvy.Then you get those who believed fixed rates were "all you can eat" type deals.

The energy market is/was a mess and Ofgem did little to help the consumer IMHO.

brewerdave

Astria said:

Think of whats already happened, if we already had the 3 month review in place, we wouldn't have been in the situation where energy companies were going bust because they had to sell power cheaper than they could buy it for, and we wouldn't be in the situation now where we are paying for the collapse of these companies through the standing charge.

Most of the Companies went bust because they were offering long fixes without adequate hedging -not sure that the cap came into it, certainly not before last Autumn.

Astria

brewerdave said:

Astria said:

Think of whats already happened, if we already had the 3 month review in place, we wouldn't have been in the situation where energy companies were going bust because they had to sell power cheaper than they could buy it for, and we wouldn't be in the situation now where we are paying for the collapse of these companies through the standing charge.

Most of the Companies went bust because they were offering long fixes without adequate hedging -not sure that the cap came into it, certainly not before last Autumn.

The cap came into it because even the variable tariff was cheaper than what some companies were paying for energy, and they weren't allowed to just "offload" customers, so they were just making a loss until they went bust.

brewerdave

Astria said:

brewerdave said:

Astria said:

Think of whats already happened, if we already had the 3 month review in place, we wouldn't have been in the situation where energy companies were going bust because they had to sell power cheaper than they could buy it for, and we wouldn't be in the situation now where we are paying for the collapse of these companies through the standing charge.

Most of the Companies went bust because they were offering long fixes without adequate hedging -not sure that the cap came into it, certainly not before last Autumn.

The cap came into it because even the variable tariff was cheaper than what some companies were paying for energy, and they weren't allowed to just "offload" customers, so they were just making a loss until they went bust.

I think some Companies did withdraw from supply without actually going bust prior to last year tho'. Better Energy springs to mind.?

diystarter7

pochase said:

You got one point wrong here. Yes a supplier can decrease the rates whenever they want or not do so, but if the cap goes down they have to reduce their prices.

So yes, if the prices come down a three month cap review will help the consumer. And yes, if the prices increase and the cap rises it will not benefit the consumer, but who wants to see even more increased standing charges because more suppliers go bust. 

You really believe that.. I guess you have more faith in the competition between the supplies than I have.

agentcain

Astria said:

brewerdave said:

Astria said:

Think of whats already happened, if we already had the 3 month review in place, we wouldn't have been in the situation where energy companies were going bust because they had to sell power cheaper than they could buy it for, and we wouldn't be in the situation now where we are paying for the collapse of these companies through the standing charge.

Most of the Companies went bust because they were offering long fixes without adequate hedging -not sure that the cap came into it, certainly not before last Autumn.

The cap came into it because even the variable tariff was cheaper than what some companies were paying for energy, and they weren't allowed to just "offload" customers, so they were just making a loss until they went bust.

Not 100% convinced on this.
Most of these companies, if not all, went bust during September-October time, when most customers had a healthy amount of credit with them as a result of the despicable practice of default direct debit, before the increased consumption of winter. 
They had plenty of funds to absorb price hikes, especially if they were properly managed companies (which in hindsight they weren't). This resulted in them essentially stealing those credits, which all consumers are called to recoup via increased standing charges.
Even if they offloaded customers, they would miss both their consumption and their credit, so it would be only beneficial for them if they were hedging energy to an amount less than than their clientele required, which they hadn't as otherwise they wouldn't go bust.

I agree with the OP, the 3-month review as it stands will not benefit the customer. What would benefit the customer is measures that render the current cartel ineffective, so that energy suppliers actually compete by lowering prices before the annual price cap review. We also need an more detailed breakdown of the price cap calculations and their association with actual unit rates per region, not an imaginary typical household consumption.