Ofgem Price Cap

Terencemichael

Ofgem post the calculation for their energy price cap on their website.

I can appeciate why the wholesale costs of gas and electricity have risen but the supporting Ofgem data also show the following increases in other elements of their latest cap:

Network costs allowance increased by 38%

EBIT allowance increased by 52%

Direct Debit uplift allowance increased by 33%

Headroom allowance increased by 57%

Any info on where to find any explanations to support these increased allowances in the cap would be welcome?

QrizB

Welcome to the forum.

Terencemichael said:

Any info on where to find any explanations to support these increased allowances in the cap would be welcome?

It's all there on Ofgem's website.

For the current (ie. April) cap, see this Ofgem publication:
https://www.ofgem.gov.uk/publications/default-tariff-cap-level-1-april-2022-30-september-2022

Terencemichael

Thanks but, I was trying to understand the rationale or justification for allowing such large increases to pricing elements which are separate from the wholesale cost of gas and electricity.  The increases I highlighted have nothing to do with the war in Ukraine and are UK specific.

GingerTim

https://forums.moneysavingexpert.com/discussion/6339555/mse-update-why-has-the-standing-charge-for-electricity-nearly-doubled#latest

pochase

They are not allowing increases, they are adjusting to cater for necessary increases.

For example there were storms that have damaged the infrastructure and the repair costs need to be covered.

The link @Qrizb will give this type information, it is just not something that is short and easy to read.

Chrysalis

pochase said:

They are not allowing increases, they are adjusting to cater for necessary increases.

For example there were storms that have damaged the infrastructure and the repair costs need to be covered.

The link @Qrizb will give this type information, it is just not something that is short and easy to read.

Is there a reason the existing 2.8 billion in revenue for the infrastructure couldnt pay for those repairs?

Terencemichael

Thanks GingerTim.  Pretty thin explanation from Ofgem, especially as policy costs have reduced by 3.8% in the most recent cap.  They fail to explain or even mention the EBIT, Direct Debit or Headroom uplifts.

QrizB

Terencemichael said:

Thanks but, I was trying to understand the rationale or justification for allowing such large increases to pricing elements which are separate from the wholesale cost of gas and electricity.

If you look at the spreadsheets, you can see exactly which pricing elements have changed, and by how much.

Also, while the % figures might be large, the sums involved are generally quite small.

• EBIT allowance increased by 52% - from £23 to £35
  
• Direct Debit uplift allowance increased by 33% - from £12 to £16
  
• Headroom allowance increased by 57% - from £14 to £22.