Is the OFGEM price cap algorithm broken?

degs88

Suppliers going bust because of rising prices.
Others making record profits.
The Energy Price Cap increasing apparently largely due to increasing wholesale energy prices.
Suppliers making record profits but immediately using an increased price cap as the basis of new increased charges.   
Somethings got to be wrong somewhere.
Is the price cap algorithm broken?

Alnat1

I don't think the suppliers are making huge profits, it's the energy producers.

Section62

degs88 said:

Suppliers going bust because of rising prices.
Others making record profits.
The Energy Price Cap increasing apparently largely due to increasing wholesale energy prices.
Suppliers making record profits but immediately using an increased price cap as the basis of new increased charges.   
Somethings got to be wrong somewhere.
Is the price cap algorithm broken?

Could it be the belief suppliers are making record profits?

Chrysalis

Ofgem has a mandate, that mandate is to maximise the retail suppliers on the market, as the ideology is if there is more of them then competition improves things for consumers.

Theresa modified it to allow for capped tariffs to be available to restrict the profits they can make from SVR customers, however the competition mandate is their priary focus.

This is why Ofgems decisions are pro suppliers, reduction from 6 to 3 months on cap reviews, decrease time to recover losses, change of compensation for customer switches, its all about making suppliers stay in the market.

So if you think Ofgem is just here to protect consumers, you are wrong.

On that reason the cap is working, doing what its intended.

Ofgem would need to be given a new mandate for their approach to change.  They dont regulate the energy producers.

LinW13

The concept of market competition keeping prices down does not work.
At the moment, Ofgem says "Charge this amount" and the suppliers say "Yes please!". 

Ofgem mandate has to change to favour consumers. Immediately.

At the moment, I really envy the French and their approach.

degs88

Thanks all for clarifying a few things for me.
Some confusion on my part it seems.

pochase

2.2% margin makes such a big difference....

The last non profit supplier failed, and is one of the reasons we are paying for the SOLR process now.

spot1034

LinW13 said:

The concept of market competition keeping prices down does not work.
At the moment, Ofgem says "Charge this amount" and the suppliers say "Yes please!". 

Ofgem mandate has to change to favour consumers. Immediately.

At the moment, I really envy the French and their approach.

They don't say 'Yes Please', they probably use somewhat colourful language to express their annoyance at being made to sell their product at a loss.

wittynamegoeshere

pochase said:

2.2% margin makes such a big difference....

The last non profit supplier failed, and is one of the reasons we are paying for the SOLR process now.

I suspect that the "non-profit" statement referred to the industry as a whole, not just the reselling dealers (suppliers) that we are all forced to buy from.

They add to everyone's bills, but they are not the reason that bills are so high right now.

mark_cycling00

^^ we can assume this is the case. If the "price cap" was profitable then suppliers would be fighting for new customers, instead they just offer a limited amount of profitable fixes when they can purchase futures contracts. 

Worth remembering what is happening to all the customers of the "NON-PROFIT" energy suppliers set up by local councils, Mayors etc. They are all paying the same rates as everyone else. And are refusing to take on new customers.

pochase

And as always the question where does the money come from to buy this companies so you can nationalise them?

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