Is the OFGEM price cap algorithm broken?

[Deleted User]

LinW13 said:

Ofgem mandate has to change to favour consumers. Immediately.

Arguably, that is what Ofgem did in October 2021. It looked in the rear view mirror, and it set prices for 6 months forward knowing that suppliers were going to lose money. The Government even claimed that it was saving consumers money. Look at how that played out. Suppliers went to the wall and the cost of these failures is now being added to all our energy bills. Profits: from recent accounts Ovo Energy made an operating loss of £121M, and even the mighty Octopus made only just over £11.50 profit per customer.

Look at how it is playing out in France. The French Government bought out the last 15.9% it didn’t hold in EDF for c.£8Bn. It set a cap (happy consumers) which has resulted in EDF making an operating loss. EDF now wants a further £7Bn to cover that loss to enable it to stay afloat.

Governments cannot change the supply and demand pricing mechanics of the World market. All they can do is support consumers in the way that they have; by reducing taxes; increasing benefits etc. There is no silver bullet.

PS Profit or non-profit makes no difference if the supplier is badly run with little business oversight from its backers. Ask the taxpayers of Bristol; Nottingham and Warrington.

MattMattMattUK

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.

You want to pay more income tax so that you can have slightly lower energy bills? The energy prices at the plug are being subsidised from general taxation in France. If you are prepared to pay higher taxes (as the French do) then you can have lower energy bills.

pochase

For those who don't pay taxes all reductions to energy cost are paid by others who pay increased taxes. 

[Deleted User]

pochase said:

For those who don't pay taxes all reductions to energy cost are paid by others who pay increased taxes. 

‘Politics dear boy: politics’.

 It would be bizarre if either of the candidates for PM put up taxes with 2 years to run to a General Election. Any money will have to be found from behind the sofa; or through extra borrowing. I suspect that the meetings today are, inter alia,  quietly discussing a price freeze with a loan coming from Government. The ‘downside’ is that this loan will be re-paid by consumers over a period of time. This has been mooted before.

Ultrasonic

One major question I have in relation to any sort of price freeze is how can this be done in a way to also benefit those who have signed up to fixed term tariffs recently (and decided to on the basis of expected price cap changes).

What_time_is_it

Ultrasonic said:

One major question I have in relation to any sort of price freeze is how can this be done in a way to also benefit those who have signed up to fixed term tariffs recently (and decided to on the basis of expected price cap changes).

That's an excellent question.

Bark01

Ultrasonic said:

One major question I have in relation to any sort of price freeze is how can this be done in a way to also benefit those who have signed up to fixed term tariffs recently (and decided to on the basis of expected price cap changes).

Pay your cancelation fee and move if you think its cheaper. 

Ultrasonic

Bark01 said:

Ultrasonic said:

One major question I have in relation to any sort of price freeze is how can this be done in a way to also benefit those who have signed up to fixed term tariffs recently (and decided to on the basis of expected price cap changes).

Pay your cancelation fee and move if you think its cheaper. 

I wasn't specifically referring to myself but two problems with this are the exit fees you're just dismissing and that people will have already been paying higher prices for longer.

There might also be a question of whether it's possible to exit a fix to transfer to the SVT with the same supplier?

Chrysalis

wittynamegoeshere said:

Don't worry, all the forum's resident PR agents for the energy industry and opportunist shareholders will assure us that everything's absolutely fine, just keep paying and stop asking awkward questions.

Taking an overview of our energy system as a whole, it's an utter joke and disgrace.  Between them, they're getting extremely rich at everyone's else's expense.

My reply wasnt that, I have big issues for the way we sell energy in this country, but Ofgem cap is working as it was intended, it wasnt intended to protect consumers from high market rates, but merely to cap the supplier profit on energy they resell.