Opposition proposals to freeze the price cap - fair for people who have fixed?

Effician

pochase said:

You can add to that that the Ofgem "average" is not really the real average, it is higher.

Even so the cost is already almost £36 billion for 28.1 million households.


Reality will be more like over £40 billion. They have not mentioned where the additional money can be found, did they?

Would this topic now be more useful as it's own thread as i believe it requires more scrutiny before it gets lost in here

wittynamegoeshere

The boss of ecotricity was on something the other day.  He said that all that's needed is for the govt to cap the wholesale price of North Sea gas.  Just do this, and this reduced number feeds into the tariffs and the Ofgem cap, taking care of everything else.

As an outsider to the industry I can't see the flaw in this idea.  Other than stopping the likes of ShellProm and CentricaProm from taking oodles of extra cash from the entire population for doing no extra work, which may be seen as an issue if you have shares or receive "donations" of any kind from them.

Perhaps a fudge factor would be needed in the Ofgem cap to allow for more expensive imports, surely people who are paid massive salaries can work out this sort of detail.  Perhaps the cut-price UK gas would need to be fairly split between the suppliers somehow, otherwise the vertically integrated suppliers could cut out the smaller ones.  This is the sort of thing that Ofgem should be able to sort.

All of this would require a non-corrupt government that actually served the people, so is unlikely to happen.

Section62

wittynamegoeshere said:

The boss of ecotricity was on something the other day.  He said that all that's needed is for the govt to cap the wholesale price of North Sea gas.  Just do this, and this reduced number feeds into the tariffs and the Ofgem cap, taking care of everything else.

The UK isn't self-sufficient in gas.  Capping the wholesale price of North Sea gas would reduce the cost of energy a bit, but it doesn't solve the problem.

In fact it creates some new and potentially much larger problems.

wittynamegoeshere said:

As an outsider to the industry I can't see the flaw in this idea.  Other than stopping the likes of ShellProm and CentricaProm from taking oodles of extra cash from the entire population for doing no extra work, which may be seen as an issue if you have shares or receive "donations" of any kind from them.

As an outsider, you may not be aware that the government gets revenue from the gas (and oil) extracted from UK reserves.

The government also collects tax on the profits of companies involved in the energy supply chain, so each and every one of us living in the UK benefits from these "donations" (aka "tax") made by them.

One of the bigger issues is that if you both impose a 'windfall tax' and cap the price of the product these companies are investing their money to extract, sooner or later the companies will say "why are we bothering with this investment when we can make more money elsewhere?"

And if energy companies stop investing in the UK we will be in much deeper doo-doo than we are now.

Although I guess you're going to say the government should do the investment instead?

wittynamegoeshere

Ah yes, the old circular arguments that somehow we all get richer by paying more.  It all makes sense until you think about it.

Section62

wittynamegoeshere said:

Ah yes, the old circular arguments that somehow we all get richer by paying more.  It all makes sense until you think about it.

No.  More like, "You can only spend money once".

Or  "The Goose that Laid the Golden Eggs".

wittynamegoeshere

If a company is making £5bn and regulation means that this gets reduced to £1bn then they definitely do not have a stroppy sulk and close down in a tantrum.  They keep running, keep taking their £1bn profit and may invest more in the hope of increasing it.

Business is logical.  If they can make a profit they will.  If they are making a small fortune instead of an utterly massive one then they don't care, they continue.

Business only exits if it makes a loss, not because it's having a hissy fit as they're making a profit but made even more previously.

The idea that we should be terrified that business is going to have a tantrum if we stand up to it is just silly.

Section62

wittynamegoeshere said:

If a company is making £5bn and regulation means that this gets reduced to £1bn then they definitely do not have a stroppy sulk and close down in a tantrum.  They keep running, keep taking their £1bn profit and may invest more in the hope of increasing it.

Business is logical.  If they can make a profit they will.  If they are making a small fortune instead of an utterly massive one then they don't care, they continue.

Business only exits if it makes a loss, not because it's having a hissy fit as they're making a profit but made even more previously.

The idea that we should be terrified that business is going to have a tantrum if we stand up to it is just silly.

Business is about risk.  The investors make decisions on the basis of how much risk their investment is exposed to, and what reward they can get in return for that risk.  This is the bread and butter of the 'Savings and investments' board on this forum.

Nothing to do with "having a hissy fit".  Just simple economics.

Plenty of businesses have exited a market or business whilst still making a profit.  Either because they can see hard times in the future, or that the return on investment is not good enough, or that the business causes reputational harm or carries too much uncertainty.

Reputational harm is already an issue for the fossil fuel industry (see your "ShellProm" and "CentricaProm" comments above).  Add in poor rates of return (from capped prices), and uncertainty (of when the government will do its next cash-grab), and the attractiveness of the UK energy sector as a place to invest doesn't look too good.

Nobody is "terrified that business is going to have a tantrum".  But aware and informed people will understand that the UK (and Europe) needs massive investment in energy infrastructure and there is only so much change down the back of government's sofa to pay for it all.

Making the UK a bad place to invest is one of the worst things we could do right now.

Chrysalis

sienew said:

MattMattMattUK said:

littleteapot said:

That certainly cheered me up too .

Spend hundreds of millions to nationalise the consumer arms of these companies (aka middle-men) whilst their parent companies (producers) can still charge the now nationalised middle-man international market rates and continue to make huge profits for their shareholders.

In my view, once the CEGB was disbanded and the generating units divvied up between various private companies there was little or no hope of renationalising energy production in this country.

France can much more easily renationalise energy production and supply as their privatised energy industry was still largely a monopoly (EDF).

I certainly would not do it in the way that the Greens propose, but in the UK it would be possible fairly easily. The National Grid would need to be purchased at the market rate, but that would be relatively uncontroversial and certainly workable. Existing generation would be problematic, but the easiest way to manage that would be for the government to fund and build 50-100 nuclear power plants under state ownership. Older commercial plants would be decommissioned over time, those with longer life expectancies would probably be happy to sell back to the state at a reasonable price. Both for climate and energy security reasons I favour a large scale nuclear building program, but it would require investment and medium-long term planning, so no current political party is going to implement it. 

This proposal is fairly reasonable and workable (unlike most people who seem to just say "NATIONALISE ENERGY" without a real practical plan).

The main issue being Nuclear is still controversial. People seem to now like the idea until it's suggested that a plant would be anywhere near their house which means it's almost political suicide, especially building so many.

Funny I said the same thing (state ownership of energy production) and mattmattmattuk opposed it, and a few others but you didnt respond to me (who proposed it before him), forums are a funny place,  it seems its not the idea, but who says the idea.

sienew

Chrysalis said:

sienew said:

MattMattMattUK said:

littleteapot said:

That certainly cheered me up too .

Spend hundreds of millions to nationalise the consumer arms of these companies (aka middle-men) whilst their parent companies (producers) can still charge the now nationalised middle-man international market rates and continue to make huge profits for their shareholders.

In my view, once the CEGB was disbanded and the generating units divvied up between various private companies there was little or no hope of renationalising energy production in this country.

France can much more easily renationalise energy production and supply as their privatised energy industry was still largely a monopoly (EDF).

I certainly would not do it in the way that the Greens propose, but in the UK it would be possible fairly easily. The National Grid would need to be purchased at the market rate, but that would be relatively uncontroversial and certainly workable. Existing generation would be problematic, but the easiest way to manage that would be for the government to fund and build 50-100 nuclear power plants under state ownership. Older commercial plants would be decommissioned over time, those with longer life expectancies would probably be happy to sell back to the state at a reasonable price. Both for climate and energy security reasons I favour a large scale nuclear building program, but it would require investment and medium-long term planning, so no current political party is going to implement it. 

This proposal is fairly reasonable and workable (unlike most people who seem to just say "NATIONALISE ENERGY" without a real practical plan).

The main issue being Nuclear is still controversial. People seem to now like the idea until it's suggested that a plant would be anywhere near their house which means it's almost political suicide, especially building so many.

Funny I said the same thing (state ownership of energy production) and mattmattmattuk opposed it, and a few others but you didnt respond to me (who proposed it before him), forums are a funny place,  it seems its not the idea, but who says the idea.

I didn't read/respond to every point in this 250 post thread.

Generally comments here have suggested nationalising existing energy production which isn't really something that's viable. Funding and building new production is something that could be done for relatively small cost, has a ROI and puts us in a better position as a country long term.

Mstty

Let's not forget the energy suppliers are pushing for the 2 year price cap freeze and they are not financially inept.

If those that have fixed have to cancel their fix contracts and pay exit fees to cancel them and move to the SVR/T this has the following benefits to those energy suppliers

1) pocket the exit fee

2) the hedged energy they bought to supply the fixes is now sold at the current price cap rate and they will rake it in through the long term loans.

I wonder why they are pushing so hard for this🤔

https://www.theguardian.com/business/2022/aug/15/centrica-and-octopus-back-plan-to-freeze-uk-energy-bills-for-two-years