freezing the cap price

MattMattMattUK

deano2099 said:

It's interesting they want a commercial loan with the government backing it. Why can't the UK government just give them a loan on commercial terms and interest, given they can borrow cheaper than energy companies can? Then the energy companies can do the scheme they're suggesting.

It would probably get very messy in terms of state aid rules, plus potentially setting a precedent of the government lending businesses, it would also require additional legislation and processes. 

deano2099 said:

The government are backstopping it anyway. If the supplier goes bust, the government has to pay up. If they don't, a commercial company get the interest. Seems all risk no reward.

One benefit to the energy providers is that they know it would make it unlikely for the government to force them into insolvency. The major risk to the energy suppliers is that the government forces them to sell at lower than they are buying for again, the next major risk is bad debt. If the government has skin in the game it is less likely force them to sell below cost and will facilitate debt collection. 

wild666

fergie_ said:

The simple reality is that worldwide supply needs to outstrip demand for prices to fall. There are 2 ways for that to happen - either increase supply or reduce consumption.

The increasing prices are certainly going to kickstart the latter, but the hardest hit will be those who can cut back no further.

I think that come October we will see consumption of electric and gas fall and thus the average usage figures fall. The figures could be a little like from 2900 to 2850 kWh of electric and from 12,000 to 11,500 kWh of gas or as much as 2700 kWh of electric or more and by as much as 3000 kWh of gas down to 9000 kWh.

If this happens then suppliers will want to see the same amount of profit so will campaign for higher SC's and kWh charges to keep their profits high and this could be more than the 2% they currently make from each energy account.

GingerTim

wild666 said:

fergie_ said:

The simple reality is that worldwide supply needs to outstrip demand for prices to fall. There are 2 ways for that to happen - either increase supply or reduce consumption.

The increasing prices are certainly going to kickstart the latter, but the hardest hit will be those who can cut back no further.

I think that come October we will see consumption of electric and gas fall and thus the average usage figures fall. The figures could be a little like from 2900 to 2850 kWh of electric and from 12,000 to 11,500 kWh of gas or as much as 2700 kWh of electric or more and by as much as 3000 kWh of gas down to 9000 kWh.

If this happens then suppliers will want to see the same amount of profit so will campaign for higher SC's and kWh charges to keep their profits high and this could be more than the 2% they currently make from each energy account.

Except suppliers can't campaign for higher standing charges for profit reasons, as Ofgem is surprisingly transparent about what constitutes the charge and how and why it is spent. Suppliers don't profit from the SC.

brewerdave

wild666 said:

fergie_ said:

The simple reality is that worldwide supply needs to outstrip demand for prices to fall. There are 2 ways for that to happen - either increase supply or reduce consumption.

The increasing prices are certainly going to kickstart the latter, but the hardest hit will be those who can cut back no further.

I think that come October we will see consumption of electric and gas fall and thus the average usage figures fall. The figures could be a little like from 2900 to 2850 kWh of electric and from 12,000 to 11,500 kWh of gas or as much as 2700 kWh of electric or more and by as much as 3000 kWh of gas down to 9000 kWh.

If this happens then suppliers will want to see the same amount of profit so will campaign for higher SC's and kWh charges to keep their profits high and this could be more than the 2% they currently make from each energy account.

Unlikely to happen unless we have another VERY mild Winter - particularly with so many still WFH ; More likely to see a sizeable reduction on leccy usage tho' as things like tumble dryers get used only in extremis.

pochase

You are aware that many don't even make the 2% at the moment?

So how do you just claim that is what will happen? What facts is this based on?

The averages 12000/2900 are just used for the cap and have nothing to do with real average usage. They are just a figure that allows the cap amount to be compared from cap to cap.

When the energy bills I wouldn't be surprised if the 2% is reduced to for example 1.5% tomorrow.

MattMattMattUK

pochase said:

You are aware that many don't even make the 2% at the moment?

So how do you just claim that is what will happen? What facts is this based on?

The averages 12000/2900 are just used for the cap and have nothing to do with real average usage. They are just a figure that allows the cap amount to be compared from cap to cap.

When the energy bills I wouldn't be surprised if the 2% is reduced to for example 1.5% tomorrow.

I doubt in practice if they will even make that amount as they will not have been able to hedge all winter supply in the current markets, so the suppliers will likely make a loss over the the next cap reference period, and probably over the next two. 

Sea_Shell

wild666 said:

fergie_ said:

The simple reality is that worldwide supply needs to outstrip demand for prices to fall. There are 2 ways for that to happen - either increase supply or reduce consumption.

The increasing prices are certainly going to kickstart the latter, but the hardest hit will be those who can cut back no further.

I think that come October we will see consumption of electric and gas fall and thus the average usage figures fall. The figures could be a little like from 2900 to 2850 kWh of electric and from 12,000 to 11,500 kWh of gas or as much as 2700 kWh of electric or more and by as much as 3000 kWh of gas down to 9000 kWh.

If this happens then suppliers will want to see the same amount of profit so will campaign for higher SC's and kWh charges to keep their profits high and this could be more than the 2% they currently make from each energy account.

I think too many people are still in the dark about their bills usage and cost, that they are unlikely to take any positive steps at reduction until their January/February bill hits them in the face.   Especially if they are with a supplier who is a bit slow to review accounts and increase DD's, especially as accounts should be in credit this time of year.

OFGEM, are just about to "light the fuse", but it won't detonate.....yet.     Cue Mission Impossible theme!!!

double_dutchy

pochase said:

The averages 12000/2900 are just used for the cap and have nothing to do with real average usage. 

I did some digging around on the Ofgem website regarding "typical usage" and this is what I found out [I've simplified a little for ease of understanding and space saving].

Ofgem refer to TDCVs (Typical domestic consumption values). These are currently 12,000 kwh for gas and 2,900 kwh for electricity.

The value used is actually the median household usage (rounded to the nearest 100 for electricity and 500 for gas I assume).

Ofgem justify using the median rather than the mean (average) as follows:

"The distribution of consumption levels for the gas and electricity profiles is positively skewed – the mean is greater than the median. Since the small number of customers who use very high volumes of gas and electricity increase the mean, we use median consumption values to calculate the TDCVs. This provides a more representative measure of the consumption of a typical customer. As well as medium TDCVs we also provide low and high values based on the first and third quartiles."

...so that means if they used an average rather than a median the values would be higher.

In 2013 Ofgem committed to reviewing the TDCV figures every two years. If the usage changes significantly (meaning by more than 500 for gas or 100 for electricity) they would update the values. The most recent update in 2020 was actually suspended because it was unclear whether this was a genuine change or influenced by Covid lockdowns.

The usage trend has been downwards for some years, e.g. in 2015 the TDCV for gas was revised down from 13,500 to 12,500 and electricity down from 3,200 to 3,100.

If you want more detail see the following link for the 2015 TDCV details or search the Ofgem press releases for "TDCV".

https://www.ofgem.gov.uk/sites/default/files/docs/2015/03/tdcv_2015_open_letter_-_final_0.pdf

NB: The "median" is actually an average of the median values for the last two years!

[Deleted User]

They did update in 2020 - https://www.ofgem.gov.uk/publications/decision-typical-domestic-consumption-values-2020

"This letter sets out Ofgem’s decision to update the Typical Domestic Consumption Values (TDCVs) for gas and electricity and not to update the peak and off-peak split for Economy 7 meters.

This also includes the main reasons for our decisions, how we have taken into account responses to our October 2019 open letter and sets out what will happen next."

double_dutchy

Deleted_User said:

They did update in 2020 

Hello SparkyGrad,

Yes you are correct. That update was based on pre-Covid data. What I meant was that in the following year Ofgem proposed to postpone the next update to TDCV values due to the possible impact of COVID-19, see below:

https://www.ofgem.gov.uk/sites/default/files/docs/2021/04/tdcv_open_letter_2021_0.pdf