Octopus Tracker Tariff

Spoonie_Turtle

SJMALBA said:

Spoonie_Turtle said:

macman said:

I enquired by Twitter today and got a response within the hour: I'm not an existing customer.
I don't get the economics of this tariff for Octopus, as the cap is only a little above SVT, so unless wholesale prices fall I cannot see how they can profit on it, and there is no exit fee. But maybe they know something we don't?

The idea originally was so that people could use more energy on cheaper days and less on more expensive days, back when we had cheap energy.  The profit was in the calculation they do converting wholesale price to the unit rate they charge.  WAS, before prices rose.  At the moment wholesale electricty prices are back down below the 55p cap but I don't know if the difference is enough to cover the rest of their costs.  Gas right now is above the 16p cap.  They are honouring their self-imposed caps and entirely possibly making losses right now (certainly are when wholesale prices are above what they're charging).
Here is what the uncapped unit rates would be:
https://energy.guylipman.com/sm/electracker
https://energy.guylipman.com/sm/gastracker

The unit rate caps are retail, not wholesale, so the electricity unit rate is still well above the July 2022 v1 cap of 55p/kWh (and will be again tomorrow - for me, it would be 72.5p/kWh).

Thanks for the clarification, yes, I clearly didn't word that very well! 

The point I had in mind (and failed badly to communicate) was that when the wholesale price is above what they're able to sell for then they are making a loss on the energy itself straight away, even before any other costs.  Whereas when the wholesale price is slightly below what they're charging at 55p, evidently they're not making a profit but are recouping a few pence per unit towards their other costs.  Probably still nowhere near enough to break even though, at this point.

So for instance today the wholesale rate is 44.6, and they're charging 55p.  That 55p covers the wholesale cost of the energy and the 10+p difference goes towards their costs, but as it's well below what the retail price should be (63.7p for my region), they're evidently not making any profit and quite possibly still losing money on supply costs.

[Deleted User]

Spoonie_Turtle said:

PSJMALBA said:

Spoonie_Turtle said:

macman said:

I enquired by Twitter today and got a response within the hour: I'm not an existing customer.
I don't get the economics of this tariff for Octopus, as the cap is only a little above SVT, so unless wholesale prices fall I cannot see how they can profit on it, and there is no exit fee. But maybe they know something we don't?

The idea originally was so that people could use more energy on cheaper days and less on more expensive days, back when we had cheap energy.  The profit was in the calculation they do converting wholesale price to the unit rate they charge.  WAS, before prices rose.  At the moment wholesale electricty prices are back down below the 55p cap but I don't know if the difference is enough to cover the rest of their costs.  Gas right now is above the 16p cap.  They are honouring their self-imposed caps and entirely possibly making losses right now (certainly are when wholesale prices are above what they're charging).
Here is what the uncapped unit rates would be:
https://energy.guylipman.com/sm/electracker
https://energy.guylipman.com/sm/gastracker

The unit rate caps are retail, not wholesale, so the electricity unit rate is still well above the July 2022 v1 cap of 55p/kWh (and will be again tomorrow - for me, it would be 72.5p/kWh).

Thanks for the clarification, yes, I clearly didn't word that very well! 

The point I had in mind (and failed badly to communicate) was that when the wholesale price is above what they're able to sell for then they are making a loss on the energy itself straight away, even before any other costs.  Whereas when the wholesale price is slightly below what they're charging at 55p, evidently they're not making a profit but are recouping a few pence per unit towards their other costs.  Probably still nowhere near enough to break even though, at this point.

So for instance today the wholesale rate is 44.6, and they're charging 55p.  That 55p covers the wholesale cost of the energy and the 10+p difference goes towards their costs, but as it's well below what the retail price should be (63.7p for my region), they're evidently not making any profit and quite possibly still losing money on supply costs.

It’s not that simple. The wholesale cost is not the only element of the unit cost. This link shows regional daily Tracker prices:

https://energy.guylipman.com/sm/electracker

If the unit cost is less than the Cap, then that is what is charged (see 21st August).

Spoonie_Turtle

[Deleted User] said:

Spoonie_Turtle said:

PSJMALBA said:

Spoonie_Turtle said:

macman said:

I enquired by Twitter today and got a response within the hour: I'm not an existing customer.
I don't get the economics of this tariff for Octopus, as the cap is only a little above SVT, so unless wholesale prices fall I cannot see how they can profit on it, and there is no exit fee. But maybe they know something we don't?

The idea originally was so that people could use more energy on cheaper days and less on more expensive days, back when we had cheap energy.  The profit was in the calculation they do converting wholesale price to the unit rate they charge.  WAS, before prices rose.  At the moment wholesale electricty prices are back down below the 55p cap but I don't know if the difference is enough to cover the rest of their costs.  Gas right now is above the 16p cap.  They are honouring their self-imposed caps and entirely possibly making losses right now (certainly are when wholesale prices are above what they're charging).
Here is what the uncapped unit rates would be:
https://energy.guylipman.com/sm/electracker
https://energy.guylipman.com/sm/gastracker

The unit rate caps are retail, not wholesale, so the electricity unit rate is still well above the July 2022 v1 cap of 55p/kWh (and will be again tomorrow - for me, it would be 72.5p/kWh).

Thanks for the clarification, yes, I clearly didn't word that very well! 

The point I had in mind (and failed badly to communicate) was that when the wholesale price is above what they're able to sell for then they are making a loss on the energy itself straight away, even before any other costs.  Whereas when the wholesale price is slightly below what they're charging at 55p, evidently they're not making a profit but are recouping a few pence per unit towards their other costs.  Probably still nowhere near enough to break even though, at this point.

So for instance today the wholesale rate is 44.6, and they're charging 55p.  That 55p covers the wholesale cost of the energy and the 10+p difference goes towards their costs, but as it's well below what the retail price should be (63.7p for my region), they're evidently not making any profit and quite possibly still losing money on supply costs.

It’s not that simple. The wholesale cost is not the only element of the unit cost. This link shows regional daily Tracker prices:

https://energy.guylipman.com/sm/electracker

That's exactly what I mean and am trying and evidently failing to say.  That's why I referred to 'other costs/supply costs' separate from profit.  

The original point responding to the question about the economics of it was that it wasn't supposed to be this way.  The formula for working out retail unit rates was to cover all their costs and give them some profit; it was a tariff for customers to benefit from cheaper days and using less on more expensive days, and as far as I understand it tended to average out as cheaper than the SVT to boot.  That's now not working with consistently high energy prices, and honouring their own cap means they are likely not covering all their costs and evidently aren't making a profit. 

I suppose one slight positive for Octopus is they are probably losing less money on supplying energy to people on Tracker than they are on the SVT right now.  And for customers it's essentially functioning as a fix for a year at rates almost certainly below what the SVT will be in January and beyond.

macman

I have just switched to Tracker for gas only (I have a reasonable BG fix in place for leccy). I calculated that the extra vs staying on BG SVT would be about £1 per day. So, to 1/1/23, about £120. 
Then, when the Jan price cap takes effect, SVT only has to rise to about 15% to take it above capped Tracker, and I expect it to be nearer 40% if predictions are correct. So, I think that £120 will be money well spent, even if only as an insurance policy.
What really puzzles me is why they've offered this tariff to 1/9/23 without exit fees though, which makes it a real no-brainer. I keep wondering if I've missed something?