Energy price cap freeze on a fixed tariff

jak22

Around 3p more for gas - say 10p if your current April capped variable is 7p - and 5p more for electric - so 35p if its currently 30p in your region - works out at around 25% more than the current cap - is about the limit for a fix to be worth keeping if they go for £2500 typical.

There's not many fixes this year that low and those will have been paying the higher amount for many months so unless something special is announced its not a good result for those taking a fix to try to cover the cap rises without needing £100bn loans

Mstty

MWT said:

Chrysalis said:

MWT said:

Deleted_User said:

Chrysalis said:

Deleted_User said:

Zaul22 said:

Sorry if this has already been answered somewhere else in this massive thread, but is Truss expected to cap the unit rates just like Ofgem, or cap the total bill so for people paying £1200 ish on the 28p rate it would still be a massive increase?

Cap the unit rates to make the 'average user' cost £2500.  To something around 11p for gas and 35p for electricity if my maths was correct.

Its a just under 27% increase, so gas should be nearer to 9p.

That's not how the cap works, so I don't believe you.

Best number I could give now would be 9.72p gas, 34.19 electric, as a national average including VAT.

That assumes the standing charges remain as predicted for the October cap, which was a very small rise over the current cap.

Yeah 11p does seem too high actually, Your figures seem likely to be closer.  I under estimated but I dont think it would be to degree 2p unit on gas.

I adjusted the numbers to account for the 2900/3100kWh shift used in most of the press reports rather than just using the Ofgem spreadsheet, so if the £2500 is also on the basis of 2900kWh electric/12,000kWh gas then I get the following as a national average figure, inc. VAT:

10p gas / 35.3p electric.

I've got the same. Let's see how this all pans out👍

gt94sss2

The_Green_Hornet said:

littleteapot said:

GasPants said:

Reading suggestions that the cap will be frozen at £2500 (2900kWh elect & 12000 kWh gas) representing a 30% increase. The £400 `grant` will then reduce the cost to just 10% above the current level.

I've been watching with interest as the fiasco continues to unfold. I haven't checked, but I'm guessing that national debt will be close to or equal to GDP by the time this game comes to an end. Doesn't it tend to end badly when debt is this high?

As for prices, we are electricity only on EDF's April 2024v2 fix with rates as follows: 20p night, 41p day, 38p SC. EDF's current SVR rates are 16p, 35p and 38p respectively. Based on our consumption I calculated this to be approximately 23% higher than the April 2022 SVR.

If the unit rates for the 'double-capped October 2022 SVR' turn out to be not much less than this then I guess I'll probably stay on the fixed rate in case the government makes another U-turn before this fix expires in April 2024. U-turns seem to be the only thing modern governments do consistently....

Japan has a Debt-to-GDP ratio of approximately 240%. They seem to be doing ok.

Japan's debt is largely held domestically - that's not the case with most economies including the UK.

savers_united

Anyone thought that the £400 payment may only be paid to those on the SVT, with the freeze the logical choice is for everyone on a higher rate fix to move to the SVT (especially if fees are waived) , the only ones likely not to move are those already on a cheap fix, so in theory are not in need of the extra £400 of support that was being offered when cap was expected to hit £2800. I would have thought this would be easy to apply as it's via the provider anyone not on the SVT does not get it applied. 

Ultrasonic

savers_united said:

Anyone thought that the £400 payment may only be paid to those on the SVT, with the freeze the logical choice is for everyone on a higher rate fix to move to the SVT (especially if fees are waived) , the only ones likely not to move are those already on a cheap fix, so in theory are not in need of the extra £400 of support that was being offered when cap was expected to hit £2800. I would have thought this would be easy to apply as it's via the provider anyone not on the SVT does not get it applied. 

Anyone's decision to stay on a fix or not will also depend on how long the fix is for and how long anyone judges an artificial price freeze may hold for.

You do make a fair point about the £400 being predicated on a £2800 cap though.

deano2099

sienew said:

deano2099 said:

sienew said:

deano2099 said:

I guess for me the fundamental question is that, if you were on a fix, and so were going to be getting significantly cheaper energy over the next six months than half the population, did you feel that was fair?
If so, how can it be not be fair if the positions are reversed and now you're paying more than the other group?
It seems people were fine with there being significant differences in what people were paying, as long as they were in the group paying less.

I don't think the argument that "I couldn't have possibly foreseen the government doing this" is valid as there are people on here who absolutely did predict that. Not me, but people have called it. 

Pretty much anyone could get a fix and the goalposts weren't moved by govt intervention so yes, it's fair.

And it was hard to anyone to really predict this, it wasn't long ago that this proposal was first put forward and when it was both candidates specifically rejected it.

I'm saying this as someone who has a fix starting October 1st 2022 that is roughly at the October price cap that has no exit fees. I will be better off with this intervention but I don't really like this proposal  as it's essentially a massive buy now, pay later scheme.

Anyone could get a fix (well not me, I bought a house six weeks ago but that's not relevant), but not everyone could get a fix. The energy companies couldn't have hedged enough to offer everyone a fix. If everyone was on a fix, they'd all be bankrupt (and then I guess, no-one would be on a fix, so that'd even out!).
So there were always going to be winners and losers. 
And I've a list of things as long as my arm that the government "ruled out" in the past 5 years that then happened. It's a running joke that if the government say something definitely won't happen, you should assume it will!

There were fixes available 6 weeks ago that were predicted to be better than the next 12 months costs. I know pretty well about that period as I was looking at a fix at the time, I signed up for a fix around the October rate after that but have no exit fees so is no issue.

You don't understand how hedging works, they would have been able to provide anyone who wanted a fix and it would have little effect on the market.

I'll be honest, I don't. I asked about this a few days ago and what I posted was the answer I got. Perhaps you can help me out then. If there were fixes available on the open market six weeks ago (it's possible I missed them, had a lot on) that were better than the predicted prices why did the energy companies not just buy all their energy at that price? As in, if it were possible for the entire country to be on those fixes, and the certainty that they'd be a better deal was so high, why were the energy companies not all in on that? Then we would have avoided this whole thing? 
I'll admit I'd assumed it was because hedging basically worked like a bet where someone has to cover it on the other end, and so there was only so much ability to do that available. But if it was unlimited then that changes my understanding massively.

sienew

deano2099 said:

sienew said:

deano2099 said:

sienew said:

deano2099 said:

I guess for me the fundamental question is that, if you were on a fix, and so were going to be getting significantly cheaper energy over the next six months than half the population, did you feel that was fair?
If so, how can it be not be fair if the positions are reversed and now you're paying more than the other group?
It seems people were fine with there being significant differences in what people were paying, as long as they were in the group paying less.

I don't think the argument that "I couldn't have possibly foreseen the government doing this" is valid as there are people on here who absolutely did predict that. Not me, but people have called it. 

Pretty much anyone could get a fix and the goalposts weren't moved by govt intervention so yes, it's fair.

And it was hard to anyone to really predict this, it wasn't long ago that this proposal was first put forward and when it was both candidates specifically rejected it.

I'm saying this as someone who has a fix starting October 1st 2022 that is roughly at the October price cap that has no exit fees. I will be better off with this intervention but I don't really like this proposal  as it's essentially a massive buy now, pay later scheme.

Anyone could get a fix (well not me, I bought a house six weeks ago but that's not relevant), but not everyone could get a fix. The energy companies couldn't have hedged enough to offer everyone a fix. If everyone was on a fix, they'd all be bankrupt (and then I guess, no-one would be on a fix, so that'd even out!).
So there were always going to be winners and losers. 
And I've a list of things as long as my arm that the government "ruled out" in the past 5 years that then happened. It's a running joke that if the government say something definitely won't happen, you should assume it will!

There were fixes available 6 weeks ago that were predicted to be better than the next 12 months costs. I know pretty well about that period as I was looking at a fix at the time, I signed up for a fix around the October rate after that but have no exit fees so is no issue.

You don't understand how hedging works, they would have been able to provide anyone who wanted a fix and it would have little effect on the market.

I'll be honest, I don't. I asked about this a few days ago and what I posted was the answer I got. Perhaps you can help me out then. If there were fixes available on the open market six weeks ago (it's possible I missed them, had a lot on) that were better than the predicted prices why did the energy companies not just buy all their energy at that price? As in, if it were possible for the entire country to be on those fixes, and the certainty that they'd be a better deal was so high, why were the energy companies not all in on that? Then we would have avoided this whole thing? 
I'll admit I'd assumed it was because hedging basically worked like a bet where someone has to cover it on the other end, and so there was only so much ability to do that available. But if it was unlimited then that changes my understanding massively.

The deals when I fixed were roughly at the October cap so would have been worth it with the rises expected over the following 12 months, especially as the Jan rise was pretty much a sure thing at that point.

Why didn't the energy companies buy all the energy they could 6 months ago when the price was far cheaper? Or 12 months ago? Or even 2 years ago?

One reason is they don't have the financing. Another is that they your supplier doesn't want to commit to buying £3k of energy for tens of thousands of people over the next year only for prices to fall in 6-9 months and then for people to leave en-masse leaving them with a commitment to buy expensive energy that nobody wants to buy. The energy suppliers (not producers) often have terrible cash flow issues as they are just a low profit middleman.

It's also worth noting that energy companies usually make a fairly fixed percentage of your energy bills (around 1-2%) so they don't actually have much advantage selling you a cheap fix when you will pay the SVT and have limited options for moving elsewhere. They probably make more money selling you energy on the SVT (1% of £5k in Jan) than selling you a fix  6 weeks ago (1% of £2.5k).

The hedging market is a massive tradable global market. It's not just a couple of suppliers contacting producers to buy energy cheap like some people believe.

Another point is that the fixes have generally been very roughly at the next expected cap... fixes in March were roughly at the April cap, fixes in August were at the October cap an now fixes are roughly at the Jan cap. Most of the time they weren't really seen as being "cheap" at the time, it's just that almost every week the price predictions rise and rise making the deal seem better all the time. At the time the energy companies were pretty much just selling at what they thought was a market rate.

The reason that deals are pulled - often quickly - isn't because they can only give the deal to a small number of people in general. The reason the deals are pulled is because they might offer a fix at £3,000 which might be a "fair" price today but in a few days the predictions for the next 12 months might rise which means the price to hedge rises so they have to quickly pull the fix and replace it with the new market price. It also usually works pretty similar when prices go down due to competition but that hasn't been the case for the past 12 months as wholesale prices have almost constantly risen and competition is almost non existent as 85% of people are on the SVT, so many suppliers went bankrupt and have been often been advised not to switch.

It's also worth remembering that energy companies with decent funding (like Shell) can hedge but are under no obligation to sell the energy at that price. They could have hedged your energy use a few months ago for £2,500 and sell it to you this winter for £5k. This isn't that common with suppliers though as many that don't have a producer backing them (like Shell and British Gas do) are actually not very profitable at all, certainly not with good cashflow and that is also why so many suppliers went bankrupt while those who had the backing to hedge have thrived.

deano2099

I guess that's what I'm getting at: hedging is a massive global market, I understand that but don't understand the intricacies of it, but would there be capacity in that market for suppliers to have hedged supplies for 100% of UK households. And would they have had the financing?
The whole "well, anyone could have a taken a fix" argument sounds like it could be "well, anyone can use the food bank if they're really struggling" argument. It falls over as soon as a sizeable proportion of people actually do it. And the system works because some do it and some don't (allowing energy companies to spread their risk) which inevitably creates winners and losers. 

sienew

deano2099 said:

I guess that's what I'm getting at: hedging is a massive global market, I understand that but don't understand the intricacies of it, but would there be capacity in that market for suppliers to have hedged supplies for 100% of UK households. And would they have had the financing?
The whole "well, anyone could have a taken a fix" argument sounds like it could be "well, anyone can use the food bank if they're really struggling" argument. It falls over as soon as a sizeable proportion of people actually do it. And the system works because some do it and some don't (allowing energy companies to spread their risk) which inevitably creates winners and losers. 

Many wouldn't have the financing for 100% of people to fix, although if a large number of people wanted to fix I'm sure they could have got government support to finance such a package. But there wasn't demand, most people didn't want to fix.

michaels

tpeppers said:

michaels said:

I love the way people are being delighted to be bribed with their own money.  Any reduction will be paid for either through higher bills later or higher taxes.

As a broad generalisation, I think it's fair to say that those who use the most energy (i.e. subsidised energy that we'll all need to pay back via taxes) will themselves also pay the most taxes (as they are likely to be higher earners). So generally, as a whole, it is quite fair.

I suspect it is actually progressive overall, tax paid increases faster than income and income rises faster than energy use.  However the extra borrowing will likely result in higher interest rates and weaker GBP so the overall impact on individuals is pretty hard to assess.

I preferred the old days where the Tories stood for fiscal rectitude and sound money, the incoming lot seem to have more magic money trees than a Jeremy Corbyn wet dream....