Martin Lewis: Energy price freeze rumours - what it means for you, will it work?

MSE_Eesha

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Martin Lewis: Energy price freeze rumours - what it means for you, will it work?

Please click 'post reply' to discuss below.

sd8974

Is this a £2,500 fixed cap, or still a per unit cap, which equates to £2,500 for typical usage - do we "know"?

As someone who lives alone and conserves energy where I can, I currently pay c£100/month or £1,200/year. It would seem unfair to me if a fixed price cap is set at £2,500 (or £2,100 with the £400 deduction), as I would effectively get the full increase in prices - perhaps even more so, if I am charged more to subsidise those who are capped and due to higher wholesale prices.

_msemember

The proposal is bonkers. This is a commodity problem - not a price problem. Gas comes from a variety of regions, each of which has a cost associated with it. In constraining supply, Russia has meant that the global market has to produce more commodity or switch consumption to alternative fuels - meaning price goes up. As these markets operate on marginal pricing, the price set by the wholesale market is the cost of the most expensive unit of energy. There is an alternative. We can collectively (globally, as it's a global market) reduce demand by the amount of Russian supply - equilibrium will result. Imposing a price freeze does not disincentivise consumption from those who can afford to pay these prices, the net result is more demand and more commodity scarcity - it exacerbates the problem. We need a collective effort to reduce consumption - encourage the general population to wait as long as they can to turn on their heating, turn down thermostats and add layers. #delay_turndown_layerup. Everyone will gain from collective action of all and wholesale prices will fall.

sienew

sd8974 said:

Is this a £2,500 fixed cap, or still a per unit cap, which equates to £2,500 for typical usage - do we "know"?

As someone who lives alone and conserves energy where I can, I currently pay c£100/month or £1,200/year. It would seem unfair to me if a fixed price cap is set at £2,500 (or £2,100 with the £400 deduction), as I would effectively get the full increase in prices - perhaps even more so, if I am charged more to subsidise those who are capped and due to higher wholesale prices.

There are no circumstances where they would do a "fixed cap" for all you can eat-energy. The £2,500 would be based on average usage. If you use more, you pay more. If you use less, it'll be cheaper.

Somehow this will have to be repaid though and depending on how that is done it could be quite negative for low users.

pineapple

The price cap figure is just a guide - its the average household bill subjct to usage and variations. As you say, at £1,200 pa, you are a low user and paying less than the current average price cap of  £1,971. I'm an even lower user than you (£80 per month). A hike in the price cap only means that we pay proportionately more - ie its not that we are facing a hike to £2,500 (- £400). It's not ideal but it's a darn sight better than £3,549. Those who fixed recently and who are already paying more than the £3,549 October average, are in a more difficult situation - their position remains to be clarified. 

NannaH

Has some clever MSE’r worked out the kwh rate for gas/electric should the £2500 average price cap freeze come to pass?  

Given that I’ve recently fixed at 57p elec/14p gas,  I will be mightily annoyed if British gas have a financial penalty for dropping back onto svr. 

ariarnia

NannaH said:

Has some clever MSE’r worked out the kwh rate for gas/electric should the £2500 average price cap freeze come to pass?  

Given that I’ve recently fixed at 57p elec/14p gas,  I will be mightily annoyed if British gas have a financial penalty for dropping back onto svr. 

i asked that and a clever person on the energy board ( @[Deleted User] )posted this (assuming standing charges stay the same as they didn't change much between the april and october caps and before the 400 rebate)

Deleted_User said:

Depends how they cap electricity and gas differently.

If you assume 1250 for each fuel, then minus standing charges you end up with about 1150 for gas and 1075 for electricity.

That makes a unit rate of 1250/12000 for gas and 1075/3100 for electricity.

Or roughly 10.5p per unit gas and 34.7p per unit electricity.

NannaH

That would bring my monthly average useage down to £100 for electric and £70 for gas + standing charge/vat. The £400 rebate would bring it down further.
   A damn sight better than the £270 I’m currently paying. 

RuthMarianna

We started a 3 year fixed tariff before the price cap was increased and it will end in Spring 2024. We are therefore already protected from price increases until then. I am concerned that having acted to protect our household budget from increases and keeping our energy costs affordable we will be penalised later by paying much higher prices as though we had received help. Obviously when our price cap ends we will be subject to whatever prices are then but hopefully by then they will not be as bad as feared. Also it is so unfair for people who currently are not energy customers but who become one later to also effectively repay a loan they never received.

One-Eye

If the cap for a typical user is set at £2500, and the £400 grant remains to make the effective cap £2100, then it would be a mighty relief, but what happens in April 2023 when the £400 runs out. Will the cap go up to £2500 and be partly "hidden" by the approach of lower energy usage in summer?

withaspritz

I fixed for two years with Eon in Feb 2022 just a above the April 22 price cap level.

I guess I will not benefit from this but still as a taxpayer suffer the consequences later for paying back the debt