£2500 Price Cap Martin's view

TheBanker

spot1034 said:

I still like the idea of a fixed discount per unit which would be easy to implement, would preserve the value that people thought they'd secured with fixes and would also allow bills to be presented showing the full cost before the government discount was taken off, and this would bring home to consumers what the true cost of the energy was. So you'd have a 'full price' tariff based on Ofgem's calculation of the price cap, then a discount of a certain number of pence would be applied to each unit, and this could be done regardless of what tariff you were on.

In these circumstances Ofgem would still need to do the three monthly calculation on what the price cap should be.  Are they going to continue doing this anyway even though it won't apply to bills? I don't suppose we know.

A fixed discount per unit would also provide more options as the scheme comes to an end. At that point it will be important to avoid price shock if the market rates are still high. Options would include limiting the support to the first xx units per bill (a version of tiered pricing), or reducing the discount over a period of time, starting in the summer so people get used to higher prices before being hit with Winter bills. There could even be an option for subsidising Winter usage only, although this would be open to people who don't have smart meters fiddling their readings to take advantage.

It would also avoid stifling innovation - if an energy provider wanted to introduce a time of use tariff, they wouldn't be affected by the government cap - they would be able to apply the government discount to whatever unit prices they're offering. 

But as you say, consumers would see the true cost of their energy and would therefore still be incentivised to make cut backs in preparation for the end of government support. 

Politically I think this would go down well as everyone would get a regular reminder of the value of the government support.

wrf12345

Wonder what happens to the value of non-FIT solar, I guess it is not affected because the energy companies are still buying from the market... so solar ends up bringing in more than people are paying for their subsidised electric? That would be brilliant if you have solar pv!

Ultrasonic

spot1034 said:

If it becomes clear tomorrow that it will no longer be advantageous to be on a fix, I shall want to get off it the same day, or preferably sooner! I am overpaying at present and have no intention of letting this continue until the end of the month if it's no longer of any benefit to do so. (I'm with E.On Next so there's no exit fee to worry about) 

I am sorry for the suppliers as this mess is not of their making, but this is costing me about £10 extra a week over what I'd be paying on the SVT and I'll happily contribute to the overloading of their call centre rather than pay £35 or so extra to wait to be moved 'in bulk'.

I'd suggest you try to be realistic in terms of what many be possible or you're just setting yourself up for significant frustration.

Troytempest

I hope whatever the scheme is that it is simple to operate and simple to understand and as fraud proof as possible.

pochase

spot1034 said:

I still like the idea of a fixed discount per unit which would be easy to implement, would preserve the value that people thought they'd secured with fixes and would also allow bills to be presented showing the full cost before the government discount was taken off, and this would bring home to consumers what the true cost of the energy was. So you'd have a 'full price' tariff based on Ofgem's calculation of the price cap, then a discount of a certain number of pence would be applied to each unit, and this could be done regardless of what tariff you were on.

In these circumstances Ofgem would still need to do the three monthly calculation on what the price cap should be.  Are they going to continue doing this anyway even though it won't apply to bills? I don't suppose we know.

What makes you think Ofgem does not need to continue to calculate the cap? 

It is still required to know the difference between a frozen cap and the real cap to calculate what energy suppliers will need to borrow to finance the frozen cap.

spot1034

pochase said:

spot1034 said:

I still like the idea of a fixed discount per unit which would be easy to implement, would preserve the value that people thought they'd secured with fixes and would also allow bills to be presented showing the full cost before the government discount was taken off, and this would bring home to consumers what the true cost of the energy was. So you'd have a 'full price' tariff based on Ofgem's calculation of the price cap, then a discount of a certain number of pence would be applied to each unit, and this could be done regardless of what tariff you were on.

In these circumstances Ofgem would still need to do the three monthly calculation on what the price cap should be.  Are they going to continue doing this anyway even though it won't apply to bills? I don't suppose we know.

What makes you think Ofgem does not need to continue to calculate the cap? 

It is still required to know the difference between a frozen cap and the real cap to calculate what energy suppliers will need to borrow to finance the frozen cap.

Yes I guess so, that makes perfect sense. Although of-course in the longer run there will probably be a broader review of how the energy market works.

GrumpyTrucker_2

I'm a little disappointed that a rumoured "freeze" of £2500 is being reported in media as a good thing rather than what it is, and that's another rise of 25% over the current cap. The £400 rebate is to be applied, true, taking the real rise to around 6% over the 12 months but if it's still going be given over 6 months, once that rebate ends we will have a p/kWh 25% higher than now. And the prices we have now are higher than a lot of people can afford.

If Truss announces anything other than at least a freeze at current rates then she's starting off from a failed position. And of course, none of this will make a difference if the standing charge is still allowed to increase too.

Martin was right when talking to Currie, this is a catastrophe. The only difference is, it's not the potentially now scrapped 80% hike that is one, we are already in one and allowing another 25% rise and crowing that it's a freeze is unethical at best, outright lies at worst.

Astria

Mstty said:

Also will the freeze price per kWh only apply to the first £2500 worth of energy then it goes up to the price cap rate?

That would cause a lot of people to think and cut back on their energy usage to try and not exceed that figure, but I fear it will be difficult to implement and confuse a lot of people, causing mass phone calls and complaints when they see their electric go up from 30p/unit to 69p/unit.

Robgmun

"The big benefit, and problem, of this is (almost) everyone gets it."

Mr Lewis has been heroic and I think he's great, but It's phrases like this that get my goat, why shouldn't I benefit? I worked my behind off my whole life and Middle-income workers like me have been shafted lately and watching on the sidelines as those who are considered poor and on benefits get handout after handout after handout.

Without the price cap freeze my bills would have gone up from £97 a year ago to over £550 by next April, that's crippling to us and 10,000's of families across the country. Unless of course, the plan is to destroy the middle and make everyone poor and on benefits.

brewerdave

Robgmun said:

Without the price cap freeze my bills would have gone up from £97 a year ago to over £550 by next April, that's crippling to us and 10,000's of families across the country. Unless of course, the plan is to destroy the middle and make everyone poor and on benefits.

I was talking to someone the other day about the various approaches being suggested when the cap was due to go to ~ £3k ,and we both agreed that it all looked like another " Levelling Down" agenda.
Currently here in Wales ,there are consultations going on about revising Council Tax - our Marxist (sorry Labour/Plaid Cymru) Government are certainly looking at " Levelling down"