Ofgem incompetence?

dunstonh

I think the E7 pricing is working quite well at the moment.  Obviously prices are generally higher but the difference in the ratios between suppliers indicates that you can still shop around for what is right for you. The best supplier for a 60/40 split will be different to someone with an 80/20 split (or other).

Some people have found that their total pricing has gone down because of pricing that favours night use.  Others may find it has gone up and should be considering a different supplier.

70sbudgie

I received the following from Octopus at the bottom of an email titled "Energy Prices from January":

Ps. If you’re wondering why Economy 7 rates are rising disproportionately…

The Government’s Energy Price Guarantee is actually a discount to the energy prices set by Ofgem’s Energy Price Cap — it’s designed to limit the prices a customer pays, regardless of what future wholesale costs do.

So if you used the same amount of energy as a “typical” household, the discounted rates would add up to an annual bill of £2,500, regardless of the cost of energy in your area. Use less, your bills are lower. Use more, your bills are higher.

To maintain steady(ish) prices, the amount of the Government’s Energy Price Guarantee discount needs to change when the prices set by Ofgem’s Energy Price Cap change (which is every 3 months).

While the average unit rate across Britain will stay the same in January, there are some (mostly minor) regional variations in electricity prices, just due to the differing costs of supplying energy to each region.

However — and this is where things get bonkers — the Economy 7 discount for the Energy Price Guarantee is the same as the single rate discount (which is then split between day and night rates).

On the other hand, Ofgem’s Energy Price Cap has a different calculation for Economy 7 rates, which takes into account that Economy 7 homes are more likely to heat their homes and hot water with electricity (thereby using more electricity over Winter) and that electricity prices are incredibly high at the moment.

In January, the Ofgem Energy Price Cap for Economy 7 is increasing 37%, but the cap for standard rates — from which the Government’s Energy Price Guarantee discount is calculated — is only increasing by 30%.

It’s the difference between these two that is driving Economy 7 costs up from January.

Edited to add that the bold type is Octopus'.

On the topic of why electricity prices differ in different parts of the country, it is due to geography. In the north of England, there are lightly populated areas tens of km apart. This means that for the physics of transmitting electricity to work, lots of long overhead circuits are required. In the London area, the issue is the opposite - high density populations in a small area, so much larger circuits are required for shorter distances. Overhead and underground circuits have different maintenance costs per km and if you then factor in the different distances, there is a significant cost difference to just keep the existing equipment operating. 

Then you need to take into account the cost of the tranmission network and the fact that the vast majority of electricity (in the current market) is generated in the north half of the island whereas the vast majority of demand is in the south eastern third of the island. Electricity generated in Scotland and used in London has to be transmitted through hundreds of km of infrastructure. Electricty generated in the new North Sea off shore wind farms and used in Hull has far fewer km of infrastructure to be transmitted through. 

If electricity was charged on a per km from generation, it would become obvious that consumers living in the northern parts of the UK are heavily subsidising those in the southern parts.