Price cap, EPG and expensive fixed rate tariffs?

michaels

bristolleedsfan said:

Mstty said:

As I understand it (happy to be corrected)

Those on a fix will still have their prices reduced down to the notional £3000 price cap.

Screenshot from MSE news that I posted together with link to article states the opposite.

So those who stayed on a fix on the basis of the EPG are in for a rude shock....

jbuchanangb

I suppose all energy providers will do things differently, but E.ON dealt with people on fixed rates prior to EPG as follows. If the fixed rate was lower than the EPG rate, then the customer stayed on the fixed rate. If the fixed rate was above the EPG rate, by less than the max reduction allowed for an EPG reduction, they applied a discount to the fixed rate, reducing it to the EPG rate. If the the fixed rate was above the the EPG rate but by more than the max reduction allowed, then they switched the customer to the Standard Variable Rate, which was set at the EPG rate.

My case was the second of the three situations.

So nobody should be left on a fixed rate which would be higher than the OFGEM price cap rate effective from July. E.ON offered me a new fixed rate from 2 July, which I accepted, the alternative being to default to the Standard Variable Rate, which is as yet unpublished but likely to be the OFGEM price cap rate, as the EPG rate of £3,000pa is expected to be higher than the OFGEM price cap rate.

MWT

jbuchanangb said:

If the fixed rate was above the EPG rate, by less than the max reduction allowed for an EPG reduction, they applied a discount to the fixed rate, reducing it to the EPG rate.

This is the group that are at risk as the discount will be going away, not a problem for you as you've accepted a new fix from July, but there will be others who may be affected...

vic_sf49

Thanks to everyone for bringing this up.

Just pointing this out to a few friends and family, who I know are on fixes. Although I think they're on the ancient amazingly cheap fixes, but it's good to check. 

Scot_39

mmmmikey said:

Certainly an interesting point for discussion. The whole question of how the EPG should work with fixes got quite heated and emotional when we went into it with lots of insults flying about. Hopefully we can have the discussion about what happens as we move away from the EPG in a more civilised way. So far so good 😃

Putting aside the EPG for a moment, how does the Ofgem price cap work for fixes? If you fixed at 35p/kWh but the Ofgem price cap sets the maximum at 30p/kWh how is that handled. Does anyone know?

The Ofgem price caps only strictly apply to the suppliers standard variable tariffs - Ofgem actually use the phrase "default tariff".

I would say a fix at 35p stays at 35p if the cap goes from 35p to 30p.

Just as it would stay at 25p if cap went from 25 to 30p.

It's not a customer allways wins scenario - certainly not if there is an exit fee (there often wasn't to revert to SVT with some suppliers - but those frequently weren't the cheapest of fixes).

The 2 recent new fixes gaining posts here (Ovo and EOn (oops) Loyalty) - both have non trivial £75 per fuel exit fees. £150 cf c£2000 forecast DF cap.

Scot_39

michaels said:

Not sure if this has been flagged but some who took expensive fixes may have stayed on them because they were receiving the per unit discount from the EPG taking them to the EPG level.

What is happening to the EPG now the price cap will come back into play?   Is it being retained and if so will it still be at 2.5k or will it revert to 3k (50% above the likely new price cap)?

People on fixes may be in for a nasty shock as everyone else's bills fall but theirs go up.  A lot of the immediately pre-crisis fixes had high early termination fees (£150 per fuel) so it is not as simple as simply ditching the fix.

Thoughts?

Shouldn't this answer be the same as what happened in Apr - when the Ofgem cap dropped by a £1000 and the EPG discounts dropped to follow ?

You know from 31.8p to 16.6p electric and 6.4 to 2.2p for gas (all ex VAT)

As essentially - the EPG isn't disappearing - it's just the forecast July discount is zero. 

(It remains in place at £3000 - until Apr 2024 - and is also the payment method that govt is using to match prepay SC to DD etc - so will give suppliers the xp per day etc).

jbuchanangb

A year ago MSE was recommending people latched on to fixed tariffs ABOVE the OFGEM price cap, and above their supplier's SVR, on the grounds that energy prices were going to go through the roof, so a fixed tariff, even one above the OFGEM cap would be a sensible move. Last July that is exactly what I did. Then the government intervened with the EPG. I spent about £120 more on energy in the first 3 months which I was on the fixed tariff than I would have done on the SVR, and for the following 9 months I have had no benefit, because I have paid the same rates as everyone else. So I made a bad call. But it was what MSE was suggesting.

Mstty

jbuchanangb said:

A year ago MSE was recommending people latched on to fixed tariffs ABOVE the OFGEM price cap, and above their supplier's SVR, on the grounds that energy prices were going to go through the roof, so a fixed tariff, even one above the OFGEM cap would be a sensible move. Last July that is exactly what I did. Then the government intervened with the EPG. I spent about £120 more on energy in the first 3 months which I was on the fixed tariff than I would have done on the SVR, and for the following 9 months I have had no benefit, because I have paid the same rates as everyone else. So I made a bad call. But it was what MSE was suggesting.

This is where the 'e' for Expert needs dropping. Maybe changed to Emporium.

But as others have and will say it's just advice for you to weigh up like we all did

Raxiel

Mstty said:

jbuchanangb said:

A year ago MSE was recommending people latched on to fixed tariffs ABOVE the OFGEM price cap, and above their supplier's SVR, on the grounds that energy prices were going to go through the roof, so a fixed tariff, even one above the OFGEM cap would be a sensible move. Last July that is exactly what I did. Then the government intervened with the EPG. I spent about £120 more on energy in the first 3 months which I was on the fixed tariff than I would have done on the SVR, and for the following 9 months I have had no benefit, because I have paid the same rates as everyone else. So I made a bad call. But it was what MSE was suggesting.

This is where the 'e' for Expert needs dropping. Maybe changed to Emporium.

But as others have and will say it's just advice for you to weigh up like we all did

To be fair at the time, we had a rudderless country and the Tory party leadership circus. Neither candidate would commit to any kind of "socialist" help beyond the EBSS as they courted the hard right and Truss promised tax cuts as a solution.

Meanwhile everyone else, with reap problems, had to try and judge the least worst time to catch a falling knife.

I spent a few weeks in August & September on a pretty ugly fix before Octopus moved us to the SVT following the EPG announcement. That cost us a bit, but not as much as the PV system we got. That would have had a pretty short payback if all the dire predictions had come true but is now looking more modest (it was something we wanted anyway, just got it sooner).

MattMattMattUK

Raxiel said:

Mstty said:

jbuchanangb said:

A year ago MSE was recommending people latched on to fixed tariffs ABOVE the OFGEM price cap, and above their supplier's SVR, on the grounds that energy prices were going to go through the roof, so a fixed tariff, even one above the OFGEM cap would be a sensible move. Last July that is exactly what I did. Then the government intervened with the EPG. I spent about £120 more on energy in the first 3 months which I was on the fixed tariff than I would have done on the SVR, and for the following 9 months I have had no benefit, because I have paid the same rates as everyone else. So I made a bad call. But it was what MSE was suggesting.

This is where the 'e' for Expert needs dropping. Maybe changed to Emporium.

But as others have and will say it's just advice for you to weigh up like we all did

To be fair at the time, we had a rudderless country and the Tory party leadership circus. Neither candidate would commit to any kind of "socialist" help beyond the EBSS as they courted the hard right and Truss promised tax cuts as a solution.

The Covid handouts, the EBSS, the EPG, the £150 and the large handouts to those on benefits would generally be regarded as pretty socialist. Not that anyone is proposing any proper solutions though, the Conservatives seem to think lurching right is the answer to everything and Labour seems to be doing it's best to throw away a huge poll lead and trying to re-hash old battles rather than following models which work.

Raxiel said:

Meanwhile everyone else, with reap problems, had to try and judge the least worst time to catch a falling knife.

Life is often a combination of trying to work the least worst time to make some decision and the best time to take others, nothing new about that.

Raxiel said:

I spent a few weeks in August & September on a pretty ugly fix before Octopus moved us to the SVT following the EPG announcement. That cost us a bit, but not as much as the PV system we got. That would have had a pretty short payback if all the dire predictions had come true but is now looking more modest (it was something we wanted anyway, just got it sooner).

Based on current costs and the estimates going forward (£2k price cap) for the next few years the RoI on solar should be less than half what it was five years ago, for some, with the right usage and possibly a battery combined with E7 it could fall to under four years.