Something's not right

Scot_39

Jominjam126 said:

Thanks for that QrizB but as I used the same wholesale pricing information to look at the prices I got in 2021 then I would have thought the gap remains the same? So okay, perhaps the 6p per kWh I see on the BBC is actually 7p but then surely the 1.75p I see in 2021 was more like 2p? Do you get where I'm coming from? My main issue is the Cash Profit the energy company, in this case Octopus, are making looks to me to have quadrupled. Yet Ofgem claim that the companies are only allowed to make circa 1.9% profit.....

Something's still not right!

Think your missing the simple fact that the wholesale cost is effectively at the gas terminal or power station.

It is not the final price to your supplier.

National grid and the new gas network owners need to be  paid to maintain anc expand network.

So you need to add distribution and policy costs etc. As per the edf pie charts.

And then their are Octopus's own costs - wages, it, billing etc.

Now the actual cap rate is based on assumptions about some of those costs - so a more efficient organisation can make slightly more margin.

Which is perhaps why Octopus give c4% discount on svt duel fuel standing charge - and didnt pass on prepayment tariff rises in Jan etc  And can subsidise / run at a loss other tariffs like tracker (I believe they have stated it does run at a loss in past)

Then from the difference - total revenue - total costs (internal and external across all customers and tariffs)  after all that you get to profit or at least net profit.

And the 1.9% figure for April is for the allowance for the cap related default or standard variable tariff.

It's a maximum - so suppliers can charge less - but they can charge more or less for any other tariff they offer too.

Like fixes at above svt tariffs - that used to be the norm with some of the big 6.

Scot_39

Jominjam126 said:

Hmm, strange, I just feel like everyone's trying to shout me down here. Just spent half an hour on the Ofgem site and cannot find any meaningful, detailed explanations. I am just using simple maths and yes, some perhaps slightly risky assumptions as to whether operating costs etc are likely to increase in line with inflation (again couldn't find this on the Ofgem site but I'm no expert).

Rather than just shouting at me, perhaps someone can give me some detail on how operating costs have increased in the last 24 months?

If you go to the Ofgem Web site they provide large spread sheets that provide more detail how they get to to prices.

But that then might lead you to more questions than answers.

But really - in the end the price is the price.

Your only option is to find the best current deal - by supplier for your region and switch if worth it.

Just like you might shop at Lidl or Waitrose for a can of beans or a loaf of bread.  The price in the store is the price you pay (minus any loyalty scheme rebate of course)

born_again

Jominjam126 said:

Debit Card, not sure whether you're suggesting my theory is off whack or not (or possibly hijacked from elsewhere)? Really it is very simple but I am not the best at succinct prose!

CSI, I'll try and clarify:

in 2021 my 12,500 kWh of gas usage would have brought in £405.00 to my supplier, this paid the wholesale cost, operating cost, Network cost etc. Theoretically the leftover profit for the energy company should have been circa £8.00 as set by Ofgem.

Using the average wholsale cost at the time of 1.75p I know that the cash margin to cover everything bar the cost of gas was £185.00.

Let's say that Network Cost, Operating Cost etc have all gone up by 25% in the last two years. So, they were £177.00 back in 2021 (being the £185.00 cash margin less the £8.00 operating profit Ofgem allow). that means they are now £177.00 + 25% = £221.25.

The 12.61p per kWh now quoted brings in my supplier £1,567.25 in sales. Using the same wholesale cost reference the cost of this gas is now £749.05, leaving a cash margin of £827.20. Subtract the increased operating costs, network costs etc that would leave an operating profit of £606.00 to my supplier.

I don't mind suppliers making up for losses over rthe last two years but I would love the whole pricing structure to be less murky, ot feels somewhat covert right now.

You are missing a big part of the reason for the mess now.
The 29 suppliers that failed in 2021. Which caused Ofgem to step in as they had to protect & cover all the credits owed to customers.
No standing charge mentioned in your posts.

Scot_39

born_again said:

Jominjam126 said:

Debit Card, not sure whether you're suggesting my theory is off whack or not (or possibly hijacked from elsewhere)? Really it is very simple but I am not the best at succinct prose!

CSI, I'll try and clarify:

in 2021 my 12,500 kWh of gas usage would have brought in £405.00 to my supplier, this paid the wholesale cost, operating cost, Network cost etc. Theoretically the leftover profit for the energy company should have been circa £8.00 as set by Ofgem.

Using the average wholsale cost at the time of 1.75p I know that the cash margin to cover everything bar the cost of gas was £185.00.

Let's say that Network Cost, Operating Cost etc have all gone up by 25% in the last two years. So, they were £177.00 back in 2021 (being the £185.00 cash margin less the £8.00 operating profit Ofgem allow). that means they are now £177.00 + 25% = £221.25.

The 12.61p per kWh now quoted brings in my supplier £1,567.25 in sales. Using the same wholesale cost reference the cost of this gas is now £749.05, leaving a cash margin of £827.20. Subtract the increased operating costs, network costs etc that would leave an operating profit of £606.00 to my supplier.

I don't mind suppliers making up for losses over rthe last two years but I would love the whole pricing structure to be less murky, ot feels somewhat covert right now.

You are missing a big part of the reason for the mess now.
The 29 suppliers that failed in 2021. Which caused Ofgem to step in as they had to protect & cover all the credits owed to customers.
No standing charge mentioned in your posts.

In Jan the SoLR levy was c £67 iirc

In Apr and now Jul figures it is £19.

See breakdown 10a vs 10b in press release

https://www.ofgem.gov.uk/publications/customers-pay-less-energy-bills-summer

And that press release says the collapses cost the average home £83 - fair ?


Another "interesting" thing in the press release - is they have proposed increasing the allowed EBIT (one measure of pretax profit) from 1.9% to 2.4% for Oct.

Claiming that raises the forecast EBIT for Oct cap of £37 by c£10 - but arguing OK as still cheaper than the £83 cost of failures.

Cannot wait until the media and the "profit is bad brigade" get a hold of that one.

Strangely it didn't make it into today's BBC gloom take on the news.  They must be slipping.