Latest price predictions

CSI_Yorkshire

MattMattMattUK said:

Altior said:

That is quite interesting. 

The energy efficiency of housing has very little to do with electricity usage does it. This will be more correlated with improvements to technology (LED lighting for example), and appliance efficiency/replacement.  

Being someone from a finance background, this is not a great way to create a benchmark, if the 'ruler' dimensions can be changed every two years. 

Perhaps even more interesting, the gvnts own data doesn't show domestic energy consumption falling at all in any meaningful way, since 2014.

I would say that does depend on what one wants from the benchmark. If one wants the benchmark to be a true and accurate representation of cost changes over time then no, if one wants to be able to compare average expenditure over time then maybe, if one wants to manipulate the figures for political benefit, then yes.

They don't just make up the numbers out of nowhere.  It's based on an actual statistical analysis of real consumption.

Trying to claim that because total annual consumption is flat then the typical household use must also be flat is absurd.

The actual OFGEM and government data shows a reduction in both electricity and gas consumption:

"Mean domestic electricity consumption has decreased in all countries and regions since before the COVID-19 pandemic, with falls of between 1.2 and 2.9 per cent from 2019 to 2021. Over the longer term, mean domestic electricity consumption across Great Britain was 23.8 per cent lower in 2021 than in 2005, with similar reductions across all countries and regions."

"Mean domestic gas consumption has decreased in all countries and regions since before the COVID-19 pandemic, with falls of between 1.7 and 5.4 per cent between 2018 (year ending mid-May 2019) and 2021. Over the longer term, mean domestic gas consumption across Great Britain was 31.9 per cent lower in 2021 than in 2005, with similar reductions across all countries and regions."

Given that the two observation years for this change were 2019 and 2021, the justification for a reduction in TDCV is clear.

Altior

Trying to claim that because total annual consumption is flat then the typical household use must also be flat is absurd.

I'm not claiming that for what it's worth. Obviously there will be changes to the number of properties drawing from the grid etc.

But your quotes don't explain the rather neat reduction from 2900 to 2700 for electricity either. That is 7%, give or take, quite dramatic. Is the underlying working available for those specific calculations (not 2005, but the intervening years between 2900 and 2700)?

MattMattMattUK

The issue with the way the current metrics is that they are being used to portray a larger drop in energy costs than has actually happened, what they are doing is showing a drop on average energy expenditure which is something different. 

We need a flat line measure which allows year-on-year comparison, as well as one which reflects average expenditure, but the usage of average expenditure to claim that energy costs are falling is inherently dishonest.

Altior

I agree. It probably needs three numbers:

• Standing charge for a year
• Cost of a delivered unit of energy
• Typical average household annual consumption

CSI_Yorkshire

OFGEM use the BEIS (or whatever that department is called this week) sub-national consumption figures as the bulk of their input data:

https://www.gov.uk/government/collections/sub-national-electricity-consumption-data

The method and initial calculations are described in this document:

https://www.ofgem.gov.uk/sites/default/files/2023-02/TDCV 2023_Call for Input.pdf

Broadly speaking, they note the lower-quartile, median and upper-quartile figures from the collected data in the two observation years, and then take the average of each pair to create the base table.

Some sensitivity analysis, and a bit of industry comment (there's where the politics come in), gives the final figures.

Weirdly, the 'benchmark consumption' (the one used for the price cap) is still at 3100kWh electric - they decided not to change it because there's a concern about "recovering sufficient revenue" at lower figures because the mean and median are 'the wrong way around'.

Altior

Thanks, I'm a qualified statistician but will be rusty as I don't use those skills daily any more. I may dig into that at some point, Just instinctively, those numbers are far too convenient to have accuracy. It smells of something we have seen a lot of recently, deciding an outcome and then coming up with the rationale to retrospectively justify it. 

CSI_Yorkshire

Altior said:

Thanks, I'm a qualified statistician but will be rusty as I don't use those skills daily any more. I may dig into that at some point, Just instinctively, those numbers are far too convenient to have accuracy. It smells of something we have seen a lot of recently, deciding an outcome and then coming up with the rationale to retrospectively justify it. 

The general reluctance to have anything more accurate than the nearest hundred is always going to make it look like that.

Interestingly (maybe), if the two years used were 2020 and 2021 electricity would have been 2800kWh - but the industry decided that 2020 was not representative and they pushed OFGEM to use 2019 instead.

Altior

Big headed perhaps but I feel like my three numbers would have far more tangible meaning to a lay person. Pretty much everyone knows what 'car tax' means, and what the cost of a litre of petrol means, and that a 3 litre vehicle costs more to fuel per mile than a 1 litre.  

All they really need to know is how the cost of a unit is changing ( petrol per litre ) and the fixed cost / standing charge (VED). 

CSI_Yorkshire

Altior said:

All they really need to know is how the cost of a unit is changing ( petrol per litre ) and the fixed cost / standing charge (VED). 

Which would work fine if there weren't 48 versions of each figure.  At that point, using an average or typical is more understandable than quoting a large table.

Qyburn

CSI_Yorkshire said:

OFGEM use the BEIS (or whatever that department is called this week) sub-national consumption figures as the bulk of their input data:

https://www.gov.uk/government/collections/sub-national-electricity-consumption-data

The method and initial calculations are described in this document:

https://www.ofgem.gov.uk/sites/default/files/2023-02/TDCV 2023_Call for Input.pdf

Broadly speaking, they note the lower-quartile, median and upper-quartile figures from the collected data in the two observation years, and then take the average of each pair to create the base table.

Some sensitivity analysis, and a bit of industry comment (there's where the politics come in), gives the final figures.

Weirdly, the 'benchmark consumption' (the one used for the price cap) is still at 3100kWh electric - they decided not to change it because there's a concern about "recovering sufficient revenue" at lower figures because the mean and median are 'the wrong way around'.

The very first link states UK mean domestic consumption in 2021 was 3509kWh.

I wonder if part of the trouble is that they keep saying "mean" but actually mean "median".