Is 8.1 Billion too much for energy firms to hold of customer money?

deano2099

[Deleted User] said:

The most a person should have in credit is one months payment, then if things go belly up and they were to lose any credit it would only be one months payment, whether it's £50 or £500.

Are you suggesting a varying credit balance or 1/12 of the annual cost? The latter would leave suppliers with a lot of potential debt. 

They have a lot of debt already. It's just to their customers. 

Grumpy_chap

Gerry1 said:

@Grumpy_chap Remind me - have you made a Subject Access Request?

No, I have not.
What would an SAR achieve in this case?
How does one go about making an SAR to EDF?

ArbitraryRandom

You can basically request all the information they're holding about your account - specifically you can ask for any information relating to them blocking your requests to move... which can help you understand why they're blocking you and get it sorted. Plus it gives you useful evidence for an ombudsman case. 

It's easy enough - this is the email address you need:  dpo@edfenergy.com

This is a guide on what you can ask for/how to ask: https://ico.org.uk/for-the-public/your-right-to-get-copies-of-your-data/preparing-and-submitting-your-subject-access-request/ 

Note you can request call recordings if you've spoken to them on the phone - but they might only keep the recordings for 90-120 days. 

Chrysalis

MattMattMattUK said:

Chrysalis said:

Scot_39 said:

the_lunatic_is_in_my_head said:

MultiFuelBurner said:

the_lunatic_is_in_my_head said:

MultiFuelBurner said:

Is 8.1 Billion too much for energy firms to hold of customer money?

It is if they go bust and we have to pay for it.  

Credit balances should be completely ring fenced, suppliers have the benefit of less customers in debt and customers have the benefit of not having to budget as much as they would on a variable DD.  

Beyond that what else are the supply companies doing with all this money?

Interest on 8.1billion at the moment is decent.

Should be over 8.1billion now as indicated fixed DD customers should go into winter win large credit balances.

I don't know if energy companies can earn interest on ring fenced money

I guess for the individual the interest on £300 isn't really much but for the big suppliers it adds up.

When Ofgem calculate the cap it's said profit is limited to 1.9%, are they considering aspects such as interest on credit balances?

If they are I guess we save a little bit now against a risk of paying for those go who bust later, if they aren't then it doesn't really benefit us with that regard. 

It's not a limit on final profits  - it's an allowance over and above nominal mutually agreed operating and variable in practice wholesale purchase costs.

And it's now 2.4% from Oct 1st afaik.

And it's on a financial accounting metric known as EBIT - earnings before interest and tax.

And despite the potential interest on that £8bn - many energy resellers are operating under high levels of  debt currently.

Due in large part to the Ofgem cap imposed as wholesale costs increased last year.

30 or so firms - large and small alike - so in debt - they collapsed.

And the interest on servicing that debt - does come out of the 1.9% / 2.4%.

And that's not good business investment return levels - and due to regulatory policy - a worsening one - as more customers - many with regulatory protection against being cut off - amass debts against the business  - sone reports say consumer energy debts trebled in last year.  

Which is another reason likes of Shell selling out.

Likes of Apple, Nike etc have regularly reported well over 10% EBIT in recent good years.

I think only the standard variable tariff is under the profit rules.  These suppliers will want fixed tariffs to make a come back, and perhaps also a reason why Octopus has been pushing out more tariffs as well.

The profit cap does only apply to the SVT but it pretty much caps the market, there is very little reason for most users to be on anything else at the moment. Octopus offer what the call experimental tariffs, these are all apart from normal and E7, so the EV, heat pump, flux, various trackers and ToU options etc. and initially they lost money on those although now make a small profit, largely because they buy chunks of power when there are surpluses (night, for EV) mid morning (largely solar, for things like Cosy) etc. Octopus are not trying to make money directly on those tariffs, they are trying to modernise the market, once more people move to ToU and smart tariffs there will be a lot more ways to both reduce costs to the consumer and increase profits.

It will be both, Octopus are not a charity, they have shareholders.  Having these unique tariffs makes it a lot easier to offer something viable, vs the traditional fixed vs SVR.  If they werent concerned about making money as an example they wouldnt have increased the caps so high on the spot tariffs.

Chrysalis

Dolor said:

born_again said:

dealyboy said:

@markinsaid:

@stu12345_2 said:

@subjecttocontract said:

I'm a few hundred quid in credit, pretty much what would be expected this time of year. I don't see any problems with it. This is someone trying to find a problem that doesn't exist.

that few hundred quid could be in an interest bearing short term  cash account making you money.
in the same way the energy companies are enjoying your money.

Or more people having to put it on the CC or get payday loans because they spent it all on the kids over the summer, Its why most people like fixed DD's

@ArbitraryRandom said:

stu12345_2 said:

50 p meters will solve anyone being short for when their variable bill comes in 
all we need is for the meters to accept debit cards every week.
 instead.
pay as you go sorted.

You do you - but I'm not convinced switching from predictable monthly payments to a variable bill with my power being shut off if I can't pay an unexpectedly high bill is the right option for me (or the majority). 

So why do 'most people like fixed DD's' ... 'the majority'. Is this actually true? I find it hard to believe IMHO.

My experience with fixed or 'static' DDs has been almost entirely bad. ...
- Historically Symbio grossly inflated my payments to 4x my previous winter monthly costs.
- IIRC suppliers invariably use old annual usage data, whether inherited or not, and is slow to change.
- Even when a change is made to the DD sometimes it is suddenly reset.

Are we really saying that over 50% are feckless, or cannot cope with varying payments, or are so poor that an 'unexpected' high payment would leave their finances in collapse, or are so rich that they are happy to leave average payments to their suppliers, or are not interested in saving money?

What is wrong with me? Paying for what I use when (after) I use it (MVDD) is so obviously the best way to be ... but I know I'm not the only one who is mad, though we may be in the minority.

How many people have fixed mortgages?
Only complaints you ever see on mortgages are people on variable rates when interest rates rise & they struggle to afford them.
Just like energy bills over winter.

You have the choice to do what you want with your energy bills. So does everyone else. I'm more than happy to build up a nice credit balance. We are low usage here & £300 credit in November was gone in March this year, despite all the Gov payments & it was not a cold winter.

I agree. People advocating ‘pay on bill’ with a variable DD give little thought to what it might mean for payees if we have a prolonged cold snap from late December to March as happened in 62/63. If smoothing payments out over 12 months helps people manage their finances, then it should be encouraged.

The problem with credit balances is that people forget that the average annual usage cost is now many times higher than it was 2 years ago. It follows that as we enter Winter, individual credit balances will also be high.

I

Ironically fixed DD might make things worse for those people.

So many people treat fixed DD as a unlimited all you can eat service, the main reason being if you suddenly use more, there is no immediate impact on your direct debit (which is what the vast majority care about).  So they continue to use heavily over a winter period, then the kicking the can down the road eventually leads to a DD adjustment (often seems during the next spring/summer) to correct the situation and suddenly they on MSE complaining about their DD going up.

On Variable DD, after a month of having the central heating on 12 hours a day every day, they get hit with reality, then for the rest of winter they adjust their behaviour, and use heating more akin to what they can afford, overall saving money.

Fixed DD can end up been akin to a debt trap.  We have a combined problem currently of historically very high energy costs and a culture problem where people have become obsessed with heavy use of central heating.  No one wants to tell people to change their habits so fixed DD is a band aid.  Government supports it as they wont want it all over the news everyone is relying on electric blankets, just heating one room etc.

I think a compromise is what was proposed by ministers, where fixed DD needs usage adjustments every single month, so if you use more this October vs last October, then the November DD will reflect that, not 6 months later.  Then the customer is impacted much quicker by what they doing, but not at the same extremity as VDD.

ArbitraryRandom

Chrysalis said:

MattMattMattUK said:

Chrysalis said:

Scot_39 said:

the_lunatic_is_in_my_head said:

MultiFuelBurner said:

the_lunatic_is_in_my_head said:

MultiFuelBurner said:

Is 8.1 Billion too much for energy firms to hold of customer money?

It is if they go bust and we have to pay for it.  

Credit balances should be completely ring fenced, suppliers have the benefit of less customers in debt and customers have the benefit of not having to budget as much as they would on a variable DD.  

Beyond that what else are the supply companies doing with all this money?

Interest on 8.1billion at the moment is decent.

Should be over 8.1billion now as indicated fixed DD customers should go into winter win large credit balances.

I don't know if energy companies can earn interest on ring fenced money

I guess for the individual the interest on £300 isn't really much but for the big suppliers it adds up.

When Ofgem calculate the cap it's said profit is limited to 1.9%, are they considering aspects such as interest on credit balances?

If they are I guess we save a little bit now against a risk of paying for those go who bust later, if they aren't then it doesn't really benefit us with that regard. 

It's not a limit on final profits  - it's an allowance over and above nominal mutually agreed operating and variable in practice wholesale purchase costs.

And it's now 2.4% from Oct 1st afaik.

And it's on a financial accounting metric known as EBIT - earnings before interest and tax.

And despite the potential interest on that £8bn - many energy resellers are operating under high levels of  debt currently.

Due in large part to the Ofgem cap imposed as wholesale costs increased last year.

30 or so firms - large and small alike - so in debt - they collapsed.

And the interest on servicing that debt - does come out of the 1.9% / 2.4%.

And that's not good business investment return levels - and due to regulatory policy - a worsening one - as more customers - many with regulatory protection against being cut off - amass debts against the business  - sone reports say consumer energy debts trebled in last year.  

Which is another reason likes of Shell selling out.

Likes of Apple, Nike etc have regularly reported well over 10% EBIT in recent good years.

I think only the standard variable tariff is under the profit rules.  These suppliers will want fixed tariffs to make a come back, and perhaps also a reason why Octopus has been pushing out more tariffs as well.

The profit cap does only apply to the SVT but it pretty much caps the market, there is very little reason for most users to be on anything else at the moment. Octopus offer what the call experimental tariffs, these are all apart from normal and E7, so the EV, heat pump, flux, various trackers and ToU options etc. and initially they lost money on those although now make a small profit, largely because they buy chunks of power when there are surpluses (night, for EV) mid morning (largely solar, for things like Cosy) etc. Octopus are not trying to make money directly on those tariffs, they are trying to modernise the market, once more people move to ToU and smart tariffs there will be a lot more ways to both reduce costs to the consumer and increase profits.

It will be both, Octopus are not a charity, they have shareholders.  Having these unique tariffs makes it a lot easier to offer something viable, vs the traditional fixed vs SVR.  If they werent concerned about making money as an example they wouldnt have increased the caps so high on the spot tariffs.

I don't see that specifically as concern with making profits (though I agree at the core they are a business) - high caps on the tariffs don't generate extra profit in the traditional sense as the rate charged always reflects the market rate; plus they were only increased when the market was in turmoil meaning there was reasonable chance they would hit and surpass those caps.

All it actually does in practice is protect them against loss by sharing the risk of market increases with the customer - something any business (even charities) need to do if they wish to continue operating. Obviously this argument would be tested if/when the markets stabilise and future offers are at a reduced cap again. 

Chrysalis

ArbitraryRandom said:

Chrysalis said:

MattMattMattUK said:

Chrysalis said:

Scot_39 said:

the_lunatic_is_in_my_head said:

MultiFuelBurner said:

the_lunatic_is_in_my_head said:

MultiFuelBurner said:

Is 8.1 Billion too much for energy firms to hold of customer money?

It is if they go bust and we have to pay for it.  

Credit balances should be completely ring fenced, suppliers have the benefit of less customers in debt and customers have the benefit of not having to budget as much as they would on a variable DD.  

Beyond that what else are the supply companies doing with all this money?

Interest on 8.1billion at the moment is decent.

Should be over 8.1billion now as indicated fixed DD customers should go into winter win large credit balances.

I don't know if energy companies can earn interest on ring fenced money

I guess for the individual the interest on £300 isn't really much but for the big suppliers it adds up.

When Ofgem calculate the cap it's said profit is limited to 1.9%, are they considering aspects such as interest on credit balances?

If they are I guess we save a little bit now against a risk of paying for those go who bust later, if they aren't then it doesn't really benefit us with that regard. 

It's not a limit on final profits  - it's an allowance over and above nominal mutually agreed operating and variable in practice wholesale purchase costs.

And it's now 2.4% from Oct 1st afaik.

And it's on a financial accounting metric known as EBIT - earnings before interest and tax.

And despite the potential interest on that £8bn - many energy resellers are operating under high levels of  debt currently.

Due in large part to the Ofgem cap imposed as wholesale costs increased last year.

30 or so firms - large and small alike - so in debt - they collapsed.

And the interest on servicing that debt - does come out of the 1.9% / 2.4%.

And that's not good business investment return levels - and due to regulatory policy - a worsening one - as more customers - many with regulatory protection against being cut off - amass debts against the business  - sone reports say consumer energy debts trebled in last year.  

Which is another reason likes of Shell selling out.

Likes of Apple, Nike etc have regularly reported well over 10% EBIT in recent good years.

I think only the standard variable tariff is under the profit rules.  These suppliers will want fixed tariffs to make a come back, and perhaps also a reason why Octopus has been pushing out more tariffs as well.

The profit cap does only apply to the SVT but it pretty much caps the market, there is very little reason for most users to be on anything else at the moment. Octopus offer what the call experimental tariffs, these are all apart from normal and E7, so the EV, heat pump, flux, various trackers and ToU options etc. and initially they lost money on those although now make a small profit, largely because they buy chunks of power when there are surpluses (night, for EV) mid morning (largely solar, for things like Cosy) etc. Octopus are not trying to make money directly on those tariffs, they are trying to modernise the market, once more people move to ToU and smart tariffs there will be a lot more ways to both reduce costs to the consumer and increase profits.

It will be both, Octopus are not a charity, they have shareholders.  Having these unique tariffs makes it a lot easier to offer something viable, vs the traditional fixed vs SVR.  If they werent concerned about making money as an example they wouldnt have increased the caps so high on the spot tariffs.

I don't see that specifically as concern with making profits (though I agree at the core they are a business) - high caps on the tariffs don't generate extra profit in the traditional sense as the rate charged always reflects the market rate; plus they were only increased when the market was in turmoil meaning there was reasonable chance they would hit and surpass those caps.

All it actually does in practice is protect them against loss by sharing the risk of market increases with the customer - something any business (even charities) need to do if they wish to continue operating. Obviously this argument would be tested if/when the markets stabilise and future offers are at a reduced cap again. 

I didnt say was anything wrong with it, but its to protect their margins.

ArbitraryRandom

Chrysalis said:

ArbitraryRandom said:

Chrysalis said:

MattMattMattUK said:

Chrysalis said:

Scot_39 said:

the_lunatic_is_in_my_head said:

MultiFuelBurner said:

the_lunatic_is_in_my_head said:

MultiFuelBurner said:

Is 8.1 Billion too much for energy firms to hold of customer money?

It is if they go bust and we have to pay for it.  

Credit balances should be completely ring fenced, suppliers have the benefit of less customers in debt and customers have the benefit of not having to budget as much as they would on a variable DD.  

Beyond that what else are the supply companies doing with all this money?

Interest on 8.1billion at the moment is decent.

Should be over 8.1billion now as indicated fixed DD customers should go into winter win large credit balances.

I don't know if energy companies can earn interest on ring fenced money

I guess for the individual the interest on £300 isn't really much but for the big suppliers it adds up.

When Ofgem calculate the cap it's said profit is limited to 1.9%, are they considering aspects such as interest on credit balances?

If they are I guess we save a little bit now against a risk of paying for those go who bust later, if they aren't then it doesn't really benefit us with that regard. 

It's not a limit on final profits  - it's an allowance over and above nominal mutually agreed operating and variable in practice wholesale purchase costs.

And it's now 2.4% from Oct 1st afaik.

And it's on a financial accounting metric known as EBIT - earnings before interest and tax.

And despite the potential interest on that £8bn - many energy resellers are operating under high levels of  debt currently.

Due in large part to the Ofgem cap imposed as wholesale costs increased last year.

30 or so firms - large and small alike - so in debt - they collapsed.

And the interest on servicing that debt - does come out of the 1.9% / 2.4%.

And that's not good business investment return levels - and due to regulatory policy - a worsening one - as more customers - many with regulatory protection against being cut off - amass debts against the business  - sone reports say consumer energy debts trebled in last year.  

Which is another reason likes of Shell selling out.

Likes of Apple, Nike etc have regularly reported well over 10% EBIT in recent good years.

I think only the standard variable tariff is under the profit rules.  These suppliers will want fixed tariffs to make a come back, and perhaps also a reason why Octopus has been pushing out more tariffs as well.

The profit cap does only apply to the SVT but it pretty much caps the market, there is very little reason for most users to be on anything else at the moment. Octopus offer what the call experimental tariffs, these are all apart from normal and E7, so the EV, heat pump, flux, various trackers and ToU options etc. and initially they lost money on those although now make a small profit, largely because they buy chunks of power when there are surpluses (night, for EV) mid morning (largely solar, for things like Cosy) etc. Octopus are not trying to make money directly on those tariffs, they are trying to modernise the market, once more people move to ToU and smart tariffs there will be a lot more ways to both reduce costs to the consumer and increase profits.

It will be both, Octopus are not a charity, they have shareholders.  Having these unique tariffs makes it a lot easier to offer something viable, vs the traditional fixed vs SVR.  If they werent concerned about making money as an example they wouldnt have increased the caps so high on the spot tariffs.

I don't see that specifically as concern with making profits (though I agree at the core they are a business) - high caps on the tariffs don't generate extra profit in the traditional sense as the rate charged always reflects the market rate; plus they were only increased when the market was in turmoil meaning there was reasonable chance they would hit and surpass those caps.

All it actually does in practice is protect them against loss by sharing the risk of market increases with the customer - something any business (even charities) need to do if they wish to continue operating. Obviously this argument would be tested if/when the markets stabilise and future offers are at a reduced cap again. 

I didnt say was anything wrong with it, but its to protect their margins.

It might be a question of emphasis and how we're interpreting the phrase  

'Not trying to make money on' (beyond the normal margins on a tariff) vs 'not trying to make money (happy to take a hit)'

They could make a higher margin (and have it be more reliable/lower risk) by offering a traditional 'competitive' fixed rate and hedging than offering agile given the lower net cost to the customer - leaning me towards Matt's point that Octopus are more interested in attracting customers/changing the market than they are making money (the long game).