energy companies and the windfall tax?

Sofigassally2

Hi, why cant the energy company's reduce the bills to us, the consumer, so that they dont have to pay the windfall tax, win win, as they are still making the same profit without having to pay the windfall tax.??

TadleyBaggie

Probably because many of the energy utility companies aren't making a huge profit at all, they are just resellers.

debitcardmayhem

https://forums.moneysavingexpert.com/discussion/6668079/energy-companies-and-the-windfall-tax

Energy suppliers don't set the prices, Energy producers don't set the prices, the market sets the prices, welcome to the OrangeMan's world. Producers will be taxed on their profits not EDF,Octopus, BG et al .

The market is also broken IMHO, by that I mean the price of electricity is tied to the cost of the most expensive means of production, i.e. gas , usually.

Welcome to the forum 😎

EDIT also OFGEM and HMG add lots to the charges you pay.

MattMattMattUK

The "windfall" tax is a percentage, not a fixed amount, so they net loose regardless. To make the same net profit the need to increase their gross, it is not as if they can drop below a threshold to pay less. North Sea extractors face a 78% tax rate, electricity generators 55%. They are already paying a huge amount of tax on their profits. Maybe the solution is you pay that level of tax.

Scot_39

The oil company windfall tax a classic example of UK shooting itself in the foot. Losing 100,00s of jobs, some estimate another upto 10,000 high paid NSea jobs annually currently over next 5+ years. By making the N Sea - already one of the more technically difficult and so inherently expensive production fields in the world to drill in - even less attractive.

Producing less, importing more. Bad for balance of trade and £

And most of the big players you see headline profits for like BP and Shell make those profits on overseas - not UK oil production.

And its not our energy suppliers making the profits - Ovo and Octopus - c10m customers between them - a third of households - failed Ofgems technical financial resilience tests last year.

Not helped by around across all uk suppliers a £4.55bn collective customer debt and 90 days arrears burden - that itself adds over £50 allowance to the £1641 cap. Liberal niceties - not making folk pay for their consumption upfront via prepay - has a real cost to the rest of us.

And that debt itself not helped by the £100s of non direct energy costs added to our bills annually over decades. Things like £150 whd for 6.1m homes (over 20%) , other biggies like eco insulation and renewables obligation subsidy - made hopefully clearer to millions now given the recent budget shift £150 for Apr etc

Even in last decade - like when oil price collapsed duruping Covid - oil cos have made regular losses in N Sea / UK shelf production. Such a regular event - the rules have been there in various forms for decades - under both Cons and Labour - as a quid pro quo for paying high taxes in the good times - been paid by govt - taxpayers - instead to safely operate and manage their N Sea field infrastructure in bad.

And the irony of the recent uprating of EGL from 45% to 55% during Iran spike - is comparing it to current round renewables auction pricing.

A 55% EGL set on profits from sales above an indexed £75/MWh (from 2024) assuming using the 2023 Cons govt EGL levy including on preexisting non CfD renewables - yet new green generation - offshore wind just been licensed at £91.20/MWh (index base 2024) . And that is before you count its likeky share of £bns pa in future curtailment, generation balancing and grid network costs to deliver its energy - that jake it far far more expensive). At the time of that auction cap was announced - wholesale rates were closer to £70-80/MWh - so wasnt competitive wholesale - even without without the extras.

Wholesale energy cost is a small fraction of our energy costs - in current cap of £1641 - just £652 - just 40% - the true / raw direct wholesale energy costs even less than that. Due again in part to increasing renewables impact on capacity market guaranteed supply costs

https://www.ofgem.gov.uk/sites/default/files/2026-02/Summary-of-changes-to-energy-price-cap-1-April-to-30-June-2026.pdf

Between Ofgem and govt - in last 3 caps - so just 6m period - dual fuel caps have increased by Oct 25 (£17 WHD extension +£24 networks) Jan 26(£14 nuclear +£7 whd) and Apr 26 (£66 networks+£17 Capacity Market) = £145+vat = £152 - and reduced by shifting c£131 (not £150 as budget headline at cap tdcv use) from bills to taxation. SO still £21 higher if direct wholesale, supplier costs etc had been "fixed".

Some of those rises inevitable - e.g. inflation - just to stand still - others are not.

The biggest chunk of that £154 treasury household average shift - £92 = 75% of RO costs - so 100% an even higher £122 = older renewables contract subsidies - been on the average bill for years (presumably with indexing). The 75%/£92 now paid by tax (or when businesses pass their taxes onto us in their pricing), the additional £30/ 25% still in our bills.

The RO scheme costs began in most of UK c2002 - the last contract issued c2017, and in theory payments to those as 20 yr guarantees could end c2037 if not extended.

if you really want to complain about energy costs - at least learn what the true costs are being driven by - and why UK costs - whilst not quite the very highest in world, are far higher than many, when all subject to the same $$$ world oil and gas pricing.

born_again

https://forums.moneysavingexpert.com/discussion/6668079/energy-companies-and-the-windfall-tax

Which of these energy co's that pay the windfall tax, are actually domestic suppliers?

Scot_39

https://forums.moneysavingexpert.com/discussion/comment/81996781#Comment_81996781

none technically are the supplier companies we are directly contracted to.

Their parent / corporate groups - thats a different discussion / matter.

The EGL levy for instance was only introduced after existing suppliers refused to enter CfD type capped contracts "voluntarility" in late 2022 during Ukraine crisis.

https://www.gov.uk/government/publications/electricity-generator-levy-introduction/electricity-generator-levy

"The levy will be applied to companies or groups generating electricity from nuclear, renewable, biomass, and energy from waste sources"

It applies to legacy uk production like non CfD renewables (CfD in use since 2015 auction) and CfD / new RAB nuclear (so excludes Hinkley if it had come on stream before 2028, Sizewell and SzMR deals) - well larger producers as their are a series of threshold tests.

most of the oil producers in NSea are not afaik domestic energy suppliers.

One that was - Shell (*) - sold out its UK, iirc German and I cannot remember which but one other major EU nations domestic retail arms.

Gas and renewables - but contract vintage would need checking - more so.

(*) It presumably wasnt a good business for them to be in - and many who didnt collapse post Ukraine - still posted big losses.

And last year 3 suppliers failed Ofgems financial resilience tests - Octopus satisfied them, Ovo now being acquired by EOn to create UKs largest supplier, the third i dont think ever publically published.

At least one others forecast failing this in last years financial report - without securing new business funding - even before Iran crisis.

Sofigassally2

Thank you to all who responded, clearer now , ie we are totally s—-ed