Energy bills - possibly 40% up this winter!!!

roddydogs

Gets on my nerves every news banging on about this- with the Obigatary pensioner saying "its either the heating or food" Rubbish- has no one ever heard of Budgeting or Saving so you have enough ?

lemontart

roddydogs wrote: »

Gets on my nerves every news banging on about this- with the Obigatary pensioner saying "its either the heating or food" Rubbish- has no one ever heard of Budgeting or Saving so you have enough ?

It is not only pensioners that have to worry about this millions of people of all ages have this worry. turning on central heating is now a luxury for many and to be honest there are ways around this by heating only to rooms you actually use as opposed to whole house, to thermal vests and hot water bottles - where as fuel to cook is a basic need.

As for saving not quite sure how one is supposed to save these days if your income does not cover the bills regardless of age - I had savings now long gone as my income strunk and bills have risen and I am doing all I can to increase earnings through ideas on this site, looking for better paid work and doing a 60 plus hr week , not every one has these options to increase earnings.

Stormy

Zazen999 wrote: »

Personally, I think they are spinning this so that when they hike them by 20% they will get a pat on the back for keeping it down. Meanwhile prices have risen by 20 flipping percent.

I hope so, I just had a quick look at fixing my prices and it would cost me a rise of about 25% to 35% so the horse has bolted for me. Trouble is if they go up 40% I would still save yet if they go up 20% then it wont be so clear cut. Time to start seeing if I can switch more stuff off....

Premier_2

Cardew wrote: »

...Do you really believe that, for example, BG got anyone to underwrite in 2005 their gas/electricity supply for the 5 years ahead at a modest increase of a few percent?...

Yes.

But as you are aware of the futures market, I'm sure you also understand the mechanisms in place that allow traders to mitigate their exposure to such risks.

Cardew wrote:

...So if gas/electricity could be bought(guaranteed) from these 'traders/speculators', for the 3 years ahead, at the price they are making it available on the fixed tariffs, why is it forecast that prices will rise 40 -50% this year. Could it just possibly be that the futures market is indicating such a rise?

Traders/speculators don't always get it right, as the 5 year deal you have proves. But remember, things can go down as well as up, as anyone caught up in the dot com bubble, or who recently invested in the property bubble will tell you.
Btw, Martin says experts are predicting a 15%-45% rise this year, the BBC is reporting a maximum of 40% increase. Make sure you don't get caught up in the frenzy by falsly suggesting prices are to rise by 40%-50% this year - unless you have an independant source.
If prices are to rise by 15%-45% (as per Martin's report), when exactly? It suggests possibly not until Jan 2009. How much premium does one pay today for a fixed rate? About 15%? If prices are not going to increase until 6-7 months time, they could increase by 30% (the mid point of Martin's range)and you'd still be better off by not fixing over a 12-14 month period.

Cardew

Premier,

We are in danger of confusing 2 issues here.

I have seen your posts on the pros and cons of taking a capped tariff or not and would totally agree with your logic.

We agree that taking a fixed rate is a gamble. The wisdom of taking that gamble depends on the premium you pay now(the known factor) and the unknown factors of by how much prices will rise, and when those prices rises will be implemented.

As I understand it, you are not taking the gamble because you believe it is not worthwhile in your case; time will tell if you are correct.

My gut feeling is that for most people the gamble will turn out to be worth taking; as indeed just about every fixed/capped price has turned out to be a good deal. - but, to repeat, it is just my gut feeling.

I clearly have no more idea about future price rises than I read in the press(and I suggest neither has Martin). However the industry are clearly 'leaking' reports of huge rises to the media; and I suspect they have an ulterior motive.

As for the Utility companies having had their fixed tariffs underwritten on the futures market, I cannot believe you are seriously suggesting that this has occurred.

I read the annual reports of the Utility companies that are of interest to me and I have seen no mention of it. Such a coup would surely be a matter of immense importance to shareholders?

As you have stated that they have managed to underwrite these tariffs perhaps you could produce some evidence to support your contention?

Premier_2

Cardew wrote: »

...As for the Utility companies having had their fixed tariffs underwritten on the futures market, I cannot believe you are seriously suggesting that this has occurred...

I am! I cannot believe you think the energy companies are taking the risk themselves

Cardew wrote:

As you have stated that they have managed to underwrite these tariffs perhaps you could produce some evidence to support your contention?

Of course I cannot give you proof.
(a) I don't work for the energy supplier and (b) if I did, I couldn't disclose the proof as it would be considered commercially sensitive data.

Look at it this way, if you think you are correct, companies like npower & scottish power are taking loads of people on at capped/fixed tariffs. Your assumption, if I understand it correctly, is that their customers on variable rate tariffs will be left paying the shortfall that those fixed/capped customers are not paying (assuming as you do that prices are to increase significantly)

Now there are some companies not offering fixed/capped rate tariffs so if you are right, it would be logical that those companies will soon be able to offer significant savings over npower/sp on their variable rate tariffs. Time will tell, but surely if npower/sp variable rates become uncompetitive, we'll see a mass migration of those customers to the cheaper suppliers. That leaves an even greater burden on the variable rate customers remaining and so will drive prices even further upwards, meaning even more will leave...

Ultimately only those on fixed/capped rates with the current suppliers will remain there, paying less than the cost of power the energy company is buying at. What will happen then? Think about it. Do you really think energy companies could act so irresponsibly in this way?

These arn't some two bob start up companies flogging mobile phone contracts with cashbacks they can't afford to subsidise - these are highly regulated and licensed energy suppliers.

Cardew

Premier,
You have just explained the reason why the offers are withdrawn if they become over-suscribed. The utilities companies make a judgement about their future exposure.

Additionally the current 'premium' we spoke about will of course offset some of the possible future loss. Which is your argument for not taking a capped tariff - is it not?

As far as I am aware there is nothing commercially sensitive about completed future deals, and they are a matter of public record - as you would expect in a 'highly regulated and licensed' industry.

Premier_2

Cardew, if you don't believe energy companies buy their energy on the futures market, take a look at the situation that developed in October 2006 when traders were paying suppliers to take the energy off their hands.

http://news.bbc.co.uk/1/hi/business/5402370.stm

Did energy supply companies give gas away to consumers? No because although that was the spot price for immediate delivery, energy companies had secured supplies by buying it in advance.

If you are so sure the prices paid by the energy companies are a matter of public record, perhaps you could post details of who has paid what price recently. :rolleyes:

Cardew

Premier,
Where was it ever said that utility companies don't buy on the futures market? Of course they do - it is why the markets exist?

The majority of their gas and electricity supplies are secured against long term contracts with the producers - often 15 years or so ahead but the price they pay is related to market prices.

What I am saying is that capped price deals(for 2.4 million customers) are not underwritten by future purchases years in advance.

I have a contact who I am trying to get hold of to get a definitive answer on how far forward gas/electricity is bought. I will post if I get an answer.

Premier_2

Look at the BBC article again.

What was the 'market price' in October 2006? Why were consumers not offered this price or anything near it? Because the companies had bought their gas supplies already at a pre-agreed price
Put another way, this is a good example of why the energy producers are willing to sell ahead at an agreed price.

I thought you said you understood the futures market? A future is not an agreement to purchase something in the future at an unspecified price; the price has to be specified!

Next you'll be telling us variable rate mortgages will soon be falling in price since the lack of fixed/capped rate ones means those on variable rates no longer need to subsidise those who were getting them on the cheap. :rotfl: