MSE News: Guest Comment - Why are energy prices increasing?

zeupater · 19 July 2011 at 1:36PM

bengasman wrote: »

Of course there isn't such a clause; the whole point is to emphasize the "promise" of sustainable energy, and repeat it as often as is possible without looking like brainwashing. To make it LEGAL, they only need to include ONE tiny little bit of small print ANYWHERE in the document, and they can make it as unobtrusive as the law permits.

If you fancy digging deep, you need to spell out the entire contract, including revisions, additions, and referrals, and look for 2 simple words: " if possible" or "where practicable"

Hi

I agree, energy companies have historically been very slippery entities when looking at T&Cs, thats exactly why they have recently had their supply licenses modified by OFGEM, as previously posted, in order to address the situation. Having taken a quick look through the relevant T&Cs regarding the 'green' offering in question, I can't see anything which is specific in their documentation, so I would think that any position that they could possibly take would be based on interpretation of the offer, which surely would be measured against a test of reasonableness, with the intent to directly offset supply to the customer with renewable energy purchases (the offer even includes the relevant renewable energy generation source) and would this not therefore form an implied term favouring the customer position ?

To me, it seems that the provider has implied and advertised that energy supplied is on a renewable basis, if they were to defend the increase of renewable energy tariffs by stating that this is not the case then I would see no reason whatsoever why any consumer would consider their offering, or if already purchasing renewable energy simply revert to a standard mix supply contract. It would seem, to a consumer, that the supplier would consider that they had no obligation to meet their customer's expectations or their license requirements, which is seemingly a very strange business model to follow.

Z

magyar · 19 July 2011 at 1:45PM

grahamc2003 wrote: »

Although renewable power probably hasn't increased much in price (and certainly less than gas), the price of renewables is something like 20 to 30 times the cost of fossil fuels.

If you want a concrete example - the suppliers pay around 96p/kwh for home generated solar power (they have an obligation to do so).
The fit and import is about 47p/kwh generated, and the supplier gets an estimated 50% of that).

They pay something like an average of 2 or 3p for power in the marketplace from conventional generators.

You've cherry-picked the most extreme example and not on a like-for-like basis (and I don't think even accurately). Firstly, baseload power is about £50/MWh at the moment, (i.e. 5p/kWh) and suppliers cannot guarantee to buy all their power on that basis. Peak power can be up to £1000/MWh for short bursts, so blended cost is probably more like £60/MWh.

The FIT/import price you've quoted is 43p/kWh + import value - it's not clear to me why you're doubling it? It's an obligation to buy that power for a set price and charge it on.

And the solar FIT is by far the most extreme example you could have chosen. Landfill gas sites only get 0.25xROCs for example, so effective cost of energy (a ROC being worth about 4p/kWh) is 7p/kWh. Offshore wind gets 1xROC and so costs in the region of 10p/kWh. No-where near the 20-30x figure you quote.

Even offshore wind (which gets 2xROCs) is therefore only about 14p/kWh. Just above double the cost of brown.

grahamc2003 wrote: »

These 'green' tariffs are pretty much a con if you ask me, and allow suppliers to increase profits by marketting tariffs which make no practical difference either to the supply or delivery of the electricity. The industry already has an obligation to source a certain percentage of it's power from renewables (at an extremely high cost as it happens), and even if no one signed on to a 'green' tariff, then they would still take exactly the same percentage of renewables, and you would still get the same electricity down your wires.

Green tariffs now by law have to provide additionality, i.e. they have to offer something in addition to the obligated level. This could either be by retiring ROCs (an expensive option) or making additional investments into a fund.

Notwithstanding that, I do agree they're a bit of a con and I am fairly sure most people think they're actually getting 'true green' power.

magyar · 19 July 2011 at 1:56PM

Skymist wrote: »

With regards to price hikes/rises/ripoffs, this makes me REALLY angry!!!

Skymist, I can understand that when reported as inaccurately and badly as the Telegraph and others reported these things, that you're angry.

The truth is that this is NOT a subisdy.
I explained why in this thread
http://forums.moneysavingexpert.com/showpost.php?p=44430434&postcount=37

Occams_Razor_2 · 19 July 2011 at 2:05PM

martinthebandit wrote: »

Rising energy bills? Its all nonsense apparently, don't know what everyone is getting worked up about

http://www.spectator.co.uk/coffeehouse/7087828/huhne-poohpoohs-rising-energy-bills-as-nonsense.thtml

of course he is a multi millionaire so may not have exactly the same view point as most of the rest of us

what article were you reading? not the one you linked to I suspect.

Occams_Razor_2 · 19 July 2011 at 2:06PM

bengasman wrote: »

During the the height of the recession, the profits went up by 58% in one year, whilst the man in the street was suffering.

If that is not profiteering, I really don't know what is.

I don't think you know what is.

they are not a socialist organisation, there is nothing wrong with turning a profit.

grahamc2003 · 19 July 2011 at 2:20PM

magyar wrote: »

The FIT/import price you've quoted is 43p/kWh + import value - it's not clear to me why you're doubling it? It's an obligation to buy that power for a set price and charge it on.

.

Because there's an assumption throughout that 50% of the generation gets used in the home (with zero payment to the supplier) and 50% gets exported.

So although the supplier pays around 45p/kwh (fit +1.7pish for assumed 50% export) for 100% of the generation, the supplier only gets the assumed 50% of the generation. (I made a mistake in my previous post by adding the export price for all units instead of for 50% of them, but it makes little difference to my point).

So, an example using approx numbers for another way of looking at the same thing ...

1000kwh generated results is £450 fit and £16 assumed export.

User uses an assumed 500kwh and exports (i.e. 'sells' to the supplier) an assumed 500kwh. The supplier pays £466 for 500kwh which is 93p/kwh, which is the suppliers cost of home generated solar power.

(Of course, the supplier is merely an intermediary in the transaction, with the ultimate payer of the 93p/kwh electricity you and me).

Just to add, before you point it out, the est have just released estimates which imply that their previous 50% home use estimate may be too high, and you may like to make a second cut estimate of the solr cost using 40% or whatever number you think appropriate under the new esi estimate, but it wouldn't alter the points I am pointing out to any great degree imv).

magyar · 19 July 2011 at 2:30PM

OK I see your point. This is again a peculiarity of the FIT scheme which at the moment represents only a tiny proportion of the renewable generation (i.e. effectively you get paid twice for the energy that you use).

I've said many times, I'm a huge opponent of solar PV and the FIT for it. It makes no sense economically. What I was really challenging was your point that renewables are 20-30x more expensive, when in fact only one very limited element of it is anything like that expensive.

SwanJon · 19 July 2011 at 4:35PM

I know I'm going to get roasted for even coming on here follwoing the last page or so (green tariffs rising), but as it all seems based on an unstated assumption I felt something needed to be said.

Has the price of 'green' electricity risen to the supplier? Have you anything to prove that the cost to the supplier of 'green' energy hasn't gone up?
'Green' generators sell to the same market as non-renewable generators. Do you think they will sell below the market price?

I suspect that there is an element of a fudge in here that the price you pay isn't calculated by the cost of 'green' generation, rather a relationship to a standard tariff.

magyar · 19 July 2011 at 4:44PM

SwanJon wrote: »

'Green' generators sell to the same market as non-renewable generators. Do you think they will sell below the market price?

Correct. Very few green generators will actually sell the power to end users themselves. They will have power purchase agreements under which a utility agrees to buy all the power generated at whatever is the market price at the time.

So if the market goes up or down, so does the price of green energy.

Consumerist · 19 July 2011 at 4:50PM

SwanJon wrote: »

I suspect that there is an element of a fudge in here that the price you pay isn't calculated by the cost of 'green' generation, rather a relationship to a standard tariff.

I think the issue here is that BG has increased, or will increase, its prices on the basis that the wholesale price of oil and gas has increased. Wind, wave and nuclear (green) energy does not depend on the wholesale price of oil or gas.

If anyone is "fudging", in our view, its BG.

Edit
If Ofgem gets to look at energy company books, perhaps the truth will become clearer. But, on the basis of past Ofgem history, we're not holding our breath.

MSE News: Guest Comment - Why are energy prices increasing?

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