MSE News: Npower to hike prices for a million customers next month

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Former_MSE_Callum
Former_MSE_Callum Posts: 696 Forumite
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Npower has become the latest Big Six energy firm to announce a price hike, with a million customers on its standard variable tariff to see bills rise by an average 5.3% from 17 June...
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'Npower to hike prices for a million customers next month'
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  • aj23_2
    aj23_2 Posts: 1,155 Forumite
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    Yet the base rate is being held at 0.5%. No inflation though huh?
  • [Deleted User]
    [Deleted User] Posts: 1,655 Forumite
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    Well hopefully people on the SVT will now move away from it.
    But I doubt it somehow.
  • ValiantSon
    ValiantSon Posts: 2,586 Forumite
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    aj23 wrote: »
    Yet the base rate is being held at 0.5%.

    What has the base rate got to do with NPower increasing their prices?
    aj23 wrote: »
    No inflation though huh?

    To the best of my knowledge nobody has claimed that there is, "no inflation". The MPC voted to keep interest rates at 0.5% as inflation is falling.

    I'm really not sure what point you are trying to make.
  • aj23_2
    aj23_2 Posts: 1,155 Forumite
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    ValiantSon wrote: »
    What has the base rate got to do with NPower increasing their prices?



    To the best of my knowledge nobody has claimed that there is, "no inflation". The MPC voted to keep interest rates at 0.5% as inflation is falling.

    I'm really not sure what point you are trying to make.

    Many things are going up 5-10% every year, yet the base rate is being held where it is and bank interest is going down.
  • Merlin139
    Merlin139 Posts: 6,858 Forumite
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    Nothing will change until people can be bothered to change suppliers.
    3.795 kWp Solar PV System. Capital of the Wolds

  • System
    System Posts: 178,093 Community Admin
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    edited 12 May 2018 at 12:07PM
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    aj23 wrote: »
    Many things are going up 5-10% every year, yet the base rate is being held where it is and bank interest is going down.

    For the consumer, CPI is a better indicator of cost inflation. This currently stands at 2.3%. Contracts normally use RPI which tends to be higher than CPI.

    That said, energy (electricity and gas) prices, in the main, fall or rise as a result of the wholesale cost of gas. Gas is used to generate electricity. In addition, there are the social and economic costs imposed by Govts of various colours. These include WHD; PV Solar feed in payments; Ofgem Consumer Levy for supplier defaults and so on.

    Looking back to 2017, the wholesale price of gas at the beginning of March 2017 was 51.01p/therm. A year later this had risen to 58.96p/therm. This equates to a 15.5% increase in the price of gas.

    So why are my energy bills not increasing by 15.5%? The answer is that for every £ that we all pay for our energy, less than 40p is paid to the wholesale energy supplier.

    In sum, the only effect that Bank interest rates have on our energy costs is the cost of any borrowing that suppliers need to keep their businesses afloat given that wholesalers require payment in advance of supply. These interest costs are passed on to us unless they can be offset in part by asking us to pay in advance of supply. This is a tactic employed by most of the smaller suppliers.
  • ValiantSon
    ValiantSon Posts: 2,586 Forumite
    edited 12 May 2018 at 11:46AM
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    aj23 wrote: »
    Many things are going up 5-10% every year, yet the base rate is being held where it is and bank interest is going down.

    This still doesn't explain what you believe the BoE base rate has to do with NPower's decision to increase their prices. There is no connection between the two. Companies make a decision over pricing that is to do with their operating costs, margin, and marketability. The Bank of England makes decisions on interest rates by taking a holistic view of the economy, and in particular inflation. As inflation is falling, there is no pressing need to increase the base rate. Retail banks offer interest rates on savings that reflect the wider market, and are made in light of their own borrowing rates, operating costs, margin and marketability; it is irrelevant that utilities companies have increased prices.

    The Bank of England uses the ONS's figures for inflation; these take into account energy prices. The figure you see for the headline rate of inflation includes those costs. There is debate about the most suitable measure of inflation in terms of impact on the individual consumer, and alternative models have been proposed (including MSE's own Bills Tracker). These, however, are not the measures that the BoE uses because, in their view, they do not adequately represent what is happening to inflation in the wider economy, and that is their remit. However, if you wish to take something like the MSE Bills Tracker, then you would find that this actually gives a lower inflation figure than the ONS's CPI (1.4% in April, compared to 2.5%) and also shows that inflation is falling (0.1% on MSE and 0.2% on CPI).

    Monetary policy is not used to try and control minutiae in the economy, but rather the overall position. To this end, the Bank of England's decision to hold interest rates at 0.5% is consistent with an inflation target of 2%.

    Retail banks do not exist to help individuals mitigate against inflation, and the Bank of England does not exist to encourage an upwards trend in retail saving rates. What you appear to be advocating would skew the economy and send it off into dangerous territory.
  • System
    System Posts: 178,093 Community Admin
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    It is also worth pointing out that Regulator intervention has also given suppliers an automatic right to increase energy prices. If the Regulator, a non Ministerial Govt Department, can increase the average cost of the Safeguard Tariff from £1031 to £1089 per year (allegedly to protect vulnerable customers) then it can hardly cry foul when similar increases are applied by suppliers to other tariffs. They will all have used the same type of Abacus.

    Government capping of SVTs may well bring some short-term positive feedback for the Government but watch this space.
  • aaajjj
    aaajjj Posts: 26 Forumite
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    If as British Gas blame increased wholesale prices have they increased the day rate by 11.44p and only 0.04p on gas price, for me i only use gas for heating and none in summer months, so effectively seeing large increase on gas i am not using, very cute move.
  • Asghar
    Asghar Posts: 433 Forumite
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    aj23 wrote: »
    Yet the base rate is being held at 0.5%. No inflation though huh?

    Totally ignorant post.

    It's to do with the price of oil which has been rising over the last few months and the cost of wholesale gas.
    People will notice it at the pumps and the higher petrol price will have an effect on inflation.

    Luckily I managed to switch to a cheaper fixed rate tariff with Npower than the one I was one already at the end of April.
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