Energy Price Cap

[Andy_W]

Here is an old breakdown , not to the same level of detail but shows it's not always been hundreds of profit leading into this

View attachment 72502


You also have to remember this is price CAP too, many went anywhere near the price cap, so that wasn't pure profit per customer, that had to subsidise the new customer deals too

Yeah, you know full well that they're stuffing profit into those other "costs" though, the actual "profit" or earnings line isn't the real earnings, everything gets funnelled out the back door in other areas, every company does it as they actually want their profit to be low as they don't want to pay tax on it. Also the profit on accounts submission day is very different compared to typical month to month running etc, and they know when accounts are due and do all they can to not show profit, well at least the smaller companies and the start-ups etc, which aren't listed with public shareholders etc.

At least on the above chart wholesale costs would have been fairly steady, but wholesale costs have rocketed down each quarter and more so in futures prices etc, and the prices coming down have nowhere near kept up.

Even when the companies go "broke", they know they're going "broke" long in advance, probably at least a year, so they use that time to shift all the cash and anything incoming out the back door and into the next "new company", and they leave nothing left to pay their suppliers/ contractors etc, other than those they need for the new business, or miraculously those companies end up with all their invoices paid before bankruptcy is declared. See things like this in the utilities sector on the actual installation and maintenance side, but it happens in any business which largely relies on invoices out on 30 day terms and invoices in on 30 day terms etc.

In 2021 I was paying 13p electric and 2.3p gas with EDF and that was fixed for a year, they won't have been losing out on that and wholesale prices now are even cheaper than then.

 

[jeff_potato]

Btw is your meter sending readings to octopus? If so it should be tracker compatible. When you say ovo smart meter do you mean the lcd display? If so that isn't even used with tracker for most people - the meter is the dull metal box in the meter cupboard rather than the display

Yes, the LCD was from Ovo and shows nothing, but the meter itself is definitely sending readings because the Octopus app on my phone has been giving full readings and energy usage stats for about 18 months.

I'll try registering again: I think when I first requested it in summer 2023 the website said it can take a couple of weeks to move existing customers across, but clearly something hasn't swung into action.

 

[ThatFragranceGuy]

Yeah, you know full well that they're stuffing profit into those other "costs" though, the actual "profit" or earnings line isn't the real earnings, everything gets funnelled out the back door in other areas, every company does it as they actually want their profit to be low as they don't want to pay tax on it. Also the profit on accounts submission day is very different compared to typical month to month running etc, and they know when accounts are due and do all they can to not show profit, well at least the smaller companies and the start-ups etc, which aren't listed with public shareholders etc.

At least on the above chart wholesale costs would have been fairly steady, but wholesale costs have rocketed down each quarter and more so in futures prices etc, and the prices coming down have nowhere near kept up.

Even when the companies go "broke", they know they're going "broke" long in advance, probably at least a year, so they use that time to shift all the cash and anything incoming out the back door and into the next "new company", and they leave nothing left to pay their suppliers/ contractors etc, other than those they need for the new business, or miraculously those companies end up with all their invoices paid before bankruptcy is declared. See things like this in the utilities sector on the actual installation and maintenance side, but it happens in any business which largely relies on invoices out on 30 day terms and invoices in on 30 day terms etc.

In 2021 I was paying 13p electric and 2.3p gas with EDF and that was fixed for a year, they won't have been losing out on that and wholesale prices now are even cheaper than then.

How much profit did EDF post in 2020 & 2021?

 

[ThatFragranceGuy]

Yes, the LCD was from Ovo and shows nothing, but the meter itself is definitely sending readings because the Octopus app on my phone has been giving full readings and energy usage stats for about 18 months.

I'll try registering again: I think when I first requested it in summer 2023 the website said it can take a couple of weeks to move existing customers across, but clearly something hasn't swung into action.

Ok - distance yourself from the lcd thing. That's called an IHD - in home display - different contained have their own brand, and it's stupid as was always going to be a nightmare supporting them. If octo ever swap your meter then you'd get a new one but otherwise I'd put it in a drawer - it's not needed for readings or anything it's just for info

The smart meter sits in your cabinet and that's what sends the readings - well, the comms hub attached to it is - and if octo are getting them readings no reason why you can't be on tracker

Twitter is imo the most effective way of getting in touch

The thing is too if you chased it up before I'd badger them and complain and ask them to backdate it as they should have followed up with you - I've seen them do that for people so can't hurt to ask - just say you've been assuming you're on it because you asked

 

[Andy_W]

How much profit did EDF post in 2020 & 2021?

I'm assuming you only asked that as you know they declared a loss

They will use that loss to get a tax break from the following years profits, and also they're obviously gaining a boat load of assets, and paying off loads of debt each year (so the loss isn't really a loss).

EDF are a producer as well as a supplier of course, and they're also French government owned, so there will be all sorts of weird things going on there, but every one of the big 6 were basically charging the same rates I think, and I think most of the other big 6 were still in profit?

EDF are also funding Hinkley Point C which will be hammering them, but I wouldn't worry too much about them, as their supply price and index linking will just ensure they make more than they otherwise would have in the long run, good investment by them, fair play.

The company is worth a trillion mind, they're not struggling.

 

[ThatFragranceGuy]

I'm assuming you only asked that as you know they declared a loss

They will use that loss to get a tax break from the following years profits, and also they're obviously gaining a boat load of assets, and paying off loads of debt each year (so the loss isn't really a loss).

EDF are a producer as well as a supplier of course, and they're also French government owned, so there will be all sorts of weird things going on there, but every one of the big 6 were basically charging the same rates I think, and I think most of the other big 6 were still in profit?

EDF are also funding Hinkley Point C which will be hammering them, but I wouldn't worry too much about them, as their supply price and index linking will just ensure they make more than they otherwise would have in the long run, good investment by them, fair play.

The company is worth a trillion mind, they're not struggling.

Yes but we arent on about producers here, thats a seperate business. I know they made a massive loss both years. I asked that because you mentioned them specifically - not all energy suppliers have the benefit of a multi billion pound government backed conglomerate behind them to help them cushion £500m-1bn+ losses.

Npower had plenty of generation also but that was in the innogy side of the business. the supply business was consistently loss making. They had a merger with SSE planned for npower, but the introduction of the price cap frankly made npower a non-viable business and they took a 1.5bn euro writedown on its value. It eventually got merged with e.on but they just wanted the customers and shuttered majority of the rest of the business. SSE themselves ended up selling their retail business to OVO for the same reasons - OVO and Octopus of course probably a lot more agile than the big six were to allow them to pivot faster. OVO swung from a £300m profit prior to the crisis to a £1.5bn loss, and at one point OfGem was going to propose nationalisation and OVO registered with co house they were no longer a viable going concern, but luckily they avoided all that. Getting a tax break on next years profits only helps if you make a profit the next year of course. It doesn't stop you going completely bankrupt if you run out of cash.



The ones that made profits over that time for the large part certainly weren't doing so from unit rates, british gas has often relied on its famously overpriced boiler installation and servicing arm. Consider that the graph above only runs to 2019 which is when the price cap came in so thats how they were strugglign when they were all already able to charge stupid rates to their SVR book which typically ran at ~50% of customer base. npower of course closed the following year after being absorbed by e.on. Octopus has never made an annual profit and recorded its first quarterly profit recently, albeit a small one. again, they definitely dont profit on supply - they profit from data and software - selling their kraken platform globally. It's not as simple as looking at the headline unit rate is X so they made Y profit, as most of these firms are massive and therefore need thousands of staff from call centres to metering operatives, smart metering program was massive but government mandated so they had to do it, bad debt is a huge cost and they had increasing regulation (and rightfully so) around how they chased that such as forcefits, vulnerable customer groups get larger and they need special treatment. £40 profit isn't a massive amount but if you have 6 million customers that's a decent number. Anything beyond that is from additional services, getting lucky with hedging or cost reduction. It's a heavily regulated business like banking is, with auditors, both internal and external, constantly reviewing things. If you are found to have charged a customer for something that isn't pure cost it creates a large issue. I remember we used to charge a fee for copy bills being posted out to cover the time and materials but if you ordered say 10 at £2 each it added up - it ended up we had to produce a formula that calculated the latest costs to within a few pence but it got to the point that it would need reviewing and changing for inflation and the like that it was cheaper to just make them free to send than to change them anytime a variable changed.

When I worked on the smart metering rollout I came in quite late on around 2016 but even then they had about 300 IBM and Cognizant contractors as well as hundreds of permanent staff from BA's, PM's, SA's, Testers, metering ops, data analysts etc, the cost was ridiculous but it had to be done and none of it was free. You cant just stuff profit into other costs and expect no-one to notice, because they would.

as for seeing earlier figures like you mentioned, this is at a higher level but back then £20 profit per account was seen as good - you would pay an introducing firm several hundred pounds for a new customer gain, with a view to hopefully retaining them long enough to become a profit. EBIT is the relevant profit element






Compare this to the below where they were allowed to claw back some of the massive costs they had suffered, but its still not hundreds/thousands per customer.