Energy Prices

Pak_Doo_Ik

Well-known member
Sorry to start another thread in this but it’s proper grating on me how the energy cap works.

I thought after the April hike that the price cap was based on actual cost of gas in the preceding months, looking at Martin Lewis and his predictions for the new cap it looks like it’s based on future predictions and not on actuals?

If this is the case then why don’t OFGEM just predict that the price will be much lower in the next 6 months and tell energy companies that they will either have to force producers to bring the price down or leave the market. In my mind if the latter happens then the energy busines will have to drop back in to state ownership.

I’m sure it is much more complicated than this but on Wednesday morning it was just a thought 🤔
 

Colgates_shaving_foam

Well-known member
Sorry to start another thread in this but it’s proper grating on me how the energy cap works.

I thought after the April hike that the price cap was based on actual cost of gas in the preceding months, looking at Martin Lewis and his predictions for the new cap it looks like it’s based on future predictions and not on actuals?

If this is the case then why don’t OFGEM just predict that the price will be much lower in the next 6 months and tell energy companies that they will either have to force producers to bring the price down or leave the market. In my mind if the latter happens then the energy busines will have to drop back in to state ownership.

I’m sure it is much more complicated than this but on Wednesday morning it was just a thought 🤔
This is how I see it as well.

If energy has got too expensive for people to afford then it is a national emergency.

Set the cap at a price people can afford and then if energy companies can't make it work then they fold.
 

Pak_Doo_Ik

Well-known member
This is how I see it as well.

If energy has got too expensive for people to afford then it is a national emergency.

Set the cap at a price people can afford and then if energy companies can't make it work then they fold.
Couldn’t agree more. I am sick and tired of the doom and gloom and nothing getting done about, we have the RAC banging on about £2 a litre petrol and then just accept profiteering from filling stations whilst shouting we told you this would happen. Same with the energy prices you have Martin Lewis shouting prices are going to double again but not offering any solution as to how to stop it as he’s not political. Inflation being out of control but rather than having a proper look at how to stop it rising we use the same old methods of not increasing wages in line with inflation and increasing the interest rate.

The country needs a massive overhaul both politically and economically.
 

Soutra

Well-known member
Set the cap at a price people can afford and then if energy companies can't make it work then they fold.
Who picks up the tab when the supply companies fail?

Either consumers, or the government. Either way we all end up paying for the energy we use.

What's needed is a much better thought out strategy where there is capacity to buy and store energy when wholesale prices are low and release it to the market when prices are high.
 

Colgates_shaving_foam

Well-known member
Who picks up the tab when the supply companies fail?

Either consumers, or the government. Either way we all end up paying for the energy we use.

What's needed is a much better thought out strategy where there is capacity to buy and store energy when wholesale prices are low and release it to the market when prices are high.
Obviously the government picks up the tab.

They can pay for it using the money that they currently choose to syphon off to their mates and donors.

Or the money that they waste due to being unbelievably incompetent.

You know who shouldn't pick up the tab? The millions of people currently struggling to keep the lights on and feed their families.
 

Emmersons_BrazillianDong

Well-known member
Couldn’t agree more. I am sick and tired of the doom and gloom and nothing getting done about, we have the RAC banging on about £2 a litre petrol and then just accept profiteering from filling stations whilst shouting we told you this would happen. Same with the energy prices you have Martin Lewis shouting prices are going to double again but not offering any solution as to how to stop it as he’s not political. Inflation being out of control but rather than having a proper look at how to stop it rising we use the same old methods of not increasing wages in line with inflation and increasing the interest rate.

The country needs a massive overhaul both politically and economically.
I wasn't quite clear on your point in regards to the journalist Martin Lewis but we can't expect him to fix the problem.

He's done an incredible job of highlighting the issue and I'd argue his intervention has meant that the 200 quid payment has been upped substantially and that the disabled get up to 1200 subsidy.

It's a sad situation when we relying on one good journalist to support the populous rather than those whose job it is. If anybody was actually deserving of a knighthood
 

Boroproud

Well-known member
Somebody somewhere is responsible for the price setting.
Somebody at the very top, not a computer .
It could be Somebody planting potatoes in the ground for all I know but Somebody says. " I am charging you this much"
Then everybody else in the chain then charges that little bit more for their own needs.
That person at the top should be told to stop being a greedy little cnut
 

Pak_Doo_Ik

Well-known member
I wasn't quite clear on your point in regards to the journalist Martin Lewis but we can't expect him to fix the problem.

He's done an incredible job of highlighting the issue and I'd argue his intervention has meant that the 200 quid payment has been upped substantially and that the disabled get up to 1200 subsidy.

It's a sad situation when we relying on one good journalist to support the populous rather than those whose job it is. If anybody was actually deserving of a knighthood
Wasn’t meant as a dig at Martin Lewis, he does an amazing job but his hands get tied as he isn’t politically motivated as what I meant. I’m sure he has a view on what the future should be for the energy industry but would risk devaluing his journalistic work if he spoke about them I suppose. In that respect he is very much like the queen😁
 

Andy_W

Well-known member
Sorry to start another thread in this but it’s proper grating on me how the energy cap works.

I thought after the April hike that the price cap was based on actual cost of gas in the preceding months, looking at Martin Lewis and his predictions for the new cap it looks like it’s based on future predictions and not on actuals?

If this is the case then why don’t OFGEM just predict that the price will be much lower in the next 6 months and tell energy companies that they will either have to force producers to bring the price down or leave the market. In my mind if the latter happens then the energy busines will have to drop back in to state ownership.

I’m sure it is much more complicated than this but on Wednesday morning it was just a thought 🤔
They have to base on future prices, as people enter contract for a year or whatever, if prices went up and they were forced to sell energy at a loss they would go under (this is what happened when loads of energy companies recently went bust). When they go bust, it's normally at a time when rates are high, which means those customers that now don't have a supply, have to go to a new company which either isn't offering a contract, or it's based on obscene rates. So this doesn't help companies, or the people.

The UK can't force energy companies to sell at a loss.

The energy distribution/ supply companies can't demand cheaper supply, especially to foreign companies, as they would just say "no" and sell to whoever was willing to pay more (and there would be a big queue).

The world could effectively cut it's demand, driving prices down, but it would mean a massive recession, and everyone going cold over winter.

When things are more "in demand" or in shorter supply prices go up, we're ticking both boxes as the minute as production recovers from covid, and supply is lessened as the current biggest knob head in the world has a massive supply of oil/ gas, which is already connected to the UK/ EU etc.

The energy producers are making a killing, as they're selling the same product for a lot more than they used to, but that's because people will pay more, and that will happen until the prices go so high that it just becomes economically unviable. As there's next to no immediate alternative, everyone has to pay the higher price, and if you don't you get no gas (or electric).

Bringing an energy company into state ownership would cost a fortune, and way over what it's worth (buying at peak demand), and for that we would be buying a company that we're specifically going to run into the ground, by selling gas at a loss, it doesn't make sense.

The only way to claw some of the excess money/ profits back would be in a windfall tax on the energy producers (we can only do this to uk ones), but this could mean they just shut down on the expensive wells, and operate the cheaper ones, which again lessens supply and the problem starts again. Obviously the energy companies get hit with inflation too, they don't run for free, so if their prices go up, then so do their costs (albeit not at the same rate).

There could be some sort of world pact, that each country forces a windfall tax on it's own energy providing companies but then all this would do is drive up demand in the countries which don't sign up to it (as they would be selling it for less), and some will probably be registered in dodgy places with dodgy tax laws. Those companies in the pact nations would massively lose out to the non-pact nations, so ultimately we just end up funding the worst countries in the world more (which we're trying to not do).

The only way I see solution is just to tax those (companies and people) who can afford it more, and rebate those who can afford it least, but obviously the Tories won't do that.

We also need to lift every bit of red tape/ restriction on planning laws for renewable projects and get them all on line as fast as possible, even if it means massively increasing costs.
 
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Pak_Doo_Ik

Well-known member
I get that selling at a loss is a no brainer, but how do they know what the future prices are? It seems to me like a licence to print money and falsely inflate an already over expensive market or I am missing something? What incentive is there for the market prices to come down of they are always based on a future market and an opinion and not based on an actual?
 

GazC_MFC

Well-known member
I get that selling at a loss is a no brainer, but how do they know what the future prices are? It seems to me like a licence to print money and falsely inflate an already over expensive market or I am missing something? What incentive is there for the market prices to come down of they are always based on a future market and an opinion and not based on an actual?
Ye what happens when the price is below what was predicted. They keep it. So it all about protecting the company not the consumer
 

Pak_Doo_Ik

Well-known member
Ye what happens when the price is below what was predicted. They keep it. So it all about protecting the company not the consumer
I suppose the producers argument would be we have to predict higher prices to cover risk or they go bust, but as with everything in the world at the moment when does covering risk become profiteering????
 

Nano

Well-known member
I get that selling at a loss is a no brainer, but how do they know what the future prices are? It seems to me like a licence to print money and falsely inflate an already over expensive market or I am missing something? What incentive is there for the market prices to come down of they are always based on a future market and an opinion and not based on an actual?
It's a traded market. Gas futures. You can buy now a future which is a contract that says on September 1st I will buy 10k units of gas for £100 and there will be a cost for that contract. If prices are expected to be high in September then locking in a price now means if 10k units in September are selling for £150 then there is obviously a profit made. That contract can also be sold or you can buy an existing contract. Whether prices will go up/down are just basic supply and demand. Pries have jumped recently because China have increased demand and due to Russia we have reduced supply.

It is just sensible to always hedge so that there is no massive shock if prices do jump significantly, conversely, if prices drop significantly the companies have overpaid. The purpose is to reduce volatility. It's like being on a fixed term mortgage and not being able to take advantage of interest rate drops but also being protected from rate rises.

Some companies weren't hedging enough so when costs jumped last year they had no option but to buy at the very high price but they were selling it to the customer for much less so they weren't viable.
 

ThatFragranceGuy

Well-known member
What nano says is correct, price of gas today doesn't matter because we are hardly using any and the companies that were making hay doing short term trades have all had their fingers burned and mostly folde

Ofgem can't control the actual cost to buy gas/elec units - they can just cap what the supply industry can charge us for them. If they set that cap too low those firms will go bust and the tab will need picking up for that - see bulb for example.

We need more reliable Nuclear and to up wind and solar generation as this will be needed for EV's and non-gas heating, but everyone wants to focus on the now.
 

Blf

Well-known member
Weird today. I've lived in Coulby 25 yrs. The tesco filling station at the Parkway centre has always been at least 2 p a litre cheaper than the Tesco/Esso one at the Blue Bell. Never the other way around in 25 yrs.
Yesterday and this morning the Coulby one is 10p a litre dearer than the Blue Bell at £1.93 a litre compared to £1.83 a litre.
 
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