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.