Energy price cap
Discussion
The actual rates will vary, but this shows the average cost
https://www.ofgem.gov.uk/check-if-energy-price-cap...
If you choose to go onto a more expensive tariff (say a fixed price one), the cap isn't relevant.
The price for October has not been fixed yet, but many are forecasting a further >30% rise.
https://www.ofgem.gov.uk/check-if-energy-price-cap...
If you choose to go onto a more expensive tariff (say a fixed price one), the cap isn't relevant.
The price for October has not been fixed yet, but many are forecasting a further >30% rise.
From what I see, most 12 month fixed rates are todays cap rates + approx. 32%?
General thought seems to be somewhere between 25-40% so this is in the middle of that range.
However it is also ‘predicted’ by industry experts (haha) that it could drop next February by 25%…
Fix now for 12 months at +32% to June 2023 and you could be overpaying from now to October, then again Feb to June 23…
Crystal ball anyone?
General thought seems to be somewhere between 25-40% so this is in the middle of that range.
However it is also ‘predicted’ by industry experts (haha) that it could drop next February by 25%…
Fix now for 12 months at +32% to June 2023 and you could be overpaying from now to October, then again Feb to June 23…
Crystal ball anyone?
Martin Lewis is predicting the cap rate to go up by 51% in October (reasonable prediction), then +1% in January (best guess) followed by down 8% in April. That last one must be a bit of a punt. I will be coming off a long term fix with British Gas at the end of June and have opted for another fix with them through to May 23. Eye watering increases of gas 3.225p to 10.464p and electricity 17.171p to 34.531p all per kWh. My monthly cost will go from £63 to £155. Even so this should be cheaper over the next year than sticking to the variable rate and being subject to the cap. I checked out all the options assuming I used the same over the next 12 months as I have over the last, but maybe I can make some savings….
Maxwell
Maxwell
I have to say that I've comprehensively failed to understand why, if a price cap applies to a per unit charge, the media all talk about a different number. If the cap is the highest price per unit a utility can levy then no other number is relevant than that specific per unit number.
As for where prices will go, I've become pretty convinced that the only tool left for Putin to stop EU expansionism is to completely turn off gas supplies this winter. The EU is utterly obsessed with expanding all the way through the Soviet states and having a toxic, hard border with both Russia and the Middle East. Turning off its ability to keep its people warm and triggering an industrial output collapse and subsequent civil unrest just seems too much of a free gift for Putin to give up. That will spike North Sea gas way beyond what we saw last winter and as the market now works on spot those prices all have to come through to us.
I wonder, given this forum, whether a wider question would be how best to hedge that risk or even seek to potentially gain from it?
Paying a premium to the utilities to fix now is one solution and if you know your monthly usage through the fix period you can easily calculate the premium that you're paying. And it also may not be much of premium if your summer usage is negligible and in October the max price comes in above your fix level. Although you'd expect the current fix price to be reflecting what the entire industry and the financial markets think the next fix level will be.
But I've never traded Nat gas and I think I ought to look into what the contracts are as being able to go long if winter looks more and more perilous could be a worthwhile consideration.
As for where prices will go, I've become pretty convinced that the only tool left for Putin to stop EU expansionism is to completely turn off gas supplies this winter. The EU is utterly obsessed with expanding all the way through the Soviet states and having a toxic, hard border with both Russia and the Middle East. Turning off its ability to keep its people warm and triggering an industrial output collapse and subsequent civil unrest just seems too much of a free gift for Putin to give up. That will spike North Sea gas way beyond what we saw last winter and as the market now works on spot those prices all have to come through to us.
I wonder, given this forum, whether a wider question would be how best to hedge that risk or even seek to potentially gain from it?
Paying a premium to the utilities to fix now is one solution and if you know your monthly usage through the fix period you can easily calculate the premium that you're paying. And it also may not be much of premium if your summer usage is negligible and in October the max price comes in above your fix level. Although you'd expect the current fix price to be reflecting what the entire industry and the financial markets think the next fix level will be.
But I've never traded Nat gas and I think I ought to look into what the contracts are as being able to go long if winter looks more and more perilous could be a worthwhile consideration.
DA.
Sounds logical.
I have never had any involvement with derivatives.
Have sometimes spotted opportunities for their use (AML.L being an obvious one), but did not have any practical derivative knowledge.
The oil sector is in my long-term portfolio, not a majority holding but fairly significant, so have experienced the ups and downs (Deepwater Horizon) over the years. For the most recent spike in gas and oil prices, that sector has helped me to outperform the market considerably YTD.
If your expectation of European events becomes reality, do you think the oil sector will again follow the crude price, or will the resulting severe recession change the usual behaviour of oil share prices ?
Edited by Jon39 on Thursday 23 June 07:49
DonkeyApple said:
I have to say that I've comprehensively failed to understand why, if a price cap applies to a per unit charge, the media all talk about a different number. If the cap is the highest price per unit a utility can levy then no other number is relevant than that specific per unit number.
I think the real question is why do Ofgem try so hard to hide the real price per unit cap, instead quoting the cap as an annual bill based on “typical usage”. The media, being arts graduates who can’t do sums, just parrot the Ofgem press releases
outnumbered said:
I think the real question is why do Ofgem try so hard to hide the real price per unit cap, instead quoting the cap as an annual bill based on “typical usage”.
The media, being arts graduates who can’t do sums, just parrot the Ofgem press releases
A £ value for typical usage is far more relevant to households than the breakdown of caps for:The media, being arts graduates who can’t do sums, just parrot the Ofgem press releases
- Gas standing charge
- Gas per kwh charge (which can vary by region)
- Electricity standing charge
- Electricity per kwh charge (which can vary by region)
But yes, not sure why it is so difficult to find the above 4 figures.
I would think that if the actual unit price was what was quoted, a weighted average plus the same for the standing charge then such overt transparency would improve downward price competition. The U.K. population can cope with petrol being publicly priced by the individual unit as opposed to a centralised body referencing the average annual cost to a motorist.
I can't really see the logic other than a regulator assuming the people they exist to protect are too thick to understand how a price works?
By quoting the actual price it would force consumers to have a far more robust understanding of their usage (I'm sure most have this after recent rises however) while also pushing more pressure on vendors to be competitive.
I can't really see the logic other than a regulator assuming the people they exist to protect are too thick to understand how a price works?
By quoting the actual price it would force consumers to have a far more robust understanding of their usage (I'm sure most have this after recent rises however) while also pushing more pressure on vendors to be competitive.
DonkeyApple said:
I would think that if the actual unit price was what was quoted, a weighted average plus the same for the standing charge then such overt transparency would improve downward price competition. The U.K. population can cope with petrol being publicly priced by the individual unit as opposed to a centralised body referencing the average annual cost to a motorist.
I can't really see the logic other than a regulator assuming the people they exist to protect are too thick to understand how a price works?
By quoting the actual price it would force consumers to have a far more robust understanding of their usage (I'm sure most have this after recent rises however) while also pushing more pressure on vendors to be competitive.
The fault I'd suggest lies with the energy providers in making their pricing exceptionally opaque and hard to compare. I also can't find a way, even with a smart meter, to get my full usage data from my provider. They genuinely go out of their way to make this stuff difficult.I can't really see the logic other than a regulator assuming the people they exist to protect are too thick to understand how a price works?
By quoting the actual price it would force consumers to have a far more robust understanding of their usage (I'm sure most have this after recent rises however) while also pushing more pressure on vendors to be competitive.
I am a numerate chap and even then I have to create an excel sheet every time I want to compare tariffs and suppliers. God knows how my sister copes, when she barely scraped GCSE maths on the fourth attempt. Actually I do know how she copes - she doesn't, as she doesn't have a clue how much energy she uses or how much it would cost her with a different supplier. Which is exactly what they want.
It's a good question. Until October a typical U.K. home could run on very little gas and electric usage so paying 30% more wouldn't be a huge hit. Come October it would boil down to whether prices will rise significantly above your fix level to reap a return.
Personally, I believe there is a significant risk that spot gas next winter could exceed the spot prices of last winter and that even if they don't the period of time they are up there could be much longer.
However, what I am very u sure of is whether those prices can be passed on to the consumer immediately or have to be stored on the books of the utility firms and passed on slowly over the next few years. What I mean by this is that you have two parties involved in buying gas, the utility which has a very powerful balance sheet and could issue corporate bonds to pay for the gas and then charge back the end customer over 5 years to clear the bond and it's charges, or you have the end consumer who if struggling with the cost wouldn't be able to borrow at a fair rate and would face capitulation and heavy social unrest.
You could feasibly create a hybrid buffer solution whereby the Govt issues a gilt and the utility books excess customer amounts to it and also is liable for the eventual collection, it being harder for an individual to evade utility bills than HMRC
The big risk of stepping in to underwrite obviously being that tonnes of end consumers will decline to moderate their consumption anywhere near the rate if they were immediately culpable. That's the horrible fine line any Govt has to tread. Announce support plans too early and no one will change their consumption and the final bill will be double what it needs to be or more. This is further complicated by the fact that so many £billions of furlough cash remains in so many current accounts and that excess money needs to be spent on petrol and gas and not importing Chinese tat.
I suspect the only sane strategy for a normal individual is to use the next 3-4 months to cut their usage to the absolute bare bones, put aside as much money as possible and carry out whatever work is plausible to further insulate their homes and themselves.
Insulating an entire house may not be feasible but preselecting vital rooms for winter use and insulating those may be more practical. Secondary double glazing on young children's bedrooms and the living room, door closers so that warm rooms aren't left open to the cold spaces, draught excluders, thermal curtains, even using curtains to create internal zones.
The reality is that most people will have the financial means to cover the increased cost and a lot of the grumbling is because they'd ideally wish to spend that money on nice things. Beyond savings and furlough cash, eople can temporarily divert pension contributions, cut non essential monthly subscriptions, reduce alcohol consumption, revert to prudent home cooking and in extreme cases revert to the historic tactic of spending winter in one room!!
We would all like a bailout but in the cold, hard, light of day almost every household has the means at their own disposal to get through. It might be a bit grim but in the grand scheme of things it is utterly irrelevant in comparison to many millions of people outside the U.K. who have no home to keep warm and no food on their table. In Britain we won't freeze or starve, we'll just have a s
t Christmas which we'll fine off for years like 3 Yorkshiremen.
Personally, I believe there is a significant risk that spot gas next winter could exceed the spot prices of last winter and that even if they don't the period of time they are up there could be much longer.
However, what I am very u sure of is whether those prices can be passed on to the consumer immediately or have to be stored on the books of the utility firms and passed on slowly over the next few years. What I mean by this is that you have two parties involved in buying gas, the utility which has a very powerful balance sheet and could issue corporate bonds to pay for the gas and then charge back the end customer over 5 years to clear the bond and it's charges, or you have the end consumer who if struggling with the cost wouldn't be able to borrow at a fair rate and would face capitulation and heavy social unrest.
You could feasibly create a hybrid buffer solution whereby the Govt issues a gilt and the utility books excess customer amounts to it and also is liable for the eventual collection, it being harder for an individual to evade utility bills than HMRC
The big risk of stepping in to underwrite obviously being that tonnes of end consumers will decline to moderate their consumption anywhere near the rate if they were immediately culpable. That's the horrible fine line any Govt has to tread. Announce support plans too early and no one will change their consumption and the final bill will be double what it needs to be or more. This is further complicated by the fact that so many £billions of furlough cash remains in so many current accounts and that excess money needs to be spent on petrol and gas and not importing Chinese tat.
I suspect the only sane strategy for a normal individual is to use the next 3-4 months to cut their usage to the absolute bare bones, put aside as much money as possible and carry out whatever work is plausible to further insulate their homes and themselves.
Insulating an entire house may not be feasible but preselecting vital rooms for winter use and insulating those may be more practical. Secondary double glazing on young children's bedrooms and the living room, door closers so that warm rooms aren't left open to the cold spaces, draught excluders, thermal curtains, even using curtains to create internal zones.
The reality is that most people will have the financial means to cover the increased cost and a lot of the grumbling is because they'd ideally wish to spend that money on nice things. Beyond savings and furlough cash, eople can temporarily divert pension contributions, cut non essential monthly subscriptions, reduce alcohol consumption, revert to prudent home cooking and in extreme cases revert to the historic tactic of spending winter in one room!!
We would all like a bailout but in the cold, hard, light of day almost every household has the means at their own disposal to get through. It might be a bit grim but in the grand scheme of things it is utterly irrelevant in comparison to many millions of people outside the U.K. who have no home to keep warm and no food on their table. In Britain we won't freeze or starve, we'll just have a s
t Christmas which we'll fine off for years like 3 Yorkshiremen. Resurrecting this thread to try and get a grasp of what will happen to my finances soon.
Long story short is that my fixed rate deal is due to come to an end on Dec 31st this year. Obviously there's nothing available in terms of new deals and so I'll have no option but to roll onto the standard variable rate.
My current usage is indicated as broadly 'normal' by the various metrics I have at my disposal (from supplier and Loop.homes app). I'm currently paying ~£280 p/m on a dual fuel DD which is around £3400 per year. My current tariff is:
What I can't quite work out is how the £2500 'cap' comes in. From the Ofgem website "For the period the Energy Price Guarantee is in place, a household with typical usage on a dual fuel tariff will on average pay no more than £2,500 for their energy, regardless of the price cap level announced."
There doesn't seem to be a definition of "typical" and "on average" which means my meagre mind is struggling to comprehend what likely change I'm going to see once I roll off this fixed tariff.
Appreciate there'll be a level of stupid in here but it's been a long week already and so would appreciate any guidance on what the future holds from those who understand this in more detail than I do!!
Long story short is that my fixed rate deal is due to come to an end on Dec 31st this year. Obviously there's nothing available in terms of new deals and so I'll have no option but to roll onto the standard variable rate.
My current usage is indicated as broadly 'normal' by the various metrics I have at my disposal (from supplier and Loop.homes app). I'm currently paying ~£280 p/m on a dual fuel DD which is around £3400 per year. My current tariff is:
- 23.8p for electricity, and
- 5.6p for gas.
- 34p per/kWh for electricity, and
- 10p for gas
What I can't quite work out is how the £2500 'cap' comes in. From the Ofgem website "For the period the Energy Price Guarantee is in place, a household with typical usage on a dual fuel tariff will on average pay no more than £2,500 for their energy, regardless of the price cap level announced."
There doesn't seem to be a definition of "typical" and "on average" which means my meagre mind is struggling to comprehend what likely change I'm going to see once I roll off this fixed tariff.
Appreciate there'll be a level of stupid in here but it's been a long week already and so would appreciate any guidance on what the future holds from those who understand this in more detail than I do!!
the £2500 cap is nothing of the sort, its a cap on the unit price, that for the non existent "average" customer means they won't pay more than £2500
your new unit rates are dictated by the price cap
look at your bills this time last yearm take your useage and apply this years rates
then add the new standing charge, which has also gone up massively
your new unit rates are dictated by the price cap
look at your bills this time last yearm take your useage and apply this years rates
then add the new standing charge, which has also gone up massively
Notshortnottall said:
Resurrecting this thread to try and get a grasp of what will happen to my finances soon.
Long story short is that my fixed rate deal is due to come to an end on Dec 31st this year. Obviously there's nothing available in terms of new deals and so I'll have no option but to roll onto the standard variable rate.
My current usage is indicated as broadly 'normal' by the various metrics I have at my disposal (from supplier and Loop.homes app). I'm currently paying ~£280 p/m on a dual fuel DD which is around £3400 per year. My current tariff is:
What I can't quite work out is how the £2500 'cap' comes in. From the Ofgem website "For the period the Energy Price Guarantee is in place, a household with typical usage on a dual fuel tariff will on average pay no more than £2,500 for their energy, regardless of the price cap level announced."
There doesn't seem to be a definition of "typical" and "on average" which means my meagre mind is struggling to comprehend what likely change I'm going to see once I roll off this fixed tariff.
Appreciate there'll be a level of stupid in here but it's been a long week already and so would appreciate any guidance on what the future holds from those who understand this in more detail than I do!!
Basically £2500 is what an average user would pay under the price cap regime. You’re an above average user. Long story short is that my fixed rate deal is due to come to an end on Dec 31st this year. Obviously there's nothing available in terms of new deals and so I'll have no option but to roll onto the standard variable rate.
My current usage is indicated as broadly 'normal' by the various metrics I have at my disposal (from supplier and Loop.homes app). I'm currently paying ~£280 p/m on a dual fuel DD which is around £3400 per year. My current tariff is:
- 23.8p for electricity, and
- 5.6p for gas.
- 34p per/kWh for electricity, and
- 10p for gas
What I can't quite work out is how the £2500 'cap' comes in. From the Ofgem website "For the period the Energy Price Guarantee is in place, a household with typical usage on a dual fuel tariff will on average pay no more than £2,500 for their energy, regardless of the price cap level announced."
There doesn't seem to be a definition of "typical" and "on average" which means my meagre mind is struggling to comprehend what likely change I'm going to see once I roll off this fixed tariff.
Appreciate there'll be a level of stupid in here but it's been a long week already and so would appreciate any guidance on what the future holds from those who understand this in more detail than I do!!
So, you will be paying much more than you have been previously, once your fix ends.
Frankly, the cap is poorly explained in the public consciousness. It’s a cap on unit rates (not strictly true, but works as a simplifying assumption) not a cap on the total monies owed.
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