Energy bill price cap predicted to go to £3850 - 3 x what it was a year ago

[cakeorwine]

There is an AIBU here - but really it's posting for traffic

Russia is having 'maintainance issues' so has reduced the gas flow to Europe to a low level.

Gas prices have soared again.

Price cap prediction - £3850 - about 3 x what it was a year ago.

This is going to affect all of us

www.theguardian.com/money/2022/jul/27/uk-energy-bills-forecast-to-hit-3850-pounds-russia-cuts-gas-supply-further-europe-pipeline

Thank you really helpful. Based on that I’m hopefully looking at around £225 with the price increase (not great but better than some) looking at investing in smart heating before the winter so we can control it more closely allowing us to only heat where we need to rather than the whole house so hopefully can bring it down a bit

It's beginning to feel like the BBC/media are encouraging the energy companies to put the price up as much as possible.

How would that even work? They already charge the limit they're allowed to with the price cap - they can't charge more.

Aren't energy companies making a loss on selling at the price cap levels?

Am loathe to post but PPs with firm opinions about energy company pricing and price caps will presumably know:
Do all the UK energy retailers have upstream based in the UK that provides enough gas and electricity to meet customer demand?
Why did all the smaller energy retail firms go bust?
Why did the government have to run Bulb? itself instead of the remaining firms fighting to take on these profitable customers and growing this part of their business?
What happens when you make firms sell product for less than it costs them?
What happens when you try and over tax overseas upstream subsidiaries that are relatively sellable?
Did the UK government subsidise energy firms direct costs during COVID when the firms made significant losses?

At least the French government instructing EdF to limit price rises to 4?% and working out the funding subsidy with this state-owned entity had some rigour to it.

People voted for a government to privatise firms and allow overseas purchasers and de-regulate a market then institute a price cap without the structures to make the consequences viable.

I question whose side ofgem is on
I dont actually think it is the customers

Have concerns about Regulators of utilities allowing firms to load up debt at above market interest rates with offshore related companies allowing money to be extracted by the owners without hitting regulated profit caps such as in the English water supply industry.

That said, haven't seen the detail but on the face of it, am unsure Ofgem recognising the commercial suicide of making firms sell energy at below their input cost for 6 months is taking the side of suppliers, especially given this has led to the liquidation of most/all? the smaller firms in the market. Ultimately, if the government want to subsidise energy prices then that's what they need to do, whether in part by directly taking on green subsidies that are long-term contractual commtments made to establish sustainable domestic generation or by reducing VAT or paying the difference between costs and prices as the French imposed on their state-owned provider.

The Telegraph is reporting that EDF is to sue the French government for £7bn for forcing it to supply electricity below the price of generation.

It's in the guardian too.

www.theguardian.com/business/2022/aug/10/edf-sues-french-government-for-7bn-after-forced-to-sell-energy-at-a-loss-macron-price-cap

The Tories don't lack insight into the energy and cost of living crisis - they simply don't care and that clearly applies to Truss. Her brainless tax cut idea won't help the working poor and pensioners who pay little or no tax, ditto her NI freeze. Sunak is more fiscally literate but the blue rinses think he knifed Boris. The deep hole now occupied by the UK needs a good deal more than either of them seem able to give.

@Zilla1

Am loathe to post but PPs with firm opinions about energy company pricing and price caps will presumably know:

Not sure I have firm opinions, but I have been reading and gathering information, so I’ll give this a go.

Do all the UK energy retailers have upstream based in the UK that provides enough gas and electricity to meet customer demand?

I don’t think so, no.

Why did all the smaller energy retail firms go bust?

Because they had not hedged their supply sufficiently to cope when wholesale prices rose so quickly. They were supplying to some customers on fixed rates, without having bought all of that capacity ahead. Therefore they had to buy some of their energy at rapidly increasing market rates, and were then selling at a loss. They also had to keep supplying customers on the variable tariffs at the price cap rate even when wholesale rates outstripped it.

Why did the government have to run Bulb? itself instead of the remaining firms fighting to take on these profitable customers and growing this part of their business?

These customers were not profitable, they were loss-making. So other companies didn’t want to take them on, and the Government couldn’t force them to. So it had no option but to allow Bulb to continue trading and fund it in the meantime.

What happens when you make firms sell product for less than it costs them?

Once the money runs out, they become insolvent. This is defined as the inability to meet the firm’s obligations as and when they become due. How long this takes depends on how much they have in their coffers and the rate at which they are having to dip into it.

What happens when you try and over tax overseas upstream subsidiaries that are relatively sellable?

Pass.

Did the UK government subsidise energy firms direct costs during COVID when the firms made significant losses?

Dunno.

My standing charge is 51p!

@PuzzledObserver admirably honest and self-aware answers.

I thought it was state owned by the French. How can it sue the French government?

Am I being stupid?

The French Government are EDF's majority shareholder but it's still a separate legal entity with a Board etc. And there are other shareholders, too.

The point I was making was that nationalising power generation is unlikely to solve consumer inability to pay their energy bill. A lot of power is generated using gas-fired generation, which is a global wholesale market and therefore immune to government intervention.

And in answer to one question @PuzzledObserver passed on: when Shell and BP made huge losses thanks to lockdown, they were not bailed out. Corporations are supposed to retain earnings in good years to smooth out the bad ones.

I also can't answer the question on the saleability/taxability of overseas upstream assets but guessing that's probably a very complicated accountancy matter involving relative currency values.

@XingMing indeed. I think the point I was alluding to is that a few of the energy retailers have international upstream exploration operations that will be making significant profits. If these are given a haircut then it will be possible to further separate that from the retail arms. As you say, unless all the major retailers had UK based upstream operations, they will have to buy energy in aa market linked to the global commodity prices. The UK government's decision not to support investment in UK storage then one of the means by which prices could be hedged is removed. It is possible to hedge using financial instruments but the current Northern Hemisphere Summer market prices are high. Ultimately if the government forces retailers to sell product for 6 months at a price much higher than the wholesale price then companies will fail. I don't see Tesco being instructed to sell food for a price lower than the wholesale cost yet.

Saw this yesterday, about supermarkets not passing on fuel price drops. They are profiteering

Supermarkets not passing on lower fuel price - RAC www.bbc.co.uk/news/business-62494404

We pay £385 a month for dual fuel, in a 5 bed house. There are six of us, two over 65 one of whom is disabled. The house is occupied 24h/ day.
we are in a fixed rate to June 2023, which I fixed last year, so the price rises are yet to hit us. I suspect when they do, we will be around £1000 per month, which is frankly terrifying.

Sit tight and enjoy feeling a bit pleased with yourself for fixing until mid-23, Pineapple. And keep your fingers crossed that the Ukraine war will be over by then, and gas prices will be on the way back down.

It's a bit of a gamble, though, isn't it? Pineapple is obviously paying a lot more than she would if she hadn't had fixed and the govt still might be shamed into stepping in and sorting things out. I don't see how they can't tbh...the pressure is building

Scroll back about a page @GreenLunchBox and you'll read why it's not as simple as the government "stepping in to sort things out".

Well, I will be demanding a wage rise to cover the increased costs of the mortgage, my energy bills and general price rises. I need an extra £700 a month which is an extra £15k a year gross.

I have an occupation in demand so my firm can either pay it or I will move to a company that will. And no, I don't give a toss what the £200k a year head of the Bank of England says about wage inflation spirals.

Predictions are £5k by next April:

www.dailymail.co.uk/news/article-11101527/Fat-cat-bosses-Britains-biggest-energy-firms-head-showdown-meeting-ministers.html

Yes LD proposal to freeze price cap would cost 35 billion (for just one year)

Perhaps what could be done is tier the pricing so the frugal pay far less and the high end user, pays far more, with some exceptions for those with medical reasons to need more.

After all, why Should Sunak heat his pool for the same unit cost as someone struggling to keep warm

Doubtless some support for energy companies but this could be done very quickly, unlike insulating homes or building Nuclear & targets the less well off.