Why can Regulator raise the energy price cap?

[Maybeebebe]

The Don’t Pay UK group, which is demanding a reduction of bills to an affordable level, has reportedly gathered support from 80,000 people who intend to cancel their direct debit payments from 1 October, when the regulator raises the energy price cap, the maximum amount suppliers are allowed to charge.

the government are saying that its going to be tough and are arranging some help for some people, but I dont understand (because I don't know why) why they can't put a new cap on?

Why wasn't a cap agreed previously?

When the last cap was put in,surely they didn't just put it in, with nothing to follow?

(Explain like I am 9!)

I don't really understand what you're asking. The purpose of the cap is to stop companies overcharging people who never shop around for the best deal. It's not intended to force companies to sell electricity and gas at a loss. It changes regularly because the price of electricity and gas changes.

Because of the sudden rise in prices, the cap is forcing prices below the level they should be at, since it's not supposed to do that, it needs to be raised.

There is a cap which is designed to balance the costs to the suppliers and the costs to people

Having looked at the state of the market they have increased it - so there is a cap in effect now / but they have decided that come October it will need to go up again or the suppliers won't be able to cope

They didn't put it up all at once because then people who would have been protected over the summer would no longer be protected

The basic problem is that we are at the whim of market forces with only regulation to try and counter those problems / capitalism and global market for you

If you sell energy for less than you paid to buy it, you'll go bust. The government can't cap prices at below cost.

There is always a cap, and there will still be a cap, but it will be higher, to reflect the increased price that the suppliers are having to pay to buy the energy that they then supply to your house. Generally speaking (apart from a couple of big companies who have both a production arm and a supply arm), the people you pay for your energy aren't the same companies who are producing the gas/electricity and making massive profits - they are struggling (and sometimes going under) as their costs (ie the price of energy) are going up but the price they can charge their customers (us) is capped - therefore the cap gets reviewed every 6 months to ensure it reflects the cost of the energy.

Look at the 5 year prices BBC

if they don’t increase the cap companies will go bust. Government has a choice of subsidies at source, French model, or targeting benefits.

Although the cap is going to be reviewed every 3 months now so next review after October will be January

the people you pay for your energy aren't the same companies who are producing the gas/electricity and making massive profits

Ah... this makes sense

Cant we do something about the ones making the massive profits

How much do you think will every household get, had their suppliers distributed ALL profits back to them, I.e. effectively were run as a charity?

It is a simple question, easy to find an answer to, just one number divided by another. But I am interested in how much people think it would be without running any calculations.

@forinborin An alarmingly small number.

Eg - last week I posted in response to someone who wanted a universal basic income of £2-4k pm per household depending on number of residents without any notion of how it would be paid for, particularly as with that amount coming in, most people wouldn't bother to work, or would only work very part time.

I suspect the OP was thinking of paying for it with a vague notion of 'tax the rich' but if you take £1bn from a billionaire, or large multinational multibillion profit company, and share it across approximately 65 million people, it comes to less than £15 per per person.

So even if we took £10 bn each from 10 large companies, which is a vastly enormous number and probably most of their profit (which often funds pensions and infrastructure and the like) and shared it out directly between 25 million households, you're still only looking at £4k per household, which will pay our utility bills but little else, but in the meantime, wipes an enormous amount off our pension funds and leaves a great whole in government funding for other things.

Exactly. And to add, billions in your post relate to worldwide profits, there's no ethical grounds to assume that all ExxonMobil or Chevron profits in this hypothetical scenario have to go to UK households.

How are they making such huge profits though if they are having to raise prices to stop them going bust? I struggle to understand this.

@Mouldyfeet I dont either.

Things dont add up.

I dont think Ofgem acts in the interests of customers either.

There are two types of company involved in getting gas out of the ground and into your boiler.

The first type are the ones who extract and trade in these hydrocarbons. They just sell to whoever bids the highest. That's why when the European price spiked, a few LNG tankers going from the US to China ended up docking here instead. Why would Shell/Exxon/Gazprom sell to us for £300/thm if they are being offered £400/thm by Germany (to pick a hypothetical example)? So the UK bids higher to make sure that supplies don't run out. The big winners are those extraction companies.

The second type are the ones named on your bill. EDF/Octopus/British Gas/Scottish Power/Bulb etc. They can only buy gas at the above wholesale price. They'll add their own margin to the price, but that's only around 2% so not megabucks. They then sell on to us.

There are some cases where extractors and consumer suppliers come under common ownership, but that doesn't really alter the issues.