Support road.cc

Like this site? Help us to make it better.

forum

Energy price cap

Can someone please explain how the energy price cap works.

Specifically: in what way is it a "cap"?

I read that the price cap is increased, then will be increased again, and so on and so forth.

I also read that the energy companies' profits have been increasing massively.

So, in what way is the energy price cap what the chap on the Clapham Omnibus would understand to be a cap (ie. a limit)?

If you're new please join in and if you have questions pop them below and the forum regulars will answer as best we can.

Add new comment

96 comments

Avatar
David9694 | 1 year ago
4 likes

Pubs could be 'lost forever' as energy bills threaten mass closures

https://www.manchestereveningnews.co.uk/whats-on/food-drink-news/pubs-co...

just when we may need them them most. 

Avatar
chrisonabike replied to David9694 | 1 year ago
0 likes

Luckily road.cc doesn't need to be licenced - although maybe a breath test before posting might be useful?

Avatar
mdavidford replied to chrisonabike | 1 year ago
1 like

Are you referring to the commenters or the staff?

Avatar
chrisonabike replied to mdavidford | 1 year ago
2 likes

I can only speak for myself.

Avatar
srchar | 1 year ago
2 likes

It is effectively a cap on energy suppliers' profits. It was never intended to cap energy prices across the board; the intention was to prevent energy suppliers taking advantage of customers who didn't switch suppliers regularly to get the best deal. Note that we are talking about energy suppliers here, not generators, nor oil and gas companies.

"Energy price cap" is a bit of a misnomer. You can't cap the price of energy - oil, gas, coal, electricity etc - all are internationally traded commodities, sold to the highest bidder (unless you have a solar panel at home and feed excess back to the grid, in which case you get mugged off).

If you cap the price you're willing to pay for energy at below market rate, nobody sells you any energy and you freeze to death.

A better way to help during spiking energy prices would be to reduce the rate of tax on energy. Another way would be to stop telling oil and gas companies that they are going to be legislated out of business and give them some certainty of the regulatory environment they will operate in for at least the next decade, preferably two. Otherwise, they will continue to direct profits towards shareholders rather than exploration. A third way would be for everyone to simply use less energy.

We had better hope that the coming winter is mild. And the winter after that. And the winter after that. The era of cheap energy is over, and this is just the beginning.

Avatar
David9694 replied to srchar | 1 year ago
0 likes

So I can afford a £400 fuel bill for what sounds like for December and then for January if that is what it it is coming to - it's not what I'd prefer to spend my hard-earned on. I would quite like to stop soon as well. 

And everything we buy and use is affected - farmers, schools, hospitals. Everything goes up.

My Nan spent many an afternoon on a bench in her new local Arndale - free warmth and often company - are we going to go back to things like that?

It sounds like we've to this for a while, when/how does it end,  or is srchar right?

 I'm getting a sense of "that dog will have to go", not yet getting a sense of "that Audi will have to go". They're a quiet bunch and hard to read, but there must be fixed income households who won't be able to pay this sort of rate.

 

Avatar
Mungecrundle replied to David9694 | 1 year ago
3 likes

My predictions:

Increase in pressure on social services and the NHS this coming winter as frail people who would normally cope require treatment following hypothermia and malnutrition over periods of colder weather. I think there will be bed blocking as patients will be unable to be discharged back into those same circumstances and dumping of relatives who require extra care; heating, washing of bedding, support from plugged in equipment etc.

Personal insolvencies rocketing, debt spiralling, credit harder to come by for those now at higher risk of defaulting.

Increased suicides and mental health illnesses.

Knock on effects in cost of food and other essential items that cannot be offset by shopping around or living off pasta.

Reduction of council tax revenue as heating and eating take priority in household budgets that cannot possibly cover all essential costs. Leading to even more stress on social services funding.

Return to a cash economy and unregulated employment arrangements with implications for criminality, exploitation and tax evasion.

Increasing sense of injustice. I think we will see organised protests and even civil disobedience if enough people end up with nothing to lose.

I'm thinking of buying a bunker, a crate of baked beans and some sort of system that can turn urine back into fresh water.

Avatar
David9694 replied to Mungecrundle | 1 year ago
0 likes

A good description of the risks here and how they may well play out. People are going to die if there is prolonged cold.  Scotland will likely do something - whether they're allowed to/the UK govt likes it or not. Significant numbers of people cut off from the grid will trigger the unrest you describe. 

I wouldn't want to be flashing wealth with a 71 Evoque at a time like that, any more than showing an emerald green lawn in these conditions now (my local football club grrr).  My solar battery shuts down in a power cut, but if I overcome that I still would be wary after dark of showing a bright light or TV when everyone around me is off. 

Government (attitude: "you're free: free to starve") off-line until September to bring about some mitigation of all that you describe.

 

Avatar
hawkinspeter | 1 year ago
3 likes

I read someone's opinion the other day on domestic solar panels, and they brought up the point that excess electricity produced is typically sold back to the energy companies at below market rates, which means that people are paying lots of money for panels and batteries and then end up subsidising a private company with the excess energy.

Avatar
HoarseMann replied to hawkinspeter | 1 year ago
3 likes

yep, the demise of the Feed-in-Tariff obliterated the already marginal financial case for domestic solar... https://neweconomics.org/2018/04/the-war-on-solar/

Avatar
Secret_squirrel replied to HoarseMann | 1 year ago
1 like

That link doesnt substantiate your statement.  Especially at 2022 leccy prices.

This article is better balanced.

https://www.moneysavingexpert.com/utilities/free-solar-panels

Avatar
HoarseMann replied to Secret_squirrel | 1 year ago
0 likes

The difference is you used to be able to make money generating solar with the higher feed in prices.

Avatar
David9694 replied to hawkinspeter | 1 year ago
1 like

The payment (5.5p per kWh) for exported power shows what a one-sided rip-off this now. 

Avatar
Rich_cb replied to hawkinspeter | 1 year ago
4 likes

That's just the price that generators get paid.

Look at the latest CfDs for solar. About 4.5p/kWh.

While FIT were great for the homeowners able to benefit from them they were essentially just a way of passing money from all bill payers (including the poorest) to (usually wealthy) solar panel owners.

FIT made electricity more expensive for everyone other than the lucky few who could afford to install the panels.

Avatar
David9694 replied to Rich_cb | 1 year ago
1 like

I'm one less user drawing from the grid when all the demand for aircon threatens us all with blackouts.  On sunny days, I put out 2-3 times what I use. If I generate 15 kWh, I cover that day's energy standing charges - riches indeed. I started in February, so haven't yet experienced the horror of December and January. 

Avatar
brooksby replied to David9694 | 1 year ago
1 like

David9694 wrote:

I'm one less user drawing from the grid when all the demand for aircon threatens us all with blackouts.  On sunny days, I put out 2-3 times what I use. If I generate 15 kWh, I cover that day's energy standing charges - riches indeed. I started in February, so haven't yet experienced the horror of December and January. 

Slate.com had an article about how weird they find it that Europeans would rather get hot and sweat than just get decent aircon fitted...

And yet a couple of weeks ago they also had an article about an outdoor shopping area in one of the Gulf states which had aircon.  Yes - huge aircon units to keep an outdoor area cool in a Gulf state... 

Avatar
Rich_cb replied to David9694 | 1 year ago
3 likes

I'm hoping to be joining you soon, have put down a deposit on a system and just waiting on it now.

Will probably be in place just in time for winter at this rate!

Avatar
David9694 replied to Rich_cb | 1 year ago
2 likes

We were 6 months from ordering to switch-on. Get a battery. Consider if you want an island circuit - sold separately, I think. I haven't yet found an electrician able to do this. 

Avatar
Rich_cb replied to David9694 | 1 year ago
1 like

I've gone for some custom shaped panels to fit more on but, unsurprisingly, that's meant a longer wait.

Hopefully be on by end of the year.

I would like an island circuit, didn't realise it was tricky to do (clearly I'm not an electrician!), will start asking around for quotes now. Cheers for the heads up.

Avatar
AlsoSomniloquism replied to Rich_cb | 1 year ago
1 like

Unfortunately we are an end terrace house with a gabled roof with the main roof area pointing north so no real chance to have decent Solar outputs otherwise would have gone for it years ago.

Avatar
mattw replied to hawkinspeter | 1 year ago
0 likes

That's the default Smart Export Guarantee, and your choice.

You can choose a tariff which pays the market wholesale rate for exports.

The downside is that you may get burnt in winter when you buy from the grid and demand exceeds supply, when you will pay a higher price.

Alternatively you can self-consume (even timeshifted with a house battery).

In a (even currently struggling due to the supply constraints we all know about) free market with a diversity of suppliers you have a choice.

On your separate point on feed-in tariffs, the case is that solar had developed sufficiently for high subsidies to be unnecessary - that rent-a-roof entrepreneurs built fortunes of 10s of millions on the back of high FITs suggests that that was probably a good decision.

Avatar
Mungecrundle | 1 year ago
6 likes

I don't understand all the fuss. Surely our professional leaders are working diligently on how best to claim heating costs for their multiple homes through their benefit-in-kind exempt MPs allowances. Once they've got that sorted I'm certain they won't forget about the rest of us. "All in it together" or something...

Avatar
mdavidford | 1 year ago
2 likes

The bigger question is how much luft can you get on your energy price cap?

Avatar
Gm_Crop replied to mdavidford | 1 year ago
0 likes
mdavidford wrote:

The bigger question is how much luft can you get on your energy price cap?

It's almost worth a cost of living crisis just for that

Avatar
OnYerBike | 1 year ago
7 likes

In the "good old days" before the price cap, old fuddy duddies who never switched or even signed up to a better tariff with their existing supplier were massively ripped off. Suppliers were free to charge whatever they wanted, and so ramped up prices as high as they liked, and (some) customers just blindly paid their bills without question. 

The price cap was brought in to prevent this - essentially the idea was to cap the profit suppliers could make on individual tariffs. So rather than being free to charge the customer whatever they wanted, suppliers had to cap their tariffs based on a forumla that looked at the wholesale energy prices. Customers could still normally still save substantially by switching, but if you didn't switch you weren't being ripped off quite so massively. 

The current problem is caused by wholesale costs rising, which is a problem the cap was never designed to cope with. The energy suppliers that deal directly with retail customers like you and I are not currently making much profit, and indeed several have gone bust since the crisis started. The companies that are making the huge profits are the wholesalers, who operate on an international market and aren't subject to the cap.

Avatar
TheBillder | 1 year ago
4 likes

The idea was to protect people who had either never switched from the old gas and electricity board tariffs, or were coming off a fixed price, from punitive costs caused by ignorance of switching or inertia. It could never insulate people fully from global price hikes without regulating the entire energy process.

The most interesting thing was how the policy developed within the Conservative Party. When suggested by Ed Milliband, it was Dangerous Socialism. By the time of the next election, it was Tory policy. Odd.

Avatar
hawkinspeter replied to TheBillder | 1 year ago
3 likes

TheBillder wrote:

The idea was to protect people who had either never switched from the old gas and electricity board tariffs, or were coming off a fixed price, from punitive costs caused by ignorance of switching or inertia. It could never insulate people fully from global price hikes without regulating the entire energy process. The most interesting thing was how the policy developed within the Conservative Party. When suggested by Ed Milliband, it was Dangerous Socialism. By the time of the next election, it was Tory policy. Odd.

 

Avatar
NOtotheEU replied to TheBillder | 1 year ago
4 likes

TheBillder wrote:

The most interesting thing was how the policy developed within the Conservative Party. When suggested by Ed Milliband, it was Dangerous Socialism. By the time of the next election, it was Tory policy. Odd.

So if the Conservatives have stolen New Labour policy maybe Labour might move towards 'Old' Labour and remember how they got their name.

Given how Mick Lynch has recently performed in interviews showing complete and utter contempt for the media and politicians alike he seems a perfect candidate for the leaders job which is currently held by, you know, that guy in a suit, whatshisname. It'll come to me eventually.

Avatar
hawkinspeter replied to NOtotheEU | 1 year ago
1 like
NOtotheEU wrote:

TheBillder wrote:

The most interesting thing was how the policy developed within the Conservative Party. When suggested by Ed Milliband, it was Dangerous Socialism. By the time of the next election, it was Tory policy. Odd.

So if the Conservatives have stolen New Labour policy maybe Labour might move towards 'Old' Labour and remember how they got their name.

Given how Mick Lynch has recently performed in interviews showing complete and utter contempt for the media and politicians alike he seems a perfect candidate for the leaders job which is currently held by, you know, that guy in a suit, whathisname. It'll come to me eventually.

Keith something?

Avatar
hawkinspeter replied to NOtotheEU | 1 year ago
4 likes

NOtotheEU wrote:

So if the Conservatives have stolen New Labour policy maybe Labour might move towards 'Old' Labour and remember how they got their name.

Given how Mick Lynch has recently performed in interviews showing complete and utter contempt for the media and politicians alike he seems a perfect candidate for the leaders job which is currently held by, you know, that guy in a suit, whatshisname. It'll come to me eventually.

What we really need is a new party fronted by Lynch and Corbyn pushing a strong socialist agenda to redress the balance somewhat. Labour is now just Tory-lite.

Pages

Latest Comments