Energy bills to rise - how much is yours going up by?

[nlogax]

Surprises me if true, I saw a report yesterday that stated Bulb was carrying between £600 million to £1bn in debt.

Yes..I may have been a bit quick off the mark responding to a couple of reports of Bulb account holders recieving emails from Ovo this morning.

 

[duncanp]

Why do you say that if your DD is set up for the right amount?

It depends what you mean by the "right amount".

The "right amount" should be the cost of the electricity that you use, averaged out over the year.

If your account is in credit the "right amount" should be ((annual cost of electricity) - (amount account is in credit))/12.

If you are moved to a new supplier because your previous supplier has gone bust, you would hope that the new supplier would take into account any credit balance when working out how much you have to pay.

However energy companies are notorious for making it difficult to get hold of a credit balance, either by a refund to your bank account or a reduction in your direct debit payment for next year.

There have been plenty of cases of direct debit payments being increased, despite an account being in credit.

 

[najaB]

Yes..I may have been a bit quick off the mark responding to a couple of reports of Bulb account holders recieving emails from Ovo this morning.

It's still possible that Ovo may be buying Bulb. It depends on how much (relatively) cheap has Ovo pre-purchased. If they have a lot then they can make an absolute killing by taking on the customers and charging them the capped rate.

 

[Trackman]

It depends what you mean by the "right amount".

The "right amount" should be the cost of the electricity that you use, averaged out over the year.

If your account is in credit the "right amount" should be ((annual cost of electricity) - (amount account is in credit))/12.

If you are moved to a new supplier because your previous supplier has gone bust, you would hope that the new supplier would take into account any credit balance when working out how much you have to pay.

However energy companies are notorious for making it difficult to get hold of a credit balance, either by a refund to your bank account or a reduction in your direct debit payment for next year.

There have been plenty of cases of direct debit payments being increased, despite an account being in credit.

Don't I know it. Just gone over to Octopus from Avro.
Avro wouldn't give me a £450 refund even though my DD was paying for my usage over 12 months (gas and electric).
Octopus are not having a bean out of me.
No letters in the post but emails about setting my online account up and to set up a d/d. They can go and whistle.
They can go to the magistrates for a rights of entry warrant and fit prepayment meters.
Whilst I'm ranting, my 'smart meters' haven't been 'smart' for about 6 years (as I've changed supplier several times) and it's a real pain in the bum to read them because of the location.

 

[nlogax]

Whilst I'm ranting, my 'smart meters' haven't been 'smart' for about 6 years (as I've changed supplier several times) and it's a real pain in the bum to read them because of the location.

Some of us are still waiting for our first smart meters to be installed years after registering for them.

 

[najaB]

They can go to the magistrates for a rights of entry warrant and fit prepayment meters.

Yes. They can. And it would inconvenience you more than it would them.

 

[duncanp]

Some of us are still waiting for our first smart meters to be installed years after registering for them.

And some of us are NOT having smart meters unless they become a legal requirement.

They won't work properly in my flat because the meter is in a metal box, and this is one of the factors which can cause a "smart" meter to send "inaccurate readings".

Of course you know in whose favour the "inaccuracy" will be. (clue - it won't be the customer)

 

[jon0844]

Surely there's some error correction in place so the wrong data won't get through (more likely it will simply require a manual reading)? And are you suggesting a smart meter will purposely send a false reading?

 

[Mcr Warrior]

And are you suggesting a smart meter will purposely send a false reading?

Presumably no longer fully operational SMETS1 meters still record useage but no longer send any readings.

 

[Darandio]

Some of us are still waiting for our first smart meters to be installed years after registering for them.

I still get a happy smiley email every six months with news about my smart meter. It's always to tell me that they still aren't available yet and it's been at least 5-6 years now.

 

[High Dyke]

I still get a happy smiley email every six months with news about my smart meter. It's always to tell me that they still aren't available yet and it's been at least 5-6 years now.

I'm in the other position. My supplier can't contact me enough to advise I've not yet booked to have one fitted. Meanwhile, I've been Bulb some considerable time, but it still hasn't stopped them advising myself, and many other loyal customers, that we should increase our payments. I've agreed to increase my payment by the minimum amount possible, about £120 p/mth, but not to the £134 p/mth as they suggested. This would've been the second substantial increase in 2021.

 

[Baxenden Bank]

And some of us are NOT having smart meters unless they become a legal requirement.

They won't work properly in my flat because the meter is in a metal box, and this is one of the factors which can cause a "smart" meter to send "inaccurate readings".

Of course you know in whose favour the "inaccuracy" will be. (clue - it won't be the customer)

And the bad news is:

From 1 January 2022 it will be compulsory* (some BEIS** decision rather than Ofgem) and the suppliers will be given targets / have timetables to fully install by the end of 2025.

In their customer dashboard Futility Warehouse have an option to 'arrange an appointment'. I ignored their offer so they just arranged an appointment for me to have one fitted anyway. The only on-line option then is to re-arrange the appointment with no option to cancel or say you don't want one all the same thanks. After a very strongly worded (but no swearing) complaint I got a written response that, in effect, they assume you want one installed unless you tell them otherwise. So it seems pointless having a button to request an appointment.

Which, having followed it up, I found that the previous 'Q: is it compulsory to have a smart meter fitted, A: no'* has changed to 'you will be having a smart meter fitted, suck it up luddites'*.

* I haven't looked up the exact wording.

** Department for Business, Energy and Industrial Strategy

I'm in the other position. My supplier can't contact me enough to advise I've not yet booked to have one fitted. Meanwhile, I've been Bulb some considerable time, but it still hasn't stopped them advising myself, and many other loyal customers, that we should increase our payments. I've agreed to increase my payment by the minimum amount possible, about £120 p/mth, but not to the £134 p/mth as they suggested. This would've been the second substantial increase in 2021.

Why would Bulb want you to have your money in your bank account when it can be in theirs? They can make far better use of it than you can. Pat on head, there, there, let us work everything out for you, don't worry yourself.

If £120 per month is the correct amount - based on your actual usage, or the industry standard figures, then fine.

If not object, ask how they have calculated the figures, give them your estimate of what the monthly payment should be.
Response 1 will be: but you don't want to worry about the BIG BILL do you? No attempt will be made to provide an explanation of how they calculated the amount.

Escalate, again ask how they have calculated the figures, give them your estimate of what the monthly payment should be.
Response 2 will be: we don't know what your usage will be, you don't want to be IN DEBIT do you? No attempt will be made to provide an explanation of how they calculated the amount.

Escalate again. Once more ask how they have calculated the figures, give them your estimate of what the monthly payment should be.
Response 3 will be: your budget payment is based on industry standard figures, we have to use these. No attempt will be made to provide an explanation of how they calculated the amount, or what industry standard figures they have plucked out of the air to inflate your monthly budget plan.

Formally complain. Tell them that they have to use either your actual usage, or the relevent industry standard figures. Tell them they have to explain to you how they arrived at their figure and that that figure must be fair. Give them your estimate of what the monthly payment should be. Also offer an alternative monthly payment amount based on 'industry standard figures', base this on the 'Typical Domestic Consumer Values (TDCV) which are available with some digging on Ofgem website but I think I quoted them above - it depends on whether you are gas / electric / economy 7 / dual fuel and based on low, medium or high usage. Whether you actually say 'TDCV' or just 'industry standard figures' is up to you.

At each stage, tell them you will only communicate in writing so that you have a record of the discussion which you wish to use, if necessary, to make a formal complaint and a referral to the ombudsman.

It worked for me. My payment is back to what it should be (based on lower pre October prices) and they have kicked any review of the amount into the long grass (next September). Just hope they take the correct amount tomorrow.

Don't I know it. Just gone over to Octopus from Avro.
Avro wouldn't give me a £450 refund even though my DD was paying for my usage over 12 months (gas and electric).
Octopus are not having a bean out of me.
No letters in the post but emails about setting my online account up and to set up a d/d. They can go and whistle.
They can go to the magistrates for a rights of entry warrant and fit prepayment meters.
Whilst I'm ranting, my 'smart meters' haven't been 'smart' for about 6 years (as I've changed supplier several times) and it's a real pain in the bum to read them because of the location.

The problem is, if you don't set up a direct debit, they can charge you the 'standard credit' rate per Kwh, which is rather higher than the direct debit rate - be that on the SVT or a fixed price deal.
You set up a direct debit, they empty your bank account by just giving you notice of a higher monthly amount under DD rules. They win.
You don't set up a direct debit, they charge you more. They win.

 

[Ediswan]

And the bad news is:

From 1 January 2022 it will be compulsory* (some BEIS** decision rather than Ofgem) and the suppliers will be given targets / have timetables to fully install by the end of 2025.

This appears to be the BEIS document: https://assets.publishing.service.g...2020-govt-response-minimum-annual-targets.pdf

It does appear to crank up the pressure on energy suppliers, but I don't see anything which says that smart meters will be truly compulsory.

My supplier is E.ON Next. When they were plain E.ON, they were constantly badgering me to take a smart meter. Since the brand change, nothing.

 

[Darandio]

I still get a happy smiley email every six months with news about my smart meter. It's always to tell me that they still aren't available yet and it's been at least 5-6 years now.

I'm in the other position. My supplier can't contact me enough to advise I've not yet booked to have one fitted. Meanwhile, I've been Bulb some considerable time, but it still hasn't stopped them advising myself, and many other loyal customers, that we should increase our payments. I've agreed to increase my payment by the minimum amount possible, about £120 p/mth, but not to the £134 p/mth as they suggested. This would've been the second substantial increase in 2021.

My energy company really excelled themselves today regarding this. A text at 11:42 am read.....

Great news - we're ready to install your smart meter and appointments are available. Be smart, book yours today at.......

At 3:33pm came another text.....

We told you that we're ready to install your Smart Meter - but we're not. We're really sorry for the confusion, please ignore that text.

 

[Jimini]

EDF emailed me the other day to say that my dual fuel bill DD was going up from £94 per month, to £242. You could almost hear the beeping noise as they backed up when challenged over the phone, but I do wonder how many people just roll over and accept sizeable changes like that.

 

[3rd rail land]

EDF emailed me the other day to say that my dual fuel bill DD was going up from £94 per month, to £242. You could almost hear the beeping noise as they backed up when challenged over the phone, but I do wonder how many people just roll over and accept sizeable changes like that.

How can any energy provider justify a price rise of that proportion? I'm amazed there are people out there given price rises of this scale who don't challenge them. I understand that wholesale fuel prices are increasing and that end consumer prices are increasing as a result but I'd be challenging an increase of this level and if it wasn't resolved satisfactorily I'd threaten to change suppliers. It wouldn't be an empty threat.

One time I was with a small electricity supplier and I was paying a very reasonable price but all of a sudden they informed me that my direct debit would be increasing by a huge amount. I challenged them pretty rapidly and after providing an up to date reading they backed down. They never did explain why they thought I had been substantially underpaying. Undoubtedly something to do with the fact I was on estimated usage at the time.

 

[najaB]

How can any energy provider justify a price rise of that proportion?

To be pedantic, that was the price rise just the amount of the direct debit. The actual price will be no higher than the cap.

 

[3rd rail land]

My fixed electricity deal ends on 29th January 2022. My property is electricity only.

Am I correct in thinking the best course of action at present is to allow this deal to run out and go on whatever variable tariff my provider puts me on? At what point should I consider a new fixed deal?

I am perfectly happy with my provider. The only minor hiccup was the amount of time they took, a couple of months to adjust my usage figures from their estimate to real world figures after I gave then my first meter read.

 

[skyhigh]

How can any energy provider justify a price rise of that proportion? I'm amazed there are people out there given price rises of this scale who don't challenge them. I understand that wholesaler fuel prices are increasing and that end consumer prices are increasing as a result but I'd be challenging an increase of this level and if it wasn't resolved satisfactorily I'd threaten to change suppliers. It wouldn't be an empty threat.

If you were on a fixed deal you'd only be shooting yourself in the foot by switching right now as right now no new supplier would give you a price anywhere near your current tariff. If the direct debit goes up but your tariff and usage stays the same, all that will happen is you build up more credit in your account (which most suppliers will allow you to withdraw if you wish). Although more money is leaving your bank account you're not actually spending any extra - although I do realise that if finances are tight that is a difficult situation.

My fixed electricity deal ends on 29th January 2022. My property is electricity only.

Am I correct in thinking the best course of action at present is to allow this deal to run out and go on whatever variable tariff my provider puts me on? At what point should I consider a new fixed deal?

Martin Lewis suggests that is best - stay with your current supplier and treat the cap as effectively a fixed tariff until things settle down. I suspect the earliest it'll be worth fixing is around March/April when the cap is expected to rise. If you have battery storage/an EV there may be better fixed options for you, but they are edge cases that require calculation.

 

[3rd rail land]

Martin Lewis suggests that is best - stay with your current supplier and treat the cap as effectively a fixed tariff until things settle down. I suspect the earliest it'll be worth fixing is around March/April when the cap is expected to rise. If you have battery storage/an EV there may be better fixed options for you, but they are edge cases that require calculation.

Doing some quick due diligence it seems you, and Martin Lewis, are correct. So Energy are quoting me a huge increase, in percentage terms, for a new fixed deal. A 1 year fixed deal for example is very close to double what I am paying now.
The comparison sites are unable to find anything to show me so I'll let my current fixed deal expire and move onto the standard variable tariff my provider offers.

 

[Doppelganger]

This should show you all you need to know.

Prices at the NBP - the UK natural gas pricing point have exploded:

UK NBP Natural Gas Futures Pricing

Contracts are for physical delivery through the transfer of rights in respect of Natural Gas at the National Balancing Point (NBP) Virtual Trading Point, operated by National Grid. Delivery is made equally each day throughout the delivery period.<br>

www.theice.com

Over 300 p/th in October. Although it has dropped it is still way above around 50 p/th it was in the 1.5 years running up to that point.

 

[Howardh]

OK, so Sunak is giving everyone a £200 "loan" but not to ud directly, but to the power companies. Therefore we ahve to pay it back, via our bills, if and when prices go down. Basically the loan is coming to us and we have to pay it back.

I've never had a loan in my life, and I don't want this, I'll take the hit and then I don't have larger bills down the line. If we could, somehow, refuse the loan I would...but if I did and moved, then wouldn't I be paying back someone elses loan in the new house?

The simpler solution would be a VAT holiday and cutting back green levies; after all I bet everyone is cutting back on power use right now. And France has decided consumers won't pay more than 4% - putting the costs at the door of the energy suppliers; whether that will work I don't know, but if we had the profits from Shell alone divided amongst all the public we'd get far more than that £200 "loan".

 

[Starmill]

OK, so Sunak is giving everyone a £200 "loan" but not to ud directly, but to the power companies. Therefore we ahve to pay it back, via our bills, if and when prices go down. Basically the loan is coming to us and we have to pay it back.

I've never had a loan in my life, and I don't want this, I'll take the hit and then I don't have larger bills down the line. If we could, somehow, refuse the loan I would...but if I did and moved, then wouldn't I be paying back someone elses loan in the new house?

The simpler solution would be a VAT holiday and cutting back green levies; after all I bet everyone is cutting back on power use right now. And France has decided consumers won't pay more than 4% - putting the costs at the door of the energy suppliers; whether that will work I don't know, but if we had the profits from Shell alone divided amongst all the public we'd get far more than that £200 "loan".

It's not a loan I'm afraid, it's a £200 electricity subsidy in October 2022, followed by a £40 electricity levy in April 2023 and for five years thereafter. All consumer electricity accounts in England / Scotland / Wales will be charged the levy (whether they were active when the £200 subsidy was paid or not).

A flat £200 subsidy has a couple of advantages over VAT relief. One is that on average it will be worth around twice as much. The other is that it disproportionately benefits lower energy users, giving an incentive for higher users to cut back.

I also reckon that when the consumer rate caps rise again in October, the government might come under further pressure to pay a second £200 subsidy in December or next January because the price rises will be so painful.

 

[GB]

It's not a loan I'm afraid, it's a £200 electricity subsidy in October 2022, followed by a £40 electricity levy in April 2023 and for five years thereafter.

Ridiculous, there should be some way of opting out of this if you don't want or need it. What's worse is those that are not a recipient of the £200 subsidy (eg first time buyers after this has taken effect) will still have to pay it back.

 

[Starmill]

Ridiculous, there should be some way of opting out of this if you don't want or need it. What's worse is those that are not a recipient of the £200 subsidy (eg first time buyers after this has taken effect) will still have to pay it back.

Indeed. Even someone currently living with their parents but who moves out next year to rented accommodation will face the tax despite having not received the subsidy.

The only good thing about it is it means if someone receives the subsidy but then unfortunately dies before April 2028, it doesn't count as a liability on their estate.

 

[Howardh]

Over the last two months, winter obviously (!) my bills were £132 (Jan) and £102 Dec; all including VAT and standing charges. Previous year - under lockdown - £146 and £118 so despite the increase of something like 50% I've managed to reduce my bills.

That's down to the sheer effort of only having radiators on in the rooms I need (basically 2 out of 8) and switching them off altogether when out. The bathroom radiator gets turned on an hour before I want a bath and off immediately afterwards. I've had a smart meter installed, I didn't want ti but by heck I'm glad I did! Also the radiators are on thermostats.

Hot water and heating is gas; electricity for cooking and my use of that has remained stable - I don't think now I can cut down any more and be comfortable. May move all my toys (PC, telly) into the smallest bedroom as that's easiest to heat - and it's an empty room doing nothing. That and go out for long days on the trains!!

Anyhow, this time next year I'm expecting the cost to double over the winter months and that's unavoidable, just hope I can use little in summer to make some leeway. Last July cost me £40 and I wasn't particulary saving energy on colder days. Just do without the radiators over summer I suppose.

 

[3rd rail land]

Over the last two months, winter obviously (!) my bills were £132 (Jan) and £102 Dec; all including VAT and standing charges. Previous year - under lockdown - £146 and £118 so despite the increase of something like 50% I've managed to reduce my bills.

That's down to the sheer effort of only having radiators on in the rooms I need (basically 2 out of 8) and switching them off altogether when out. The bathroom radiator gets turned on an hour before I want a bath and off immediately afterwards. I've had a smart meter installed, I didn't want ti but by heck I'm glad I did! Also the radiators are on thermostats.

Hot water and heating is gas; electricity for cooking and my use of that has remained stable - I don't think now I can cut down any more and be comfortable. May move all my toys (PC, telly) into the smallest bedroom as that's easiest to heat - and it's an empty room doing nothing. That and go out for long days on the trains!!

Anyhow, this time next year I'm expecting the cost to double over the winter months and that's unavoidable, just hope I can use little in summer to make some leeway. Last July cost me £40 and I wasn't particularly saving energy on colder days. Just do without the radiators over summer I suppose.

I've gone one further and hardly had the radiators on at all this year. My fixed deal ran out on 29th January so I spent January practicing not turning on the radiators unless it was extremely cold. I simply put on warm top over what I would usually wear with the radiator on which works rather well. I'm not particularly looking forward to my 1st bill on a variable tariff.

Oh and I'm envious of the radiators in the bathroom. Neither of my bathrooms have a radiator so can be a bit chilly in the deaths of winter.

 

[Baxenden Bank]

An interesting piece on twitter about the current round of price rises, published by @richardjmurphy. Full text (at time of writing) follows. Within the twitter thread there is an 'unwrap' if anyone wants to look it up easily.

@richardjmurphy

12 March 2022

Making sense of energy price rises is important. They’re going to be the cause of a lot of poverty in the UK, soon. So, I’ve been doing some analysis. What follow is a bit simplified, but not too much. What it reveals is that you’re about to be ripped off, massively. A thread….



In January 2020 SSE suggested that the cost of the energy they supplied was broken down as follows:

Let’s take that SSE data as a reliable benchmark for what’s happened to date. And let’s assume that all the data that I can find that says that the average house paid £1,200 a year for fuel in 2021 is also right. It was pretty much for me, for example.

Now let’s base what energy costs might be on the fixed prices now being made available by the same energy suppliers who were happy to supply our electricity and gas for £1,200 last year. It seems around £3,000 is that new normal. Again, it happens to be for me.

So, the price is increasing by £1,800. But the cost of some things has not changed. For example, the costs of delivery, billing and customer services have not changed, certainly by much. Nor should government and environmental schemes cost more.

To be clear, delivery cost £288 on average in 2021, and I am assuming it still does. Billing and customer service cost £240, and still should. And green and other levies cost £156, and I see no reason why they should change. That’s £684 of cost that should not change, at all.

The government is still taking 5% in VAT. That was (and this is near enough) £60. Now it’s £150. Why you need to be penalised with £90 of extra tax for energy costs going up is for the government to justify. It’s a decision they seem happy with. Take it up with them.

So, of the new £3,000 cost we’ve explained £684 of fixed costs and £150 is VAT. That leaves £2,166 to cover the cost of buying in the energy sold to you and profit.

In 2021 the cost of bought in energy was 36%. That was £432. I’ve checked the accounts of UK based energy company. I used SSE again, because that seemed fair. They made a normal profit margin of 11.6% in 2020 and 13.3% in 2021, or about 12% on average.

SSE both makes and distributes energy. Now this is a little simplistic, but let’s assume they make 2% on distributing energy to us and so made 10% on making energy. The profit on energy distribution was £24. That on the bought in energy was, then, roughly £43.

So now we can work out that the cost of producing the energy that was sold to you in the last year was the bought in cost to the distribution company of £432 less £43 (near enough) of profit the producer made, or about £389 of real cost of production for the year.

Now let’s assume the profit margin on distributing energy remains at 2%. With the average cost of domestic energy increasing from £1,200 to £3,000 that puts the distribution profit per customer up to £60. That’s two and a half times what it was before. That’s a big jump.

And let’s be clear, that none of the cost of producing energy in the world has changed because of war in Ukraine. In fact, right now, there is not even a shortage of energy in the world because of that war: Russia is still supplying oil and gas right now.

So, the only reason for price increases is because oil and gas dealers expect a shortage in oil and gas which has not happened as yet. Bluntly, what we’re seeing is panic buying of oil and gas that’s still in the ground right now by countries terrified that they might run out.

It’s vital to remember this: oil and gas are going up in price because people – oil companies, hedge funds and others - are speculating in oil and gas in the expectation that there will be shortages. No one actually thinks the stuff is going to cost more to produce.

So, let’s summarise where we are in this table:

Please accept that some of these numbers will be give and take a bit, but probably not that much. I think my assumptions are pretty fair.

Then notice that the first three lines in this table have not changed. These costs are near enough fixed. The government meanwhile is going to take £90 a year more off you whilst the distribution company is going to make £36 extra profit a year out of you.

And then note that the electricity and gas suppliers to the distribution companies are going to see their profits increase almost exactly forty times, from £43 a year to an extraordinary £1,717 a year.

That’s where your extra payment is going. It does not disappear into a black hole. It goes to oil and gas companies, power generators, the countries and shareholders that own these, and of course to the speculators who are currently making billions out of this.

To put this in context, it’s estimated that the price of UK energy is going to increase by £38 billion. That increase will be split between the government (£1.9 billion), the energy distribution companies (£760 million) and oil, and generation companies (£35.34 billion).

In plain straightforward terms that is profiteering – or exploitation if you like – on a quite staggering scale. Brexit is the excuse for some. Covid was the excuse for more. And now the war in Ukraine is being used as an excuse for the biggest rip off of all time.

Four questions then. Why is out government accepting this? Why are governments elsewhere accepting this? Why aren’t they cooperating to stop it, individually or together? They could. They aren’t. So, what is going on here?

I look forward to answers from ministers and justifications from oil companies. And in case I have anything wrong, I look for clarifications. But the explanation I seek is why is war being permitted as an excuse for a massive rip-off of ordinary people by big oil companies?

ADDITIONAL MATERIAL ON SUNDAY 13 MARCH. Thanks to so many who have read this thread. I can’t answer all the questions individually so I am doing to post some additions to the thread to clarify some issues.

First, to all those asking about the extra standing charges they are paying, which are often double this year to what they were last. I can’t see how these can be justified. In my calculation, I assume they should be fixed.

If standing charges have increased for a reason then the energy companies need to say why, and precisely what and who is to blame. If it is Brexit, say so. If it’s poor regulation, say that too. But explain it so we know who to demand change from.

Second, it’s been suggested I do not appreciate the split between energy creation / generation and energy distribution companies. I am confused by this claim. I thought it obvious from what I have done that I have made this split.

I have done a bit more checking though and think that I was, maybe, generous in assuming 10% profit in oil companies. Some don’t make that. But all that means is that their profit increase is even bigger. The logic remains intact, in other words.

Third, some say I am ignoring the economics of scarcity here, and that the price rises are justified that there may be 11% less oil and gas supply in the world if Russia is cut off from supplying that oil and gas to Europe and beyond.

I have several responses. One is I guess I know some economics or I would not have been a professor of political economy for five years. Two, theories of economics are just that i.e. they’re theories about how pure markets work.

Pure markets say scarcity increases prices. Political economy says something different. It says that those with power can influence markets, for better or worse. In other words, what economic theory says can be changed in reality, but it takes the powerful to do so.

Right now the powerful in this game appear to be the oil companies. They are exploiting us all to make exceptional profits. That’s what my evidence shows. However you play with the numbers the answer will always be the same: they’re exploiting this situation.

My answer to that is that for well over a century governments have challenged the power of those exploiting markets and the power they give to large companies to make profit at the expense of everyone else. This is a process that began in the US, surprisingly.

In the US they have what are called Antitrust Laws whose whole purpose is to prevent the exploitation of consumers by companies in the marketplace. My argument implicit in this thread is that this is what governments around the world need to be doing now.

More than that, I’m suggesting that if we want to stop Putin winning by making sure millions of people don’t demand the end of sanctions on him because those sanctions lead to them being exploited by energy companies then we need cooperation now to end international exploitation.

Political economy says we can do that. We can reallocate energy supplies between nation states to stop the risk of energy rationing in some. We can use international tax laws - including some I helped create - to track down the profits of energy companies and tax them.

And we can also impose taxes on energy companies at home. There is a straightforward case for a massive increase in taxes on energy companies right now - to be applied to their excess profits, but nothing more.

But more than that, there is something else the government can do. Ofgem, a UK government regulator, does in effect sets UK electricity prices. And it, in effect, prices that energy at the cost of the highest component element in the energy mix - which is gas.

What this means is that even though most electricity is not generated from gas in the UK, we pay for it as if it all is. So the price has skyrocketed even though we all know that the cost of creating renewables, nuclear, hydro and even coal power has not changed.

The government could change that regulation now and bring down electricity prices overnight. France provides evidence that this is possible.

Just as the govermment could also keep green levies fixed (but very definitely keep them, please). It could also cut the rate of VAT so that it takes no more money from us now.

However, none of these things, all of which are possible in the political economy, are happening. So there is a failure of our politicians to stand up to the power of energy companies here, nationally and internationally. And I am calling that out.

Finally as an addition, I know - and said - that the numbers may be a little simplified, but not much. But I would add, that’s just fine. I am showing what can and cannot be controlled, and by who, and I am showing who is exploiting us. And that is deliberate.

This thread is in itself an exercise in political economy. Using the power of logic - and everything I have argued is logical and subject to minor simplifications likely to be as close to the truth as is needed to prove a point - I can show we’re being exploited.

That’s my aim. I want to use the power of Twitter to say that something different to what we are told is inevitable is in fact possible.

What could be different:
1) VAT could be cut
2) Excess profits could be taxed
3) The pricing formula used by Ofgem could be changed and the price of electricity could be cut, a lot
4) Standing charge increases can be challenged
5) International cooperation is possible

What can you do? First, share this.

Second, write to your MP and ask them:
1) Why the gov’t can’t cut the rate of VAT on domestic energy to control prices, when Brexit permits this;
2) Ask why we can’t have an excess profits tax on energy companies;
3) Ask why Ofgem can’t change its electricity pricing formula.

Third, tell your energy company you are not happy. Ask them what they are going to do about this. Post the answers on Twitter.

Exploitation is not acceptable is the message we need to deliver. And right now we are being exploited.

 

[Starmill]

An interesting piece on twitter about the current round of price rises, published by @richardjmurphy. Full text (at time of writing) follows. Within the twitter thread there is an 'unwrap' if anyone wants to look it up easily.


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I disagree very slightly with the analysis here because there's not an acknowledgement that someone ancillary costs actually have gone up. For example there have likely been small pay rises for staff, there may be some increased costs for things like IT contracts and there is an increase in the costs of energy for offices. There is also an increase in Employer's National Insurance to consider. However these increments will all together be small still, while the rises in global markets for oil and gas are large.

 

[Baxenden Bank]

I disagree very slightly with the analysis here because there's not an acknowledgement that someone ancillary costs actually have gone up. For example there have likely been small pay rises for staff, there may be some increased costs for things like IT contracts and there is an increase in the costs of energy for offices. There is also an increase in Employer's National Insurance to consider. However these increments will all together be small still, while the rises in global markets for oil and gas are large.

I haven't looked at it in detail but I think he also misses the extra payments to cover customer credit balances of failed energy companies. This is around £68 per account and is, I understand, the reason for the big increase in standing charges. Hopefully this will be removed in October being a one-off cost, but the costs for ongoing support to Bulb have to be raised from somewhere.