Energy price rises and price cap discussion.

[najaB]

The PM made the claim "We can't tax our way to growth" in response to calls for a windfall tax. This is ignoring the fact that, despite paying a nominal tax rate of c. 60%, oil companies actually pay very little tax:

Taxes on their profits are higher - they pay 30% corporation tax on their profits and a supplementary 10% rate on top of that. Other firms currently pay corporation tax at 19%.

But oil and gas firms have been able to reduce the amount of tax they pay by factoring in losses or spending on things like decommissioning North Sea oil platforms.

In recent years, such methods have meant that BP and Shell, for example, have paid almost no tax in the UK.

BP and Shell both received more money back from the UK government than they paid every year from 2015 to 2020 (except 2017, when Shell paid more than it received). Shell also paid a negative amount of tax in 2021 - BP has yet to publish its figures for last year.

What is the windfall tax on oil and gas companies and how much do they pay?

The government raised £2.6bn from the windfall tax in its first year.

www.bbc.co.uk

 

[Bantamzen]

And now the ban on fracking from shale & rock is lifted. I pity anyone that lives in areas that are being eyed up, check your home insurance policies!

 

[Dai Corner]

The PM made the claim "We can't tax our way to growth" in response to calls for a windfall tax. This is ignoring the fact that, despite paying a nominal tax rate of c. 60%, oil companies actually pay very little tax:

What is the windfall tax on oil and gas companies and how much do they pay?

The government raised £2.6bn from the windfall tax in its first year.

www.bbc.co.uk

As an accountant working for Shell between 1996 and 2000 she may have had something to do with them minimising their tax liabilities

 

[Nicholas Lewis]

And now the ban on fracking from shale & rock is lifted. I pity anyone that lives in areas that are being eyed up, check your home insurance policies!

She did infer that it would have to be subject to local agreement

 

[najaB]

And now the ban on fracking from shale & rock is lifted. I pity anyone that lives in areas that are being eyed up, check your home insurance policies!

Property damage is possible but highly unlikely - most induced earthquakes are ~M2 so barely perceptible.

Waste water disposal and increased greenhouse gas emissions are a bigger concern, not to mention that it's likely to take a few years to produce enough to make a significant impact on supply, plus there's not reason to expect that the producers will sell at significant discount to market prices.

 

[Dai Corner]

Property damage is possible but highly unlikely - most induced earthquakes are ~M2 so barely perceptible.

Waste water disposal and increased greenhouse gas emissions are a bigger concern, not to mention that it's likely to take a few years to produce enough to make a significant impact on supply, plus there's not reason to expect that the producers will sell at significant discount to market prices.

It may help security of supply though. We will need gas for the foreseeable future and I'd rather it was produced here than imported from countries we'd rather not have to business with.

 

[Bantamzen]

She did infer that it would have to be subject to local agreement

Or in other words throw some money at the local council to keep them onside.....

Property damage is possible but highly unlikely - most induced earthquakes are ~M2 so barely perceptible.

Waste water disposal and increased greenhouse gas emissions are a bigger concern, not to mention that it's likely to take a few years to produce enough to make a significant impact on supply, plus there's not reason to expect that the producers will sell at significant discount to market prices.

Never take anything for granted in this respect. It only takes one unexpected geological event to cause serious problems, I'd be far happier us not fracking at all. Even the US have been somewhat cautious about it, that should speak volumes to us on our little islands.

 

[Bletchleyite]

Never take anything for granted in this respect. It only takes one unexpected geological event to cause serious problems, I'd be far happier us not fracking at all. Even the US have been somewhat cautious about it, that should speak volumes to us on our little islands.

Indeed, I don't believe we should be taking the risk. I'd accept it in the middle of rural Scotland, but not well-populated residential areas like the Fylde.

 

[najaB]

Never take anything for granted in this respect. It only takes one unexpected geological event to cause serious problems, I'd be far happier us not fracking at all.

I also would prefer for us not to be going after shale gas, but not because of the extremely low risk of seismic events. Nothing is impossible, but injecting water into rock thousands of feet down is unlikely to cause major effects felt on the surface. We have a lot of experience with pumping water/gas into existing oil fields to increase production without causing our island to slip into the ocean.

I'd accept it in the middle of rural Scotland, but not well-populated residential areas like the Fylde.

What's that, Sassenach??

 

[johntea]

Crikey, just as you're trying to process all this breaking news that the Queen is under medical supervision!

 

[ainsworth74]

I presume from the above that she's still ruling out a windfall tax on the excess profits that are being made by energy producers and will instead expect the taxpayer to stump up the full price of this cap? I don't disagree with the need for a cap, to be clear, simply that shouldering the burden entirely on the taxpayer whilst the private companies run all the way to the bank is somewhat painful to swallow...

 

[najaB]

Crikey, just as you're trying to process all this breaking news that the Queen is under medical supervision!

I rather suspect that having to meet both Boris Johnson and Liz Truss in the same day would cause anyone to give up the will to live!

 

[GusB]

I presume from the above that she's still ruling out a windfall tax on the excess profits that are being made by energy producers and will instead expect the taxpayer to stump up the full price of this cap? I don't disagree with the need for a cap, to be clear, simply that shouldering the burden entirely on the taxpayer whilst the private companies run all the way to the bank is somewhat painful to swallow...

It has only been a couple of days since Truss took office; plenty of time for a U-turn!

 

[yorksrob]

Unless producer profits are diverted, it's fiddling with the deckchairs.

 

[Herefordian]

Mixed feelings.

From what I've read so far, I think it's a good plan on the whole. I'll give Truss some credit for that.

What isn't good is burdening the taxpayer with more borrowing while oil and gas companies are making record profits.

It's kicking the can down the road and getting us to pay it back later.

 

[Broucek]

It's nice seeing a relatively sensible discussion about this. There's no obvious magic bullet to solve the issue and I think the government had no choice but to "do something" and for it to be quick and simple.

I just had a quick look at Mumsnet - what a sewer! Lots of people moaning without any constructive suggestions, whining that their specific and unusual niche wasn't addressed instantly and complaining that the government "hadn't been clear" as to what the "cap" meant (which seems to have been more a factor of how it was reported than what the PM actually said).

 

[Bletchleyite]

In my view it should have been part-funded via a windfall tax, and the same thing should have applied (in terms of a cap on unit prices) to all businesses, or at least small ones.

The actual figure is fine.

 

[Ediswan]

the same thing should have applied (in terms of a cap on unit prices) to all businesses, or at least small ones.

BBC are reporting that there will be cap for businesses. Very short on detail though, other than that it will only be for six months.
https://www.bbc.co.uk/news/business-62831698

Businesses will get support, with bills capped for six months, a shorter period of protection than many had hoped for.

 

[Russel]

Some 1970s terraces (the ones built before the trend moved to wooden framed) are a lot better than you'd think. Mine is very cheap to heat indeed, despite not being quite as well insulated as it could be (I really need to sort out the loft with a good foot thickness!)

The trouble with the average is the vast swathes of poorly insulated single-skin Victorian terraces across the country.

Yes, agreed, I find it retains heat quite well, normal level of loft insulation and cavity wall insulation certainly helps.

I would imagine the average is pushed up by how a lot of people can't survive winter if their house isn't at a consistent 30 degrees...

Also, seeing the announcement from Liz Truss regarding the price freeze, do we know what the price per kwh will be frozen at, is it at current rate or higher?

 

[skyhigh]

Also, seeing the announcement from Liz Truss regarding the price freeze, do we know what the price per kwh will be frozen at, is it at current rate or higher?

Between the current rate and the previously announced October rates. £1971 was the April cap, proposed October cap was £3549 but the new cap is £2500.

As a very very rough estimate, I'd guess capped rates at around 35p/kWh for electricity and 9p/kWh for gas. The current cap is 28p/7p respectively.

 

[Howardh]

In my view it should have been part-funded via a windfall tax, and the same thing should have applied (in terms of a cap on unit prices) to all businesses, or at least small ones.

The actual figure is fine.

Due to other events, the statement hasn't had the scrutiny is needs. On the face of it it's very helpful, but I see it as a bit of a con, we are relieved now but the payback comes later, it's gas on the tick. But the scrutiny should be around those windfall profits which I've read as somewhere between "trifling" and "multi-billions". Either way it's not good that these companies and their shareholders have excessive profits when they would never have expected anything like this time last year.

So it's money going begging and I doubt even the companies know what to do with. So Truss needs to bin Tory dogma/policy r/e private company profits and give that money back to the real shareholders - the consumers..us. Even if it's just a few hundred pounds it would look a lot better than government-loanz-r-us.

 

[Russel]

Really does seem to be a lack of detail on this.

Appreciate it's been overshadowed by the Queen though.

 

[Nicholas Lewis]

Between the current rate and the previously announced October rates. £1971 was the April cap, proposed October cap was £3549 but the new cap is £2500.

As a very very rough estimate, I'd guess capped rates at around 35p/kWh for electricity and 9p/kWh for gas. The current cap is 28p/7p respectively.

The green levies are being removed from the bills as well but thats probably all built into th2 headline £2500 price but that should lower the standing charge element.

 

[Citybreak1]

My energy price is due to rise by £150 pounds a month I thought they had capped energy and a grant? Is anybody else having to fork out alot more here?

 

[Darandio]

My energy price is due to rise by £150 pounds a month I thought they had capped energy and a grant? Is anybody else having to fork out alot more here?

It's been frozen at £2,500 which is still over £500 more than the current cap. Without the £2,500 freeze it was predicted to be as much as £4,000.

 

[Baxenden Bank]

My energy price is due to rise by £150 pounds a month I thought they had capped energy and a grant? Is anybody else having to fork out alot more here?

Is that your monthly direct debit or your actual amount per unit multiplied by units used? The direct debit is obviously related to your unit price but could include previous under payment or a high forecast for future use.

Me, I have a forecast annual increase of just £20. This is due to my supplier REDUCING the night-time rate and increasing the daytime rate. The April increase for me was 90% instead of the published 54% figure. As a heavy night-time electric user I benefit from the reduction which very nearly balances off the daytime increase, so 'just' an 88% increase over 12 months. I don't know what their proposed monthly payment is yet.

Don't forget the monthly payment should have £400 netted off over the next six months due to the government 'grant' (2 x £66 then 4 x £67).

 

[DelayRepay]

Don't forget the monthly payment should have £400 netted off over the next six months due to the government 'grant' (2 x £66 then 4 x £67).

How that works depends on the supplier. Some are reducing the Direct Debit by £66, but some are leaving the DD at its original amount and paying the $66 back as a credit to the customer's bank account. The later seems an odd approach but I guess it's down to how easily they can change their systems. The net result is the same of course.

It's been frozen at £2,500 which is still over £500 more than the current cap. Without the £2,500 freeze it was predicted to be as much as £4,000.

Important to remember that the £2,500 is not really a cap. It's what the 'average' household will pay under the new prices. I mention this because I have seen a couple of people elsewhere assume their annual bill will not be more than £2.5k regardless of how much energy they use.

 

[GusB]

How that works depends on the supplier. Some are reducing the Direct Debit by £66, but some are leaving the DD at its original amount and paying the $66 back as a credit to the customer's bank account. The later seems an odd approach but I guess it's down to how easily they can change their systems. The net result is the same of course.

My supplier, EDF, is collecting the direct debit as usual and then issuing a refund for the £66. I'd rather they just applied the £400 discount against my projected spend and then amended my monthly direct debit accordingly, but I'm not going to complain about it too much. By the time my next review comes up, I should have amassed a fair amount on credit on my account.

Important to remember that the £2,500 is not really a cap. It's what the 'average' household will pay under the new prices. I mention this because I have seen a couple of people elsewhere assume their annual bill will not be more than £2.5k regardless of how much energy they use.

This is not being made clear enough, in my opinion. The key word here is "average"; I fear that there will be some people who, upon calculating their annual spend and coming up with a figure less than the average, will be inclined to use more energy than they normally would and risk receiving a horrendous shock bill later on.

Another thing that irritates me is Martin Lewis. Hitherto I've respected his advice, but when prices started going up last year I grabbed the best fixed-rate deal I could. At the time it was rather more expensive than what I had been paying, but my exit fee is only £15. If prices suddenly drop (unlikely) I can leave the deal I currently have, knowing that I've saved a damn sight more than £15.
.

 

[DelayRepay]

My supplier, EDF, is collecting the direct debit as usual and then issuing a refund for the £66. I'd rather they just applied the £400 discount against my projected spend and then amended my monthly direct debit accordingly, but I'm not going to complain about it too much. By the time my next review comes up, I should have amassed a fair amount on credit on my account.

I think that's what my supplier is doing. They've also told me that my current Direct Debit is too high - but I do have about £500 of credit on my account built up over the summer so that's maybe why.

I've reduced my DD as suggested, but I've set up a separate savings account and I'm putting the difference in there. I'll also put the £66 credits in there. Then if I find myself going into arrears, I can use the savings to pay off the balance. If not I will have a nice sum saved by the Spring.

This is not being made clear enough, in my opinion. The key word here is "average"; I fear that there will be some people who, upon calculating their annual spend and coming up with a figure less than the average, will be inclined to use more energy than they normally would and risk receiving a horrendous shock bill later on.

I've already seen people elsewhere comment that there's no need to cut back on energy usage now they know their bill is capped at £2.5k.

I work for a bank - if we said mortgages were capped at £1,000 a month when we actually meant the average customer pays £1,000 a month, we'd rightly have the Financial Conduct Authority on the phone to our Compliance department within minutes! It amazes me that a regulator and the government are using such misleading language.

 

[Xenophon PCDGS]

Important to remember that the £2,500 is not really a cap. It's what the 'average' household will pay under the new prices. I mention this because I have seen a couple of people elsewhere assume their annual bill will not be more than £2.5k regardless of how much energy they use.

What methodology is used to determine an "average" household?