Energy price rises and price cap discussion.

[AM9]

The problem though is that energy pricing generally is complex and not well explained or understood. We have the confusion around the 'cap', confusion around estimated vs actual bills, confusion around how monthly direct debits are supposed to work and actually work. Not to mention confusion about how to work out the cost of running a device/appliance leading to people taking steps to reduce consumption that actually lead to bigger bills...

This is the nub of the whole problem that is terrorising the less well off. If in times of food price escalation, there was a fix on a staple item, e.g. milk*. The government decided to state that the milk's price cap was £100* per head p.a.. There would be howls of protest from those who use less than the average and couldn't afford that much and need urgent support. Energy is no different except that for some obscure reason, the government chooses to obscure the cost per kWh and quote a meaningless average for all. This causes many who have smart meters to boast that they never look at theirs. Why not? - at least the figures that they show are personalised and are actually relevant to the household's bills.

* milk is just a random item of almost universal household consumption (be it full fat/skimmed/soya/oat/etc.), and the price was just a figure for the purposes of discussion.

 

[DelayRepay]

What would be really interesting is knowing the percentage of households whose annual usage that is within, say, £200 of the 'average household' used to express the price cap. I doubt anyone's ever calculated that.

Thinking back, I vaguely remember learning how to calculate kWh usage of an appliance in physics at school 20+ years ago! So it's really not that difficult.

== Doublepost prevention - post automatically merged: 7 Sep 2022 ==

* milk is just a random item of almost universal household consumption (be it full fat/skimmed/soya/oat/etc.), and the price was just a figure for the purposes of discussion.

It is a good example, in that the media occasionally take delight in highlighting that politicians often don't know how much it costs. I imagine the same is true for energy - if a journalist asked the minister responsible how much it costs to run a TV for an hour, I wonder what they'd say (obviously, the newly appointed minister would probably ask what a TV is! )

 

[WelshBluebird]

My advice is never trust your energy company, they like to have your money in their accounts and not the other way round. Remember when annual budget schemes had periods of being in credit and periods in debit which balanced out over the 12 months! Now it's credit all year.

It has only been like that this year because the prices have been going up throughout the year, largely during the period of least usage. So yes, you may well be in credit now, but you have yet to be hit by the huge bills most will see come winter. I genuinely think that the lack of trust in energy suppliers at the moment is a problem because it has pushed more people into this line of thinking, which ultimately will just result in people seeing larger bills come winter if they do move their direct debits down to what they actually use.

I might suggest that we should be moving away from the fixed monthly direct debit arrangement as the default. Most people can't get beyond the 'my electric is £300 a month' argument and the energy firms seem to have total control over that monthly amount with the consumer unable to work out what the real figure is. Much of the poverty will be caused by people paying unrealistic sums set by the providers.
I would like to start a campaign that the energy firms move away from fixed direct debit as the default and offer variable direct debit based on real consumption as the default. I can't see it happening but we really do need to get round this £3000/year £200/month terminology, it is doing nobody any good.

Except all that will mean is people will check their usage in the summer, think they are using say £100 worth a energy a month, change their direct debit to that then get a massive shock come winter when their usage goes up. The whole point of fixed direct debits for energy is so people pay the same price each month of the year to iron out the differences in usage between summer and winter. People are pretty bad at budgeting for variable costs but usually ok at budgeting for fixed costs.

For balance, other poverty will be caused by people who have cancelled their Direct Debit because they think it's too high based on their summer usage, and then get a massive shock when the winter bills arrive.

Exactly this.

 

[Howardh]

Got an email from my provider "We want you to increase your direct debit from £110 to £140. That's reasonable enough, but I have hundreds in credit ans was planning at keeping the d/d at £110 until the credit + £400 govt subsidy was used up; so rang them and - on a very poor line which kept breaking up and woman with very poor diction - was told that your crecit could only be used "with authorisation".

Every winter when useage is over £110 they simply access the credit, so what has changed? Looking at my account on the website, nothing has changed, and I think the woman was telling me tosh. Anyhow I've decided to raise that d/d to £140 assuming that if bills are "frozen" at current levels we won't be getting that £400 which would have covered any October raise.

 

[GC class B1]

Has anyone else spotted that the proposal to cap energy bills now and recalim the money by increasing bills in the future is very similar to the covid response in early 2020 of restrictions aimed at ‘flattening the curve’ to save lives. I hope the end result is not similar.

 

[DelayRepay]

Has anyone else spotted that the proposal to cap energy bills now and recalim the money by increasing bills in the future is very similar to the covid response in early 2020 of restrictions aimed at ‘flattening the curve’ to save lives. I hope the end result is not similar.

Leaving aside my views on the actual measures taken in response to Covid, this whole situation feels a bit like the Government response to the pandemic. Dither and dather for ages, then do something drastic at the last minute, without fully considering all the consequences of the action being taken.

 

[Shrop]

Has anyone else spotted that the proposal to cap energy bills now and recalim the money by increasing bills in the future is very similar to the covid response in early 2020 of restrictions aimed at ‘flattening the curve’ to save lives. I hope the end result is not similar.

Pretty much everything is a game to politicians. They present things in a manner that is hard to understand, with numerous hidden meanings, but with the overall objective that there's ultimately a way to make themselves appear to be knights in shining armour coming to the rescue of the population who everyone else except the Government is trying to fleece. We're watching a perfect example right now with the energy bills - I have little doubt that the present outcome of help for the public was well known about by Government many months ago, it just happens to be Truss galloping to the rescue rather than Boris.

 

[DelayRepay]

It has only been like that this year because the prices have been going up throughout the year, largely during the period of least usage. So yes, you may well be in credit now, but you have yet to be hit by the huge bills most will see come winter. I genuinely think that the lack of trust in energy suppliers at the moment is a problem because it has pushed more people into this line of thinking, which ultimately will just result in people seeing larger bills come winter if they do move their direct debits down to what they actually use.

I think the advice not to trust the energy supplier is sound to be honest. I don't trust them, so I look at what they are suggesting as a Direct Debit, look at my usage, look at forthcoming price rises, look at my account balance and then decide what to do. Within reason you can normally adjust their suggested direct debit up or down. But I've never found their suggestions to be outrageous. Of course having a good understanding of my historical usage (in terms of units, not pounds and pence) helps.

 

[Dai Corner]

Pretty much everything is a game to politicians. They present things in a manner that is hard to understand, with numerous hidden meanings, but with the overall objective that there's ultimately a way to make themselves appear to be knights in shining armour coming to the rescue of the population who everyone else except the Government is trying to fleece. We're watching a perfect example right now with the energy bills - I have little doubt that the present outcome of help for the public was well known about by Government many months ago, it just happens to be Truss galloping to the rescue rather than Boris.

It was probably presented to the previous Government by officials, along with other options, but rejected. New Government, different opinions.

 

[Baxenden Bank]

I think the advice not to trust the energy supplier is sound to be honest. I don't trust them, so I look at what they are suggesting as a Direct Debit, look at my usage, look at forthcoming price rises, look at my account balance and then decide what to do. Within reason you can normally adjust their suggested direct debit up or down. But I've never found their suggestions to be outrageous. Of course having a good understanding of my historical usage (in terms of units, not pounds and pence) helps.

I did find my suppliers suggestions to be outrageous. Beyond outrageous in fact. Never, ever, go anywhere near Utility Warehouse.

I changed supplier last summer, before all this kicked off. I gave my new supplier honest figures based on my actual usage for the previous 12 months. They quoted me a monthly budget scheme figure based on that and I could see how they arrived at that monthly amount. No problems so far. After just one payment the 'we are increasing your payment email' arrived, a monthly increase of £80 without any explanation of how they had arrived at that higher figure - remember this was before talk of the (now small) increase in the price cap in October 2021. Given that the original payment was enough to cover my usage anyway, even at October 2021 prices the increase 'requested' would have led to something approaching a £960 surplus on my account at annual review. As it happens I forced them to reduce the payment back to the original amount and, lo and behold, despite the October 2021 and April 2022 price increases, I am still £280 in credit as my annual review approaches (I used less electricty 2021/22 than the 2020/21 winter). That is why I do the sums myself.

Payment on receipt of bill (monthly or quarterly) would suit me fine, as would a variable direct debit on the same basis. Unfortunately suppliers charge a higher rate for such arrangements. You can retain control but they will make you pay for it!

 

[DelayRepay]

Payment on receipt of bill (monthly or quarterly) would suit me fine, as would a variable direct debit on the same basis. Unfortunately suppliers charge a higher rate for such arrangements. You can retain control but they will make you pay for it!

And this, in my opinion is wrong. I agree with Direct Debits attracting a discount, because the admin costs are far lower than other payment types. But the discount should apply equally to fixed and variable Direct Debits.

I must be lucky that I've never had an issue with excessive Direct Debits - enough people have to indicate that I'm the one that's unusual!

Utility Warehouse, with their pyramid marketing approach and bundled products has always struck me as a slightly odd set up though.

 

[najaB]

And this, in my opinion is wrong. I agree with Direct Debits attracting a discount, because the admin costs are far lower than other payment types. But the discount should apply equally to fixed and variable Direct Debits.

The direct debit discount does apply to both fixed and variable. There's an additional discount for fixed payments, which is common in other industries as well. My company, for example, gives discounted rates to customers who commit to a minimum monthly spend.

 

[jon0844]

I am already in credit and plan to increase my direct debit next month, matching the Pure Planet system which charged different amounts in the summer and winter months automatically. I'll now do this myself and override Shell and its predictions that will most certainly see me massively in credit.

For sure they're going to seek to adjust my debit every single month, and I will keep watch!

 

[Baxenden Bank]

I must be lucky that I've never had an issue with excessive Direct Debits - enough people have to indicate that I'm the one that's unusual!

Utility Warehouse, with their pyramid marketing approach and bundled products has always struck me as a slightly odd set up though.

Since I started regularly switching supplier, the only company that I had no problems with the direct debits with was the one that went bust! I have been with most of the majors and they all requested excessive amounts once I had signed up and transferred over (not necessarily after just one month though). They equally expected an even larger monthly payment going forwards if I requested my annual review surplus to be returned to me.

Utility Warehouse have a very strange way of billing: after the event, assuming your payment is made at the end of the month, then this is what your credit balance will be. Essentially crediting the 30 September payment against 31 August readings so your credit balance appears higher than it should be.

 

[DelayRepay]

Since I started regularly switching supplier, the only company that I had no problems with the direct debits with was the one that went bust! I have been with most of the majors and they all requested excessive amounts once I had signed up and transferred over (not necessarily after just one month though). They equally expected an even larger monthly payment going forwards if I requested my annual review surplus to be returned to me.

The only problem I've ever had was when I switched from NPower. I had a credit balance, it was less than £100, but it took me months and a formal complaint to get the money refunded after my account was closed. It was some kind of admin cock-up, but the kind that nobody seemed able to undo. Their first attempt at refunding me involved sending a cheque payable to 'The Occupier'!

Other than that there have been occasions when I've thought the suggested DD is too high, but generally only by a small amount. Not the £100s I read about.

My current supplier, Bulb (I'm trapped!), are suggesting I should reduce my DD. I haven't yet because I don't think they've factored in the price rise. I'll decide what to do when the Government announce what's happening.

 

[johncrossley]

Has anyone else spotted that the proposal to cap energy bills now and recalim the money by increasing bills in the future is very similar to the covid response in early 2020 of restrictions aimed at ‘flattening the curve’ to save lives. I hope the end result is not similar.

The EU plan to restrict peak electricity usage. The phrase 'flatten the curve' was actually spoken by von der Leyen:

EU proposes limits on energy use during peak hours

The European Commission is proposing a mandatory reduction in electricity use during peak hours as part of sweeping new measures to tackle the energy crisis.

www.rte.ie

Commission President Ursula von der Leyen told reporters: "We have to save electricity, but we have to save it in a smart way.

"If you look at the costs of electricity there are peak demands, and this is what is expensive, because in these peak demands expensive gas comes into the market.

"So what we have to do is flatten the curve and avoid peak demands. We will propose a mandatory target for reducing electricity use at peak hours and we will work very closely with member states to achieve this."

 

[jon0844]

California recently asked residents (via alerts sent to phones) to cut consumption to avoid blackouts (during a massive heatwave) and there was a sufficient drop to avoid any issues.

I wonder if we'd be so compliant here? Some would probably turn the heating on in protest at being asked to conserve energy.

 

[najaB]

I wonder if we'd be so compliant here? Some would probably turn the heating on in protest at being asked to conserve energy.

Unfortunately, I suspect you might be right.

Then they'd complain that the bill was so high!

 

[MikeWM]

Has anyone else spotted that the proposal to cap energy bills now and recalim the money by increasing bills in the future is very similar to the covid response in early 2020 of restrictions aimed at ‘flattening the curve’ to save lives. I hope the end result is not similar.

Yes. I see the similarities, and I'm very wary of anything that adds a lot more to the incredible amount of money we already owe and/or have printed, and the comparison to covid does seem very familiar, even down the continual cries of 'something must be done, and right now'.

However, there is also a key difference, and that is that this is something over which the Government ought to be in control. I didn't and don't think it the business of government to try to control a respiratory virus. But energy security *is* one of the basic things a government ought to be doing.

I think there probably does have to be a short-term, rather dramatic response in this particular case, to cover for the many errors previous governments have made in this area over the past few decades. But it must be matched with a proper plan for being self-reliant for energy as quickly as possible.

 

[DelayRepay]

California recently asked residents (via alerts sent to phones) to cut consumption to avoid blackouts (during a massive heatwave) and there was a sufficient drop to avoid any issues.

I wonder if we'd be so compliant here? Some would probably turn the heating on in protest at being asked to conserve energy.

I think people would do their best. Look at how people generally stayed at home when we were told that was necessary to save the NHS. I know some didn't, but most people did.

It's possible an alert would cause a surge in demand though as people boil kettles and heat up food etc in anticipation of a blackout.

This could be the first real use of the government's new emergency mobile phone alert system?

 

[johncrossley]

This could be the first real use of the government's new emergency mobile phone alert system?

Does that include the texts sent by the government on 24 March 2020?

 

[najaB]

Does that include the texts sent by the government on 24 March 2020?

Given that the system @DelayRepay is referring to isn't operational yet, I think that's an affirmative.

 

[DelayRepay]

Does that include the texts sent by the government on 24 March 2020?

No, I meant the system that will send a push notification to any mobile phones in a given area - not a SMS message. There have been some tests recently and it is supposed to be launching in October

There's a thread about it here: https://www.railforums.co.uk/threads/uk-emergency-alert-tests.218980/

 

[Cdd89]

For sure they're going to seek to adjust my debit every single month, and I will keep watch!

Are you not able to simply cancel your direct debit? I did so with my supplier, and while they weren’t best pleased, I’m paying my bill and they aren’t cutting me off.

 

[skyhigh]

Are you not able to simply cancel your direct debit? I did so with my supplier, and while they weren’t best pleased, I’m paying my bill and they aren’t cutting me off.

Depending on supplier - some may, according to their terms and conditions, swap you off any fixed tariff you're on to their standard Variable rate. Some may stop giving you the cheaper per-unit rate they offer customers who pay by direct debit. Cancelling your direct debit with no prior communication with the supplier is bad advice.

 

[Baxenden Bank]

California recently asked residents (via alerts sent to phones) to cut consumption to avoid blackouts (during a massive heatwave) and there was a sufficient drop to avoid any issues.

I wonder if we'd be so compliant here? Some would probably turn the heating on in protest at being asked to conserve energy.

Will the power be cut down / off in Downing Street etc? They have set the precedent for compliance (or not) with restrictions during Covid. They made their bed, now they can lay in it.

 

[jon0844]

Are you not able to simply cancel your direct debit? I did so with my supplier, and while they weren’t best pleased, I’m paying my bill and they aren’t cutting me off.

I don't see the need to do that. I am not against them having the funds to settle the bills, just not build up a huge credit.

I certainly don't want to find myself not budgeting correctly and missing a payment, so I set the DD to what I'm comfortable with covering my estimated usage. Of course how cold this winter is will potentially alter my budgeting - and then I can alter the DD myself.

 

[Russel]

What would be really interesting is knowing the percentage of households whose annual usage that is within, say, £200 of the 'average household' used to express the price cap. I doubt anyone's ever calculated that.

This is something I've thought about too.

I have a standard 40-year-old, 3 bed mid terrace, 3 of us live here, two adults and a child, we don't really go out of our way to cut back on energy consumption but our usage is still below the "average" by a decent amount.

 

[Bletchleyite]

This is something I've thought about too.

I have a standard 40-year-old, 3 bed mid terrace, 3 of us live here, two adults and a child, we don't really go out of our way to cut back on energy consumption but our usage is still below the "average" by a decent amount.

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.

 

[Nicholas Lewis]

Truss just cancelled the price cap. Average cost to household will be £2500.

https://www.parliamentlive.tv/Event/Index/acb2b28e-2a85-4ac3-a75a-6233a765b37d

No statement published yet and speaker has told her off for that.

Actually telling consumers and business need to make energy efficiency as well which is sensible.

Edit: Rees Mogg has just released this although Truss is running the debate

https://questions-statements.parliament.uk/written-statements/detail/2022-09-08/hcws294

HM Government is acting to protect British households from the spiralling costs of energy. The Energy Price Guarantee (EPG) which will give people certainty with their bills. The EPG will apply from 1 October and will discount the unit cost for gas and electricity use.

This guarantee, which includes the temporary suspension of green levies, means that from the 1st October a typical household will pay no more than £2500 per year for each of the next two years. This will save the typical household £1000 a year. It comes in addition to the £400 Energy Bill Support Scheme.

The scheme will start on the 1st October 2022, when Ofgem’s new price cap is due to come into effect. Cost projections for the delivery of the EPG are uncertain as they depend upon usage levels (which are highly dependent on weather patterns) and, for future three-month periods, the wholesale price of energy.

The new guarantee will apply to households in Great Britain, with the same level of support made available to households in Northern Ireland.

HM Government will also support all business, charities and public sector organisations with their energy costs this winter, offering an equivalent guarantee for six months.

The Chancellor of the Exchequer will set out the expected costs as part of the fiscal statement later this month.