OFGEM Price Cap April to June Announcement 27th Feb

[nowty]

I tried to explain this to a forum member on the phone today and I failed miserably.
Its gets a bit complicated and I hope it makes more sense written down.

Remember we had the OFGEM price cap, the price that energy suppliers could not exceed to charge us for standard rates. Then the OFGEM price cap grew like topsy and the government was forced to intervene with its government price guarantee, the price that energy suppliers could not exceed to charge us on standard rates. The only difference is that the government picks up the tab for the OFGEM price cap being over the government price guarantee.

Because we consumers now only pay to the government price guarantee, some of us may have forgotten that the OFGEM price cap still exists. A week today on 27th Feb OFGEM will announce the next OFGEM Price Cap for Leccy and Gas for the next 3 month period, April, May and June.

The wholesale price has come down a lot recently but because OFGEM take the average for the past 3 months up to 17th Feb it will still be higher than the current government price guarantee cap. And as the government price guarantee cap is rising in April prices will rise. And because ALL tariffs are now variable rate, this means most tariffs are likely to rise.

Cornwall insight have now released their final forecast now that the 17th Feb has now passed.
https://www.cornwall-insight.com/our-fi ... CiTKVD79u0

The lowdown is the OFGEM price cap will still be eye wateringly high and will exceed the increase in government price guarantee. Therefore unless anything changes in the forthcoming budget next month, our tariffs are likely to rise on average circa 20%.

Now I recall the cheap rate element of the E7 tariff came down significantly (more than the average reduction) when the price guarantee was established, so I suspect the cheap rate element may well be going north at a rate higher than 20% which will also likely impact Go and IO cheap rates as they are all now variable rates.

I will try and do some maths on it tomorrow, but I suspect we could be looking at 20p’ish / kWh on the cheap rate end. For solar panel owners it may be irrelevant as many of us will be self sufficient again by April and the next OFGEM price cap change in July is likely to come crashing back down to below the current government guarantee levels. That means cheaper than today even with an increase in the government guarantee level.

But if your solar PV is lacking and you rely on cheap rate battery charging, you might want to lash up some more solar panels pronto.

[Yuff]

Why are they still linking electric prices to the gas price?
Surely all renewable cheap production should be subsidising electric use not gas use…….FFS

[sharpener]

Now I recall the cheap rate element of the E7 tariff came down significantly (more than the average reduction) when the price guarantee was established, so I suspect the cheap rate element may well be going north at a rate higher than 20% which will also likely impact Go and IO cheap rates as they are all now variable rates.

I will try and do some maths on it tomorrow, but I suspect we could be looking at 20p’ish / kWh on the cheap rate end. For solar panel owners it may be irrelevant as many of us will be self sufficient again by April and the next OFGEM price cap change in July is likely to come crashing back down to below the current government guarantee levels. That means cheaper than today even with an increase in the government guarantee level.

But if your solar PV is lacking and you rely on cheap rate battery charging, you might want to lash up some more solar panels pronto.

@nowty have you (or Cornwall Insight) got a forecast figure for the difference between rates on the E7 tariff? I am looking at battery storage on another property ATM, the ROI at present rates is very roughly 10% p.a. but this is highly dependent on this number. No possibility of PV at this location. Not even on sheds/ground mounts like yours IIRC.

[nowty]

Why are they still linking electric prices to the gas price?
Surely all renewable cheap production should be subsidising electric use not gas use…….FFS

Because thats the way the market has always worked. You cant change it overnight because of all the financial hedging that goes on. Hence the main reason throughout Europe to do the sticking plaster approach with the windfall taxes and government subsidies.

[nowty]

Now I recall the cheap rate element of the E7 tariff came down significantly (more than the average reduction) when the price guarantee was established, so I suspect the cheap rate element may well be going north at a rate higher than 20% which will also likely impact Go and IO cheap rates as they are all now variable rates.

I will try and do some maths on it tomorrow, but I suspect we could be looking at 20p’ish / kWh on the cheap rate end. For solar panel owners it may be irrelevant as many of us will be self sufficient again by April and the next OFGEM price cap change in July is likely to come crashing back down to below the current government guarantee levels. That means cheaper than today even with an increase in the government guarantee level.

But if your solar PV is lacking and you rely on cheap rate battery charging, you might want to lash up some more solar panels pronto.

@nowty have you (or Cornwall Insight) got a forecast figure for the difference between rates on the E7 tariff? I am looking at battery storage on another property ATM, the ROI at present rates is very roughly 10% p.a. but this is highly dependent on this number. No possibility of PV at this location. Not even on sheds/ground mounts like yours IIRC.

Not yet, but I'm going to do the calculation soon. Its possible to work out with the OFGEM assumptions on the typical split between cheap and peak rate. I did something similar a year or so ago.

[Yuff]

Why are they still linking electric prices to the gas price?
Surely all renewable cheap production should be subsidising electric use not gas use…….FFS

Because thats the way the market has always worked. You cant change it overnight because of all the financial hedging that goes on. Hence the main reason throughout Europe to do the sticking plaster approach with the windfall taxes and government subsidies.

So do you expect when prices drop back to reasonable levels they’ll change the way electric is priced.
It seems crazy to me that that are trying to get users, to switch to renewable sources, whilst structuring the pricing based on a fossil fuel……nuts

[nowty]

Why are they still linking electric prices to the gas price?
Surely all renewable cheap production should be subsidising electric use not gas use…….FFS

Because thats the way the market has always worked. You cant change it overnight because of all the financial hedging that goes on. Hence the main reason throughout Europe to do the sticking plaster approach with the windfall taxes and government subsidies.

So do you expect when prices drop back to reasonable levels they’ll change the way electric is priced.
It seems crazy to me that that are trying to get users, to switch to renewable sources, whilst structuring the pricing based on a fossil fuel……nuts

Long term the subsidies on older renewables and nuclear will drop out and most will be contract for difference (CFD) pricing.
https://www.gov.uk/government/publicati ... difference

[nowty]

I'm still trying to locate the info I need from OFGEMs website to make an estimate of the prospective E7 rates. But for now I have calculated what the per unit cost of gas and leccy will likely be based on the £3000 government price cap increase.

From Cornwall Insight’s table the next forecasted OFGEM price cap is £3,294.92 of which £1,708.44 is for leccy and £1,586 for gas.
But the government price guarantee is set to be increased to £3000 so the cost to the consumer will be limited to this. Therefore, pro- rata the cost should be £1,555.52 for leccy and £1,444.48 for gas.

If we take the OFGEM energy split of 2,900kWh per annum for leccy and 12,000kWh per annum for gas and take the daily standing charges from the Cornwall Insight’s table of 38p for leccy and 29p for gas.

So for leccy,
£1,555.52 – (365 x 0.38) = £1,416.82
Divide by 2,900 kWh gives a kWh unit price for the standard variable rate of 48.86p.
That’s an increase of 43.7% from the current typical 34p.

For gas,
£1,444.48 – (365 x 0.29) = £1,338.63
Divide by 12,000 kWh gives a kWh unit price for the standard variable rate of 11.16p.
That’s an increase of 11.6% from the current typical 10p.

That’s quite a difference in increase between leccy and gas !, I suspect the difference is because the wholesale leccy price has lagged behind the wholesale gas price in coming down.

[sw25481]

Sadly for those of us on an "Intelligent" tariff our daytime price remained significantly higher than the cap price as the government agreed that it was our average price that was subject to the cap. The more we load shift to the quiet (cheep) overnight period the lower our average price and the less likely we are impacted by the price cap.

I know I get the warm feeling from doing the right thing and frankly there are folk who need far more help than I do paying their utility bills but we all invested in the batteries and solar panels to allow us to do this partly because of the savings. I feel like I am paying twice. Octopus argued that there were not enough of us to be optimized around. There are 1.2 million UK homes with solar, sadly not all on smart tariffs or owning storage, but with electric cars and chargers growing at such a rate, surely they must be millions on smart tariffs. They can't all be charging during the day at full whack or using road side chargers. How big a minority do we need to be and how much damage do they want to do to the demand for electric cars or battery storage before they consider us

I hope octopus are not being less than fully transparent on this

bah humbug I say

[Swwils]

Why are they still linking electric prices to the gas price?
Surely all renewable cheap production should be subsidising electric use not gas use…….FFS

Gas generates the power when you need it and the reliable low co2 nuclear power was fubared.