Why is electricity so expensive?

[Stuart Smith 5Participant @stuartsmith5]

AdrianR and Dave

I was surprised by the 38% rise in Network Costs in the info from Ofgem.

This area is heavily regulated by Ofgem and companies can’t just increase their charges. The amounts they can charge are specified by Ofgem after a lot of wrangling.

This page on the Ofgem website gives more detail on the breakdown of costs:

**LINK**

There is a note next to the chart regarding Network Costs:

Network costs: The main driver of this increase is the recovery of Supplier of Last Resort (SoLR) levy costs (£68). A supplier acting as a SoLR can make a claim for any reasonable additional, otherwise unrecoverable, costs they incur. These levy claims are paid to energy companies by the distribution network companies and recovered from consumers via their charges.

So £68 of this (plus, I imagine the ‘reasonable additional costs they incur ) is to be paid by all of us because of the Suppiers who have gone bust.

I must admit that I don’t understand why at least some of this isn’t recovered from the companies that fail.

The other reasons that Dave suggests will no doubt increase costs in the future as networks are reinforced and replaced as a result of the Governments push to move to electric vehicles and heat pumps etc plus network resilience to cope with extreme weather.

Stuart

 

Edited By Stuart Smith 5 on 07/04/2022 10:35:11

Edited By Stuart Smith 5 on 07/04/2022 10:37:00

[VicParticipant @vic]

From what they’ve said on the media I thought the answer was simply Greed? Over and over they’ve said the higher the demand the higher the price – the raw materials like oil and gas didn’t suddenly cost 20% more to extract? Quite why the standing charge has gone up though is something of a mystery, the media haven’t asked anyone that particular question. I suppose that’s at least partly down to greed as well?

[Ex contributorParticipant @mgnbuk]

So it would appear that there has been ongoing replacement of “large lumps of the gas infrastructure “.

Strange then that the new tariff information that I got from British Gas yesterday showed the new daily standing charge for gas went down by a penny a day from my soon-to-expire fixed rate deal to 27p, but the same charge for electricty doubled from 24p to 48p.

Nigel B.

[Clive HartlandParticipant @clivehartland94829]

Todays news that 8 new Nuclear power stations are to be built will certainly make the cost go up, almost time to start generating your own electric by whatever means.

[pgk pgkParticipant @pgkpgk17461]

It's interesting to look at some global realities. Petrol in Venezuela at 2p a litre. China responsible for 35% of global co2 averaging 1.5 times us per head. The USA using 3.5 times us per head and about 25% global. And a Russian tank on 1 mile per gallon diesel. UK responsible for circa 1% global emissions and pretty good figures per head but only around 1% saving per head over 20 years. Stuff may be more efficient but everyone has more stuff.

I have a plan based on large treadmill drums in city centres. Schoolkids PE lessons sorted, cheap gym memberships,special wheels for the Zimmer impaired and a requirement for everyone to earn treadmill points for NHS access or air travel. Cheap leccy and a fit population plus it warms you up so no heating bills. Sorted.

Pgk

[SamsarandaParticipant @samsaranda]

The announcement of 8 new nuclear power stations to be approved by the end of the decade seems like too little too late. The quickest that a nuclear power station could be brought into service after it has received approval is in the region of 12 to 15 years, so we aren’t going to see them contributing to our energy needs for many years yet, we need a much increased energy output by the end of this decade in order to keep up with the projected demand from home heating, electric vehicles etc. Renewables will obviously be able to contribute to the energy mix required but only if the sun shines and the wind blows, not all that reliable as recent statistics show, I think our country will still be operating on a knife edge as regards being able to meet requirements, and I can’t see our electricity price becoming any cheaper in relative terms. Dave W

[SillyOldDufferModerator @sillyoldduffer]

Posted by Stuart Smith 5 on 07/04/2022 10:34:35:…

…

There is a note next to the chart regarding Network Costs:

Network costs: The main driver of this increase is the recovery of Supplier of Last Resort (SoLR) levy costs (£68). A supplier acting as a SoLR can make a claim for any reasonable additional, otherwise unrecoverable, costs they incur. These levy claims are paid to energy companies by the distribution network companies and recovered from consumers via their charges.

So £68 of this (plus, I imagine the ‘reasonable additional costs they incur ) is to be paid by all of us because of the Suppiers who have gone bust.

I must admit that I don’t understand why at least some of this isn’t recovered from the companies that fail…

Stuart

Well spotted Stuart! How stuff is financed is fascinating and understanding it explains much! I wondered what British Gas got out of being the Supplier of Last Resort. I wrongly guessed the government volunteered them and arranged for the taxpayer to pick up the bill if a cheap retailer went bust. Doesn't work that way : the bill lands on consumers!

This is a bit annoying. Anyone who switched to cheap gas managed by a fly-by-night company paid less for energy than the rest of us while the party lasted. When the gamble went sour they returned to British Gas and burst into tears on being told the new rates.

Now it turns out they've dodged part of the bill and are being subsidised by the rest of us! Might write to my MP suggesting any customer returned to British Gas by a failed supplier should pay the full cost of their failure to choose a sound supplier in the first place. I don't see why existing customers should bail out anyone who chose to take a risk on sexy gas prices.

What next? A scheme for refunding people who lose money betting on horses?

Failed companies of this type aren't worth much because they're bankrupt and don't have many assets. They're administrative entities with a small staff and a computerised billing system, likely operating with leased equipment from from a leased office. Retailers don't extract gas, or store it, or own any pipes. They manage buying and selling gas, but it's paperwork rather than a solid business. (More likely computers rather than paper!)

Really annoying – I expect all the Board Members got a substantial bonus on the way out. They usually do…

Dave

[Anthony KendallParticipant @anthonykendall53479]

Posted by SillyOldDuffer on 07/04/2022 15:08:20:

Snip….

Now it turns out they've dodged part of the bill and are being subsidised by the rest of us! Might write to my MP suggesting any customer returned to British Gas by a failed supplier should pay the full cost of their failure to choose a sound supplier in the first place. I don't see why existing customers should bail out anyone who chose to take a risk on sexy gas prices.

What next? A scheme for refunding people who lose money betting on horses?

Failed companies of this type aren't worth much because they're bankrupt and don't have many assets. They're administrative entities with a small staff and a computerised billing system, likely operating with leased equipment from from a leased office. Retailers don't extract gas, or store it, or own any pipes. They manage buying and selling gas, but it's paperwork rather than a solid business. (More likely computers rather than paper!) Dave

I have been transferred to BG, my supplier having gone bust.

I find your bigotted statements interesting, and look forward to an explanation as to how you are subsidising me.

Edited By Anthony Kendall on 07/04/2022 18:14:47

[Stuart Smith 5Participant @stuartsmith5]

Anthony

No doubt Dave will give you his reply, but the costs of failed Suppliers is picked up by everyone. See my previous post.

As a former Trading Standards man for Lancashire used to say on the local radio consumer programme, ‘if it seems to good to be true, it probably is’ . Some suppliers were happy to sell at too low a cost to get business, but were not resilient enough to withstand increases in wholesale prices.

Stuart

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