Screwed Over Utilities

[d000hg]

I agree....

Privatised regulated industries can work if they can compete.

In principle yes but the truth is they only offer the competitive prices to those who go looking for them while cynically having vastly more expensive 'default' rates knowing that many, many people don't know that they can, or how to, switch.

The cap was a very clunky approach but capitalism does require some safeguards and regulation to protect the vulnerable in my view. The other ugly thing we have is that those on prepay meters pay even more - the very poorest are obligated to pay the absolute worst prices.

[jamesbrown]

It's strange that with energy suppliers telling us the cap means they're losing money and so many smaller suppliers indeed going bust, that record profits are being announced and there's calls for windfall taxes. How's that all work?

You're confusing energy suppliers with energy producers. Admittedly, some companies do both (e.g., EDF). Any speculation about windfall taxes has been for producers like BP, not suppliers. The profit margins are much smaller on supply than production and go into reverse when price caps don't increase with wholesale prices and forward contracts run out or don't fully mitigate, hence many small suppliers going under.

[Lance]

But I thought the prices were shooting up due to their own costs - is that not the case and they've simply been jumping prices?

the wholesale cost has increased.
the cost of bailing out the debt on the bankrupt companies needs to be covered.
The price is the same as the cap, as the costs exceed the cap. So the cap is the price ceiling and the price floor.

It is not a functioning market. It is a bag of sh1te.

[d000hg]

the wholesale cost has increased.

That's what I was talking about. Wholesale costs have rocketed but so have their. Do producers set their own prices, or do oil/gas prices automatically find their own level purely in terms of what people will pay, irrelevant to what it costs the producer?

[SueEllen]

That's what I was talking about. Wholesale costs have rocketed but so have their. Do producers set their own prices, or do oil/gas prices automatically find their own level purely in terms of what people will pay, irrelevant to what it costs the producer?

OPEC could be called a cartel....

[Lance]

That's what I was talking about. Wholesale costs have rocketed but so have their. Do producers set their own prices, or do oil/gas prices automatically find their own level purely in terms of what people will pay, irrelevant to what it costs the producer?

it's a market. The market sets the wholesale price. That is determined by supply and demand.
read this Economics For Dummies, 2nd Edition, UK Edition: Amazon.co.uk: Antonioni, Peter, Flynn, Sean Masaki: 9780470973257: Books

It does get more complex as the wholesale price varies as to how far ahead you're buying. The 'spot' price for gas tomorrow is far lower than for 6 months time. That's because there is an abundance of supply in the UK right now. It's summer time, and our LNG terminals are full.
The surreal, but also real, problem of Britain's gas glut | Business News | Sky News

[Lance]

OPEC could be called a cartel....

it is a cartel. It would be illegal in the EU/USA. Luckily they only produce most of the oil, not all of the oil

[SimonMac]

It's strange that with energy suppliers telling us the cap means they're losing money and so many smaller suppliers indeed going bust, that record profits are being announced and there's calls for windfall taxes. How's that all work?

Octopus, British Gas etc are retailers

BP, Shell are wholesalers

[SueEllen]

Octopus, British Gas etc are retailers

BP, Shell are wholesalers

British Gas is a retailer

Centrica is a wholesaler

Shell Energy is a retailer

Shell is a wholesaler

etc....

[SimonMac]

British Gas is a retailer

Centrica is a wholesaler

Shell Energy is a retailer

Shell is a wholesaler

etc....

I’ll give you Shell Energy (I’ll admit I’d never heard of them until now) Centrica are not a wholesaler, they buy energy and sell it to customers. They have no upstream operations which is where the mass revenues from the likes of BP and Shell Plc are making their profits (although a windfall tax won’t help in BPs case as they took a $20bn loss on their Russian arm and there is a high chance Shell will just move back away from being a U.K. registered company and re-register in Holland so what ever “windfall” you get this time round will dwarf in the lost revenues from future years after they leave the U.K.

Last year Tescos made bigger profits than Centrica, why aren’t they being targeted by a windfall tax?