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OFGEM, & the Price Cap Rip-Off
People talk about OFGEM and their role in the price cap "fix" (pun intended) as though it is part of history. When it is not.
1. Until 1986 (gas) and 1989 (electricity) we owned our own Companies. Until Thatcher decided to sell the family silver
2. OFGEM itself hasn't been around long-it was formed by the merger of the Gas and Electric Regulators in 2000
3. It has only very recently had the power to fix prices-since the end of 2018 via Domestic Gas and Electricity (Tariff Cap) Act 2018. It stipulated that the price cap would be in place from the end of 2018 until 2020, when Ofgem would recommend whether the cap should remain on an annual basis up to 2023. Ofgem would also review the level of the cap at least every 6 months while it is in place
When did the price hikes start? Only after Ofgem had the power to set prices.
Ofgem ignores the fact that domestic supply is closely linked to wholesale supply. Back in the old days (2021) there used to be a lot of firms who just did domestic, rather than wholesale, supply. They have mostly gone bust, leaving in place the operators who both provide wholesale as well as domestic, gas/electric supply.
Let's use Shell as an example. In their words, 44% of their gas is from UK oil & gas fields. We are far less reliant on imports of gas than all of the EU (unless you want to pretend Norway is in the EU)
https://help.business.shellenergy.co.uk/hc/en-us/articles/360015147837-Our-green-gas
Ofgem have only been setting prices for 5 minutes. And believe, say, Shell, in relation to their need for profit on domestic supply. See, for example,
https://www.ofgem.gov.uk/publications/price-cap-increase-ps693-april
This just states the increase in wholesale costs, while ignoring the fact that the self-same Big 6 are making massive increases in profits from wholesale production. So the utility companies are making massively increased profits at one end, and there is no clawback at the other.
This is shameful. Any Regulator that cannot see this should not be allowed to continue in its role. It is supposed to be protecting consumers. Not fixing prices for a cartel. It's only positive move has been to agree to increase prices twice as often.
1. Until 1986 (gas) and 1989 (electricity) we owned our own Companies. Until Thatcher decided to sell the family silver
2. OFGEM itself hasn't been around long-it was formed by the merger of the Gas and Electric Regulators in 2000
3. It has only very recently had the power to fix prices-since the end of 2018 via Domestic Gas and Electricity (Tariff Cap) Act 2018. It stipulated that the price cap would be in place from the end of 2018 until 2020, when Ofgem would recommend whether the cap should remain on an annual basis up to 2023. Ofgem would also review the level of the cap at least every 6 months while it is in place
When did the price hikes start? Only after Ofgem had the power to set prices.
Ofgem ignores the fact that domestic supply is closely linked to wholesale supply. Back in the old days (2021) there used to be a lot of firms who just did domestic, rather than wholesale, supply. They have mostly gone bust, leaving in place the operators who both provide wholesale as well as domestic, gas/electric supply.
Let's use Shell as an example. In their words, 44% of their gas is from UK oil & gas fields. We are far less reliant on imports of gas than all of the EU (unless you want to pretend Norway is in the EU)
https://help.business.shellenergy.co.uk/hc/en-us/articles/360015147837-Our-green-gas
Ofgem have only been setting prices for 5 minutes. And believe, say, Shell, in relation to their need for profit on domestic supply. See, for example,
https://www.ofgem.gov.uk/publications/price-cap-increase-ps693-april
This just states the increase in wholesale costs, while ignoring the fact that the self-same Big 6 are making massive increases in profits from wholesale production. So the utility companies are making massively increased profits at one end, and there is no clawback at the other.
This is shameful. Any Regulator that cannot see this should not be allowed to continue in its role. It is supposed to be protecting consumers. Not fixing prices for a cartel. It's only positive move has been to agree to increase prices twice as often.
Comments
The only previous thing of note done by an organisation who professes to have as its main goal to be the "consumer's champion" was in relation to price fixing.
It's main role since 2018 is to fix prices. Everyone charges the amount of the "price cap", so it effectively operates as price fixing.
How exactly does it propose investigating anti-competitive trade practices, when the prime instigator of those practices is the Regulator themselves?
Biggest conflict of interest since, er, OFGEM got to decide whether OFGEM should continue to fix prices.
Look at the increased profits of Shell.
https://www.energylivenews.com/2022/07/29/shells-profits-spark-fury-among-campaigners/
That is £6 BILLION given to shareholders. This year. Profits going through the roof.
Want to know how much Energy Companies are worth? Strangely, that info appears not to be readily available...
Compare/contrast this to any other industry. Imagine the cost of your raw materials trebled. Think you would still treble your profits? Or, just possibly, it might hit your bottom line, rather than just your customers.
Cornwall Insight said that bills are set to soar to around £3,582 in October, from £1,971 today, before rising even further in the New Year. Ofgem is set to put the price cap at £4,266 for the average household in the three months from the beginning of January. The energy consultancy said that this was around £650 more than its previous forecast. It comes as Ofgem last week announced changes to how it will calculate the price cap on energy bills going forward.
https://www.dailymail.co.uk/news/article-11094795/Energy-bills-hit-4-400-April.html
It's obscene and eventually folks are going to revolt
https://www.mirror.co.uk/news/uk-news/tory-minister-nadhim-zahawi-pockets-25457511
Clowns
The former Labour leader said that the price cap on bills, which is due to soar in October and again in January, should be axed. He called on ministers to negotiate with individual firms to lower bills and nationalise - temporarily - any businesses that go bust due to the difference in the rate they charge customers and the wholesale price of gas. Mr Brown, has already criticised Boris Johnson this week for going on honeymoon last week when the Bank of England unveiled a terrifying analysis of the next 18 months for Britain. And he took another swing at politicians taking time off, telling the Guardian : 'Time and tide wait for no-one. Neither do crises. They don't take holidays, and don't politely hang fire - certainly not to suit the convenience of a departing PM and the whims of two potential successors.' However his remarks could also apply to current Labour leader Sir Keir Starmer, who is also on holiday.
https://www.dailymail.co.uk/news/article-11101621/Gordon-Brown-sets-plan-tackling-energy-crisis-warns-crises-dont-holidays.html
https://www.bbc.co.uk/news/uk-politics-62513966
No-one is saying profit is a dirty word. Profit only becomes dirty when it is caused by price-fixing. Which is exactly what is happening at the moment.
BP and Shell have been around for ages. Always made decent profits. But these have suddenly gone through the roof.
In the last quarterly figures, they made a combined profit in excess of £15 Billion. Dwarfing the previous record profits.
How has this been achieved. By doing nothing other than rake in the money via the cartel price-fixing done in the name of "maximum pricing" ( a price cap) when everyone knows this is being used as the minimum agreed price.
This is not the first time this has happened. Remember when the so-called "maximum" yearly University charge was set at £9,000. And absolutely everyone charged the full whack. Regardless of whether you were studying Medicine at Oxford or Robbery with Violence/Credit Card Fraud at East London.
There is profit. And there is profiteering.
And this idiot doesn't know the difference.
First carried out in the UK in 1981. By Geoffrey Howe. Under the guidance of Margaret Thatcher. That well-known Socialist.
Any spanner who thinks windfall taxes are a tax on entrepreneurship clearly doesn't understand what a "windfall" is.
https://www.theguardian.com/business/2022/aug/11/what-is-a-windfall-tax-and-will-it-be-extended-to-uk-energy-providers
To quote from that article:-
"What is a windfall tax?
A windfall tax is a one-off levy on a sector that has made huge profits from something they were not responsible for."
And-here is a big hint to the idiot Truss. The truly poor don't currently pay taxes. So reducing taxes does not help the worst off. A typical Tory Member, yes. But not the truly poor, or the wider electorate.
If Truss doesn't believe me, she should try calling an Election.
When did everything become a "luxury item"?
Value added tax (VAT) is a tax on the purchase price of most goods and services.
VAT was introduced in 1973 to replace purchase tax, a 33.3% tax on goods classed as ‘luxury’ which was introduced in 1940 to discourage waste.
Income tax, for example, was first introduced as a temporary measure to fund the Napoleonic Wars in 1799. It was abolished in 1816 after Waterloo.
In 1841, Peel, a Conservative, was voted in on a promise never to reintroduce Income Tax. Which he promptly did. In 1842.
Politicians lying, particularly (but not exclusively) Conservative ones, is not a new concept.
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