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OFGEM, & the Price Cap Rip-Off

EssexphilEssexphil Member Posts: 7,958
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.
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Comments

  • VespaPXVespaPX Member Posts: 12,013
  • EssexphilEssexphil Member Posts: 7,958
    edited August 2022
    Truly shameful.

    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.
  • rabdenirorabdeniro Member Posts: 4,212
    This is starting to look like 1981 all over again.
  • VespaPXVespaPX Member Posts: 12,013
    I'm thinking it might be cheaper to spend the winter in Barbados
  • HAYSIEHAYSIE Member Posts: 31,518
    Energy bills to hit £4,200 in January: Price cap will more than DOUBLE next year before bills for the average household hit £4,400 by April - as dire forecast increases by £650 in a week



    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
  • stokefcstokefc Member Posts: 7,615
    The wife pulled a report from online somewhere telling how much the bosses were making from these scumbag companies it was scandalous some were having 2 million pounds bonus on top of their multi million pounds yearly contracts while working class people are using food banks.
    It's obscene and eventually folks are going to revolt
  • VespaPXVespaPX Member Posts: 12,013
    I see Ofgem have got their priorities sorted.
    Clowns


  • HAYSIEHAYSIE Member Posts: 31,518
  • HAYSIEHAYSIE Member Posts: 31,518
  • HAYSIEHAYSIE Member Posts: 31,518
    Ex-PM Gordon Brown sets out plan for tackling energy crisis - including nationalising failing firms who can't lower bills - and warns 'crises don't take holidays' in jibe at Boris Johnson AND absent Keir Starmer



    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
  • HAYSIEHAYSIE Member Posts: 31,518
  • HAYSIEHAYSIE Member Posts: 31,518
    Liz Truss defends energy firms saying profit is not evil


    https://www.bbc.co.uk/news/uk-politics-62513966
  • EssexphilEssexphil Member Posts: 7,958
    That article appalls me.

    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.
  • EssexphilEssexphil Member Posts: 7,958
    While I am in a ranty mood, "windfall taxes" are not a Socialist idea.

    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.
  • VespaPXVespaPX Member Posts: 12,013
    Whilst on the subject of taxes.

    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.
  • EssexphilEssexphil Member Posts: 7,958
    VespaPX said:

    Whilst on the subject of taxes.

    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.

    You can have that sort of fun with most taxes.

    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.
  • HAYSIEHAYSIE Member Posts: 31,518
    edited August 2022
  • HAYSIEHAYSIE Member Posts: 31,518
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