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Energy Bills To Rise More Than Predicted, Says UK Energy Regulator Ofgem Boss (bbc.com) 72

An anonymous reader shares a report: Domestic energy bills will rise faster this winter than previously forecast by the energy regulator Ofgem, its chief executive has admitted to MPs. Jonathan Brearley said in late May that a typical household would pay $951 a year more from October. But, while giving evidence to MPs, he said it was "clear" that estimate for winter bills now looked too low. The original figure was used by ministers when deciding how much to pay in direct assistance this winter. One industry analyst has predicted a rise of more than $1,426 a year in October. Cornwall Insight said that the typical domestic customer was likely to pay $3,856 a year from October, then $4,000 a year from January. The typical bill at present is about $2,378 a year. In itself, this was a rise of $832 a year in April, compared with the previous six months.
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Energy Bills To Rise More Than Predicted, Says UK Energy Regulator Ofgem Boss

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  • It sounds like the price caps put in place strangled some energy suppliers and others are at risk of failing.

    From the article:

    Soaring wholesale prices meant around 30 suppliers have collapsed during the crisis that has hit the sector. A total of 26 remain in the market.

    About 2.4 million customers were automatically moved to a rival company when their own supplier folded. Typically, according to Citizens Advice, they had to pay an extra £30 a month for the duration of their original contract, as they were shifted to a more expensive tariff.

    In addition, the cost of these failures totalled £2.7bn - a tab which was spread across all billpayers in Britain at a cost of about £94 each, not just those of the failed companies. This is before taking into account the potentially multi-billion charge that households could face due to the collapse of Bulb Energy, which is in special administration.

    Last month, it was announced that Hayden Wood, who was the company's boss and co-founder, would leave at the end of July.

    In June, the National Audit Office (NAO) said Ofgem had allowed an energy market to develop that was vulnerable to large shocks.

    The NAO said that Ofgem had decided on a "low bar" approach for allowing new domestic energy suppliers into the market to encourage competition and choice for customers after the market had been dominated by six big companies.

    • Re:The Why (Score:5, Informative)

      by Richard_at_work ( 517087 ) on Tuesday July 12, 2022 @06:45PM (#62698118)

      Note that a lot of the companies that did fail failed because they were "fake" energy companies that did little more than buy and sell on the open market - they had no generation capacity of their own, and no agreements with generating companies for favourable rates, they just bought from the National Grid and sold to consumers.

      They were undercapitalised and played the "low margin, high transaction count" game without hedging properly, which is why they got caught out by the price caps.

      It is a regulatory failing, but its also bad management by those companies that failed.

      • We have a lot of that here in the US as well. Enron [wallstreetmojo.com] comes to mind.

      • They were undercapitalised and played the "low margin, high transaction count" game without hedging properly, which is why they got caught out by the price caps.

        While that is very likely true, the underlying business model is to make money while you can, and walk away with the profits when it fails. That does not require buffer capital, hedging, and so on. The trick is to use Other People's Money to fund the business. It would be interesting to know whether the operators of these failed companies ended up profiting.

      • This is the way competition is forced onto a natural monopoly :
        First the separation of producers and distributors.
        Then separation of distributors and resellers.

        Resellers by definition have no production or distribution capacity. And almost no hedge against swan events.
        As for stupid regulation: yes. Now, pardon my french...
        France: Loi Nome. (Nome law). Forced sale of a percentage of nuclear produced electricity at a fixed rate onto the market, which is then resold at market rates.
        This was done because EDF, h

      • by nzkbuk ( 773506 )
        The only thing is that in the UK the market is intentionally split so the generation company is a separate legal than the supply (one which sells to the consumer) company.
        They may operate under the same group name, but if you look at your bills then you'll see what I mean
        • This is true, but the energy companies can still have preferential agreements between their consumer facing entities and any generation entity.

          An energy company that sells to the public can basically operate in one of two ways - it can either buy energy on the open market, basically paying spot prices, or it can buy generation capacity as well which offsets their energy purchase costs.

          This is the way "green-only" consumer facing energy companies work - of course they can't guarantee that the energy you use

    • by AmiMoJo ( 196126 )

      Just another example of deregulation failing in the UK. We also squandered all the oil wealth from the North Sea.

      There solution is always more free market, but people need energy and it doesn't work as a market. They spent over a decade trying to get people to switch providers so that there would be competition, and it never worked very well.

      Same with so many other things. Trains were never going to work as a competitive market. You can't just decide you are going to Birmingham today because the train is ni

      • “The government you elect is the government you deserve.” - Thomas Jefferson

        • “The government you elect is the government you deserve.” - Thomas Jefferson

          Perhaps, but we don't vote on who the PM is. The members of the conservative party do, all 200k of them. Mostly white, male, old and from the South.

          • Hey, I'm a member and I'm 52, white and live in Reading. Oh, wait.
          • by Budenny ( 888916 )

            People unfamiliar with the UK may not realize how this works. Its not a presidential system. Its a Parliamentary Democracy. Quite different. You elect your local Member of Parliament. They belong, normally, to a poltical party.

            Since the Revolution of 1688, the Prime Minister is appointed by the Monarch inviting an individual to form a government. To do that he or she will need to be able to command a working majority in Parliament, the Commons in particular.

            This will, since the emergence of modern pol

            • by Budenny ( 888916 )

              You can also by the way see the difference if you ask what happens if the country or party wants to dismiss the Prime Minister.

              Under the US system the only way is impeachment. In the UK, a vote of no confidence by the Commons will lead to the fall of the government and a new general election.

              A vote of no confidence by Conservative MPs will result, as now, in a leadership contest and the replacement of the PM by someone else from the same party.

              The Labour Party just now tried to schedule a vote of confidenc

      • Actually, I'd argue that it worked very well - very quickly we had entrants like Ecotricity. By no means perfect, but they aimed to only ever sell "green" energy. Nowadays there are a handful of other green-only providers, but it wasn't always that way.

        You'll note that British Gas, EDF and the others may have a "green tarriff", but they still invest heavily in brown energy. Someone's got to, but had they been left as our only providers, that green tarriff was all the choice you'd likely ever had. As it is,

    • by Shimbo ( 100005 )

      It sounds like the price caps put in place strangled some energy suppliers and others are at risk of failing.

      Mostly not. The price caps are mostly to stop the people who won't play the game and switch energy suppliers every year or so getting screwed. The people who got burnt here are the ones who switched to a cheap fixed price tariff from a 'disruptive company', who when wholesale prices rose were another firm with a 'we make a loss on every sale but think of the volume' business model.

  • Strange article (Score:4, Insightful)

    by ickleberry ( 864871 ) <web@pineapple.vg> on Tuesday July 12, 2022 @06:22PM (#62698058) Homepage
    Completely about UK but all prices in dollars instead of GBP. Anyway, now is the time to put in as much PV solar as you possibly can.
    • I have 12kw PV, 30kWh batteries, swimming pool, hot tub and aircon in 3000sqft home south UK. Paid £34 electric last month and £22 oil.
    • Solar doesn't heat your house. That typical household can skimp on electricity but will find their energy bill absolutely dominated by the cost of gas for heating. That typical household also lacks the energy rating to implement a fully electric heatpump.

      Solar helps a bit, but the typical household is far better off dedicating the money to insulation projects. If your energy rating is already a B or higher then solar may be a good option.

  • by Lije Baley ( 88936 ) on Tuesday July 12, 2022 @06:44PM (#62698116)

    From my view inside the utility industry, there are all kinds of plans to increase control over customer usage patterns, to create things like Virtual Power Plants, which basically are just new ways to describe shifting energy use off-peak, or on to whenever renewables happen to be generating. These plans will require incentives, and it's going to be difficult to incentivize anyone to do their laundry in the middle of the night based on current power rates which in many places have lagged inflation for decades. Rates will need to increase drastically.

    But at the same time, there are equity concerns, so subsidies will also need to rise. It's very unclear how any of this will actually work in a fair and yet effective fashion. What percentage of the customers will have the flexibility to shift their loads vs. those who must work outside the home for fixed hours, get home, do household chores, get to bed early, and wake up early to a recharged car. And how high will the rates need to be influence the usage of those flexible folks, who are likely richer?

    How much would you pay to be warm or cool when you need it, to eat, sleep, drive, and do laundry when it's convenient for you? I would pay a ton for those basic quality-of-life items, and I probably will. Others may not be able to afford it, but given fair and adequate subsidies, they will also opt against load-shifting.

    • How much would you pay to be warm or cool when you need it, to eat, sleep, drive, and do laundry when it's convenient for you?

      Any government that wants to reduce your choice as to when you can do these things will be short lived.

  • by dschnur ( 61074 ) on Tuesday July 12, 2022 @06:53PM (#62698134)
    Our home energy bills are *far* above the predicted maximum of what is predicted in Europe. When the outside high temperature is > 41c for several months out of the year, you need to be more aware of not only the energy you use, but that which you save. To combat the expense, we invest in efficient heat pumps, better insulation, better windows, shading and a host of other things which help keep our bills tolerable. For example, going from a 10 SEER heat pump to a 16 SEER one has reduced our energy usage by more than 10%. "Cheap" energy makes people invest in the wrong things. There is little incentive to fix the insulation on a home when the ROI is not there. Perhaps higher energy costs in Europe will beget better use of energy, therefore will reduce the amount used per capita and lead to lower bills. It could happen over time.
    • None of which has anything to do with the UK, where practically no-one has AC at home, although with the recent heat I wouldn't turn my nose up at a portable unit. Home insulation is generally quite good, especially in newer homes.

      • by dschnur ( 61074 )
        Long and short is this. The more efficient your home, the less energy you use. If you have a newer home, it's already good so you have less work to do than if you have an older one. This means that newer homes aren't as much of an issue for energy use than older ones. In the UK, homes are a lot older on average than they are here. There's a lot of room for improvement. The less energy used in a given market means that resources aren't as strained and prices are driven lower. This is applicable to
        • In the UK, homes are a lot older on average than they are here.

          I know. I live there. They're also mostly made of bricks, which is why we tend not to demolish and rebuild them as often as they do in the USA. It's also much colder here, which is why we've known the value of good insulation for decades. For example, my house was built in the forties and the only significant changes we've had to make were double glazed windows, cavity wall insulation and a new combo boiler. All were fairly easy to retrofit.

          This is applicable to every place, no matter where you live.

          Except that it isn't; you don't use gas to power your AC. We do rea

          • by dschnur ( 61074 )
            It sounds like you have done quite well.

            Our house is built for a radically different climate than yours, and would probably dissolve in UK weather. It's built more like a thermos bottle. (Using US measurements,since that's what is used in construction here.) It has thick walls 2x12" studs, a vapor barrier, and a 2" foam panel surface which is finished with a thin layer of concrete stucco. The roof is covered in ceramic tiles. Windows are triple glazed with a reflective coating and a low-e inner barrier
      • by bn-7bc ( 909819 )
        Well everyone that has recently installed an air to air heat pump in fact has AC just run it in reverse, but ok I'm thinking from a norwegian/swedish standpoint here as there is very little natural gas heating because electricity has traditionally been rather cheao so there has been no incentive to roll out the infrastructure.
    • For example, going from a 10 SEER heat pump to a 16 SEER one has reduced our energy usage by more than 10%.

      Nosy question but asking anyway: What did the 16 SEER Heat pump cost, and how much energy did you actually save?

      • by dschnur ( 61074 )
        We paid about $9,500.00 for the heat pump and installation. We bought it because the old one died after 19 years and had to be replaced. It's one of two units on our house. The other one should (hopefully) make it to next year before we have to replace it too. Its difficult to quantify the total energy savings, but for the past few months since it's been installed, we are saving around 10-15%. For our yearly energy bill, the savings will be somewhere between $600.00 and $1000.00+ Over the next deca
    • by sinij ( 911942 )
      No matter how insulated your house, prolonged blackout will still get you. The issue is ARTIFICIAL energy cost increases, we know how to extract natural gas and uranium ore, so there is no reason, aside from ideology, why energy shouldn't be cheap.
      • by dschnur ( 61074 )
        So true!

        Air conditioners use so much electricity that a normal backup generator can't handle the load.

        We live in a newer area, so we don't loose power for a significant amount of time often... but when it happens in the summer, we pack up and leave for a place with power.
      • we know how to extract natural gas and uranium ore

        You can't run uranium ore in a gas turbine.
        You can't extract more natural gas than you already have, and the UK (along with everyone except Russia) is currently sucking out wells at peak capacity.

        The "artificial" thing you talk about is called supply and demand, and unfortunately it's very easy to rapidly have supply drop, and very difficult to rapidly make it increase.

    • by AmiMoJo ( 196126 )

      There have been calls for assistance with that sort of thing for years in the UK. Our housing stock is very poorly insulated, but the cost of fixing it is relatively high for the owner. If the owner is a landlord, they probably don't care anyway.

      The government could start a scheme to insulate homes. Governments can borrow money very cheaply, and then slowly claw it back through a small levy on energy bills for homes that have had it done. The savings would far outweigh the levy and help people who can't aff

    • Sure... but to be honest, anyone running HVAC equipment rated at only 10 SEER is using some really OLD stuff, or it must have been bargain basement priced initially?

      I just had to replace the HVAC system in my own house, because the system it came with when I bought the place a year and a half ago was a highly-efficient Trane system, but still used the old (no longer produced) Freon as coolant, and it developed a leak. I got it recharged once, by an HVAC tech with a jug of recycled coolant. They couldn't det

    • Perhaps higher energy costs in Europe will beget better use of energy

      The typical European house is already far more energy efficient than a comparable house in the USA. We've never had "cheap" energy. The problem here is those people hit most by the energy rises are precisely those people who can't do anything you mention to help themselves. They are the tenants of low cost housing, they are those who are living paycheck to paycheck, or those in complex dwellings where insulation becomes non trivial.

      Heatpumps are a great solution. One estimate said only 10% of UK houses are

  • ...is all the extra money for the same amount of electricity going to? Genuine question & looking for specific answers, i.e. names of companies.
    • i.e. names of companies

      Are you talking about energy producers or their upstream suppliers? You may want to look at the cost of gas and coal. That will tell you straight away who the extra money is going to. Hint: Not the electricity producers or resellers, they are largely in the business of going bankrupt and buying / selling each other's customers in liquidation proceedings.

  • ...cost of leaving crisis.

  • Energy bills predicted to rise more than predicted.

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