Price Cap – My Views

price cap hamed adefuwa

In light of the news of this new price cap, I have a question;

If you want to control the prices of energy, why not control the prices of rent, phone bills, internet, train prices?

Controlling markets don’t work well. Restricting prices will bring short term benefits and it will make people jump for joy for the duration of the cap. What happens behind the scenes and then the immediate impact once the cap ends will be devastating to the average Brit. I wonder what will happen to all those who jumped for joy when they’re monthly bill goes from £90 to £160. Ultimately it’s short term gain, long term pain.

Getting involved in this energy market will slow down competition between suppliers, stop customers from engaging with the market and throw innovation out the window.

The problem isn’t with prices, the problem with the market is people aren’t engaging their energy suppliers. They don’t care about saving £50 a year and when this occurs every year over 10 years; they’ve lost £3900 over that period.

I’m no expert and don’t really know how to solve this problem but trust me, the political guys suggesting this are doing it to win your vote and not because it’s best for you.

I’d probably recommend insulating homes, getting customers energy monitoring devices and educating them on how to use less energy. Shopping around to save 5% on your bill will never save you as much money as reducing your energy consumption by 5%.

 

Scottish Power & EON Scrap Standard Tariffs (Domestic)

ScottishPower

Energy companies are always caught up in the political mess, thrown to the dogs in my opinion, when it comes to “ripping off customers” and overcharging for electric and gas. The reality is this isn’t the case but we’ll discuss this another time. Since everyone has been talking about these price caps, energy companies are attempting to do something to stop the price cap.

As such EON first, and now Scottish Power have moved to scrap their standard variable tariff and now put people onto fixed price tariffs when their current one ends. This means that once your November 2017 tariff expires, you’ll be put onto a November 2018 tariff. What we’re unsure about is whether you will now be free to leave that tariff at any time for free or would you have to pay an exit fee to leave, I’d assume it’s the latter.

Is this good news, yes, however I’m sure prices will continue to rise and I doubt profit margins for these suppliers will get any bigger.

Time To Consider A Longer Contract

contracts

Time To Consider A Longer Contract

As with all things, energy prices go in cycles. I joined the energy sector in 2014 when the market was as low as it was in 2008. Clearly I joined at the lowest end of the cycle. You all remember in Winter 2015 when the petrol price per litre was 0.98p. Now were about 13% above that. The average price per kWh has increased by about the same in that period however for customers that use energy brokers, they really notice the difference.

Although the average price has only changed by 15%, the absolute bottom line price has changed drastically in two years. Since the EU referendum suppliers put their base prices up by 1-2% every month.

If you worked with me in 2015 you would have been on 8-10pence per kWh. Now the cheapest client I have is on 10.5pence p/kWh, with the average kWh being 12pence.

The question may arise, who’s to blame? If you’re interested give me a call and we can discuss why the Governments plan to have half hourly meters in every property, domestic or commercial in the next 5-7 years is both pointless and expensive for us.

Any ways let’s forget the blame game and look to what you can do about it. Gas keeps getting cheaper as technology becomes better, we’re able to store it more cost efficiently. So don’t fix that one for 5 years, I can almost guarantee I’ll beat your current gas price now.

Electricity on the other hand is a different fish. About 30% of electricity is made from Gas. Odd thought I know but it’s true, the cost of making electricity is cheaper but the cost of transporting it and meeting these ridiculous government regulations/plans costs stupid amounts of money. I’d very rarely beat your current electricity prices unless you got ripped off previously. I’d recommend going for a two or three year price. Of course the prices might come down, but I most certainly doubt it.

P272 – Max Demand Meter Change – Save Money By Appointing A Cheaper Meter Operator

All sites with a meter profile of 05, 06, 07 or 08 must should have now moved to half-hourly metering.

Your new meter will take a meter reading every 30 minutes. This information will be stored on the meter and a Data Collector, known as a “DC” will come and collect it. They will pass this information onto the Meter Operator known simply as “MOP” and the MOP will analyse all this data and then send it to either you or your supplier.

You have to pay for this service. Either your supplier takes the cost and passes it onto you by way of your energy bill, thus your bill will be higher. Alternatively, you can shop around and get quotes from meter operating companies and data collectors and then pay them yourself.

The two are not equal!

What You Should Do

If you don’t do anything then your supplier will arrange their preferred Meter Operator and Data Collector for you. The market in this area is open and highly competitive – getting a contract sorted before your supplier goes ahead and agrees one for you can really loosen the blow to all this mess.

Should You Do Nothing..

If – by your deadline – you have not appointed a MOP, DC, your energy supplier will give the job to their preferred MOP, DC providers by default. This will initially be out of contract, and as such you are likely to pay inflated rates.

As there is a legal requirement for the MOP service to be contracted, their MOP will then contact you directly and ask you to sign. At this point you can of course negotiate, but without having searched the market for other providers, you are unlikely to secure the best value contract.

As DC services do not legally need to be contracted, it is likely that your energy supplier will simply charge you monthly for this. This will be out of contract and as such you are likely to be pay an inflated rate, as well as the energy supplier’s admin fees. What’s more, you won’t get access to your energy usage data – a service that is only offered under contract. This means you will miss out on crucial insight into how, when and where energy is used at your sites.

Will My Bills Rise?

Short Answer is Yes.

This government pushed change is not to save you money. It’s to make your billing accurate so the government, the energy suppliers, the national grid and all other people concerned can monitor when and how electricity is being used.

Electricity used at “peak times”, for example, the 5pm winter peak will be more expensive, you need to learn about this and avoid using electricity at the expensive times.

Should you choose to arrange the MOP and the DC yourself, then they will invoice you directly and it won’t show on your energy bills. You can use the information they send you to analyse how well your electricity management is. It may sound long and annoying, but in the long run getting your head around this will help.

I’ve tried to keep this simple so please feel free to jump on Google for a more detailed explanation.

Smart Meters Delayed Even Further & Other Issues

smart meter rollout hamed adefuwa

These smart meter delays are getting ridiculous now. I remember in 2014 they came out with a plan that all businesses using maximum demand meters will be upgraded to half-hourly meters by April 2016. That was then pushed forward to April 2017 since none of the suppliers even attempted to meet that deadline. I do feel for all the customers stuck on Maximum demand meter contracts with small suppliers who don’t have the functionality to upgrade them. It’s unknown as to how the suppliers will shift them onto a new supplier.

smart-meters-rollout-hamed-adefuwa

Is This The Right Time?

The government has chosen to mess with both the business sector and the domestic sector at the same time, which surely can’t be a smart move, especially now with all this Brexit nonsense. None the less, all energy suppliers have been told they must start installing smart meters now and have until 2020 to hit their target. It’s going to cost £10.6 billion to install 50 million smart meters. The funny thing is, it will only save the average household £26 a year.

With a target of 50 million smart meters, they began in 2011 and as of 2016 there had been 550,000 meters installed. Things were going slow.

Kind-of-Smart Meters

British Gas was a little silly in installing “kind of smart meters”, which were no-where-near what the Government had asked for. They now have the annoyingly silly task of replacing all those “smart” meters by 2020.

Privacy Issues

I’m not one to care too much about privacy. I don’t care who has my direct debit details, if money gets taken out I’ll just get it reversed. I don’t consider information like my families names or date of births as sensitive so I’m not one to buy into lots of these privacy concerns that others have. However with that said, there are some major issues with this mass smart meter rollout. When you look at the mess that has been created by it, the lack of enthusiasm by both energy companies and customers, it’s all been a bit sloppy.

The biggest issues are probably; your home energy network becomes connected to the internet, people with access to the network can see what times your usually at home if you’re at home now and what you use your energy on. Smart meters are even detailed enough to determine where in your house energy is being consumed, i.e. you’re in the shower for 45 minutes between 8pm and 8.45pm.

One of the intelligence agencies investigated the systems being installed and noticed a key flaw. Every smart meter being installed in a business and home has the same encryption key which is used to pull off all the information from the meter. This means, anyone with access to that key, or if the key was discovered by hackers, every smart meter information could be compromised.

Smart Meter Delays

Two of the big companies involved in this whole process (BEIS & DCC) claimed in July that they would have their systems up and running by September. It was originally supposed to be done by 17th August but that didn’t work. One of the spokespeople for the BEIS said;

“The new infrastructure is planned to go live at the end of September, it is currently being tested to deliver a long-lasting, world class system to bill payers.”

My Final Thoughts

I doubt the delays will affect things too much however I do believe this is a sign of things to come. E.ON got fined £7 million in November 2015 for not doing enough. With all these delays and security issues, I do believe we will see more problems with this whole transfer. Let’s hope things go well.

Report Energy Theft

crimestoppers energy theft website

A charity called Crimestoppers has set up a new website for us to anonymously report people stealing energy. They want both businesses and the public to come forward and report energy theft, either through the website or on their phone service, 0800 023 2777.

crimestoppers energy theft website

Crimestoppers are working with all of the energy suppliers to start this hotline. Hoping to get everyone to provide information and help ‘pull the plug’ on energy crime – pun intended.

Tampered and bypassed meters are costing the big companies lots of money but more importantly, people have actually been harmed by the exposed electric current. It can even cause blackouts in some neighbourhoods.

A tragic incident occurred in Glasgow, that resulted in an elderly, housebound woman losing her life in a house fire caused by a tampered meter. She died of smoke inhalation, and her son, who lived with her, and was actually responsible for tampering with the meter, was sent to jail.

If caught stealing energy, people face a fine and up to five years in prison.

Click here to report anyone you suspect of stealing energy; www.stayenergysafe.co.uk

crimestoppers energy theft website

British Gas Losing Customers Fast

british gas experience drop in profits

British Gas from a consultant’s point of view is great. They’re easy to deal with, have lots of staff so any of my customers that have problems, I can get the problem solved quick and painlessly. However, they do have many problems and they have done for years but considering their size and market share – they have not been bothered. Maybe it’s time they start taking notice.

In the last six months, British Gas has lost nearly 400,000 home customers. This has meant a 7% drop in profits. Not that that really has an effect on their overall profits; with that 7% drop in profits, their profits were still a colossal £516m over six months. Centrica, the company which own British Gas, have blamed the drop in customers on a “competitive environment” and the fact that long-term contracts have now become a thing of the past.

Centrica said that they expected some short-term impact on their profits due to the Brexit vote but they only expected it to be limited. Like all other companies, there is some ambiguity with regards to how much damage will be done and what will happen once we eventually leave Europe.

Centrica said earlier this month;

“However, the result creates general uncertainty which adds to challenges for UK businesses in all sectors, with implementation plans as yet unclear.”

“The UK is now a major energy importer and what happens in the European energy market will ultimately impact energy consumers in the UK. We will continue to engage with the UK Government and the European Commission as we move forward.”

Centrica also points to their decision to drop their home energy prices by 5%. They were actually the last of the ‘Big 6’ to drop their prices thus they lost a few customers to their competitors who dropped their prices earlier.

The company also said it has made some major savings by cutting their costs this year as a part of a plan to save £750m by 2020. They have managed a £141m drop in costs in the first half of this year by cutting 6,000 jobs with a further 3,000 being cut by the end of the year.

Their chief executive said:

“The first half of the year has been demanding for Centrica, but the response has been strong and I am encouraged by the progress we have made.”

“I remain confident in our ability to deliver both attractive returns and underlying cash flow growth, as we continue to implement our strategy.”

The GMB Energy Union Calls For Ofgem To Be Scrapped

parliament building

The GMB union are not happy with Ofgem and are calling for the government to take over. This would mean completely scrapping Ofgem and giving full control to the ones who run the country. This energy industry is supposed to be regulated to make sure it’s a fair market for everyone to compete in. Although that may sound nice and cheerful, in reality it’s often just not to case. We often hear new suppliers enter the market claiming to be different, more ethical, more efficient and a year or two later we see them doing the exact same ‘bad practices’ as others.

The national secretary for the energy union GMB said earlier this week;

“Ofgem should be abolished and the government itself should take over responsibility for regulating the industry so both are accountable to Parliament,”

“Government cannot duck taking the decisions needed to keep the lights on and ensure the decarbonisation of the sector. Government should also have powers to cap prices and limit profit levels and, where necessary, to finance and run power stations.”

The comments from the union were made due to Ofgem announcing they were going to make the market fairer and more competitive. Commenting on the comments made by the union, an Ofgem spokesperson said;

“Ofgem works within the government framework which has set out there should be a competitive energy market. We believe competition is in the best interests of consumers and put in protections where necessary, such as the price cap for pre-payment meter customers.”

The union then added following Ofgem’s comments;

“Here we go again with more Ofgem tinkering over the pretence that a free market is possible in this sector.”

Whether we want the government to take over from Ofgem or not the likelihood of it happening is little to none. It’s not in the government’s interest to be making some significant changes when everything is so unstable at the moment. Leaving the EU, change of prime minister and all the different procedures put in place in recent years by Ofgem – this move probably won’t happen.

Whether that’s a good thing or not, we won’t know anytime soon.

What Does Brexit Mean For The Energy Sector

EU Referendum - Signage And Symbols

As you may have heard, the UK recently voted in a historic referendum that resulted in us actually leaving the European Union. The result has taken many by surprise, including Prime Minister David Cameron, who has since resigned. The question on everyone’s lips now is, what will life be like now post-Brexit?

Throughout the referendum campaign we’ve heard a fair amount on the negative impacts Brexit would have on the UK economy and more specifically the UK’s energy sector.

Now not everyone is a big fan of change, however, it doesn’t look like we are going to have much of a choice.

Through a bit of research, it appears that it will be utilities that stand to be most affected within this sector. The deciding factor on the severity of the effect is if Britain will remain in the EU’s Internal Energy Market (IEM) or not.

Industry Experts Reaction To The News

Both SSE and National Grid have urged the Government to ensure Britain remains in IEM as it ensures smooth trading of gas and electricity between its members. However, if we do end up excluded from the IEM, it could result in costing UK consumers £500 million a year. It is a hefty price to pay, but this is due to disruption to electricity trading and the potential cancellation of plans for new undersea power cables to the Continent.

Other industry experts have added their views on Brexit; a senior editor at the Economist stated ‘the result had put a lot of uncertainty over the UK’s energy industry.’ While others are very matter of fact and have stated that ‘we have always been an island and that our energy system is used to being isolated from the continent.’

However on a more positive spin, now the UK has left the EU it means making energy deals with countries such as China will be a lot easier which could increase the UK’s attractiveness for investment.

Exerts taken from; http://www.telegraph.co.uk/business/2016/07/02/what-does-brexit-mean-for-the-key-parts-of-the-uk-economy/

[Featured Image Credit: http://www.businesskorea.co.kr/]