Great work again David. The bureacrats always know better than the market (which is just a reflection of all the transactions we lowly folk make voluntarily). Unfortunately we knew that the market would have to be rigged to keep this farce going. Shifting subsidies was always an easy option.... but of course, if so cheap, why the need for subsidies in the first place?
Very illuminating. Thanks. This is rampant eco-communism (aka stakeholder capitalism), Green in tooth and claw, softly, surreptitiously, ripping its way through our energy markets.
National Grid has barely started on its rewiring programme although its fair to say that the two Scottish operators have been spending big although we aren't seeing much benefit as constraint payments North of B6 boundary still remain very large element of balancing costs as well as TuoS charges being higher. So as NG works get underway we will see ever increasing charges for the "wires and cables" element in the energy cap for the next decade.
One thing that is fairer is those on prepayment meters now being charged the same as everyone else so im happy to the adjustment for that. Then we have all the other social schemes though like warm home discount which is the increased despite the lower charges now applicable for prepayment meters! The energy company obligation which in my area is now up 22% is money pit who ensures how the money is spent. ROCs you've mentioned but 15% overall increase in cost to the end consumer although i know its only CPI to the generators.
All in all its about time the mainstream media got hold of this and exposed how much of our electricity (and gas) costs are nothing to do with world events but self inflicted wounds.
Two factors that occur to me. OFGEM implemented their decision to allocate all TNUoS charges to demand last April. That actually lowers the costs generators have to recover in the market, while increasing standing charges for the grid network. In fact, a number of CFDs had a clawback clause in their contracts which meant that their strike prices were reduced by almost £10/MWh compared with straight indexation: Triton Knoll is one example. It is therefore bizarre that under the new zonal pricing just decided on, generator prices will once again reflect their effective use of the grid.
The second factor is that OFGEM has long assumed that retailers would implement a 12-18 month forward hedging programme. Immediately it implies the wholesale cost they allow reflects futures prices over the preceding period. These assumptions utterly failed during the energy crisis, because hedging on such a scale was impossible (and potentially bankrupting). The collateral required shot up because of the huge increase in market volatility. The natural providers of hedge sales such as nuclear could not afford the collateral, or the risk that their units might be forced offline by maintenance or even closure, exposing them to massive losses on forward sales.
Many smaller retailers never hedged anyway, having been happy to undercut the majors with their high cost rear view mirror hedges during a period of mostly falling wholesale prices culminating in the lockdown lows. They soon went bust in droves. The Big 6 were also badly hit because they had been unable to hedge on the assumed scale, and had to be bailed out with government loans during the height ofthe crisis: the OFGEM cap left them with large losses, added to when taking on SOLR business of failed retailers. Recent cap levels have been set to allow them to recoup losses.
I have long argued that pricing should be much more transparent, based on much prompter markets such as by futures delivery month in the month ahead. There should then be separate markets for seasonal borrowing to allow an even cashflow for a bill payer with clear debit and credit interest across seasons, and a separate market for price insurance via caps, collars and fixes, with proper standards for these complex financial products. As with commercial traders that might entail posting collateral or at least liability to exit fees.
Kudos David, another great example of well considered and accurate analysis
I’m so impressed with it, I’ve posted it out, in the hope of educating as many people as possible, as to what is happening in our nations energy system
It’s clear Ofgem have become the net zero Stasi, happily rinsing consumers with supplier protective price caps, whilst hiding its true costs in a plethora of camouflage documents and dodgy graphs
It is also clear the vast majority of our 650 MPs are either ignorant to, or unaware of, how net zero is crippling our grid and consumers, with its upmost scam like rinsing of hard earned funds
As for moving costs from electricity, to gas bills, to make electricity (hence battery vehicles & heat pumps) look cheaper and gas more expensive (again to force the masses onto inept heat pumps), that is nothing short of legalised fraud and it is incumbant on all we realists, to challenge and hold to account, all forms of State sponsored greenfoolery
There is no doubt in my mind, that the climate con, decarbonisation grift and nonsense net zero are simply enforced, regressive policies, that are designed to erode living standards of the prole masses and must be resisted at every level, with analytical data, fact and common sense
Great work again David. The bureacrats always know better than the market (which is just a reflection of all the transactions we lowly folk make voluntarily). Unfortunately we knew that the market would have to be rigged to keep this farce going. Shifting subsidies was always an easy option.... but of course, if so cheap, why the need for subsidies in the first place?
I thought the point of Ofgem and the other regulators was to protect the consumer? Thanks for exposing this.
Very illuminating. Thanks. This is rampant eco-communism (aka stakeholder capitalism), Green in tooth and claw, softly, surreptitiously, ripping its way through our energy markets.
National Grid has barely started on its rewiring programme although its fair to say that the two Scottish operators have been spending big although we aren't seeing much benefit as constraint payments North of B6 boundary still remain very large element of balancing costs as well as TuoS charges being higher. So as NG works get underway we will see ever increasing charges for the "wires and cables" element in the energy cap for the next decade.
One thing that is fairer is those on prepayment meters now being charged the same as everyone else so im happy to the adjustment for that. Then we have all the other social schemes though like warm home discount which is the increased despite the lower charges now applicable for prepayment meters! The energy company obligation which in my area is now up 22% is money pit who ensures how the money is spent. ROCs you've mentioned but 15% overall increase in cost to the end consumer although i know its only CPI to the generators.
All in all its about time the mainstream media got hold of this and exposed how much of our electricity (and gas) costs are nothing to do with world events but self inflicted wounds.
Two factors that occur to me. OFGEM implemented their decision to allocate all TNUoS charges to demand last April. That actually lowers the costs generators have to recover in the market, while increasing standing charges for the grid network. In fact, a number of CFDs had a clawback clause in their contracts which meant that their strike prices were reduced by almost £10/MWh compared with straight indexation: Triton Knoll is one example. It is therefore bizarre that under the new zonal pricing just decided on, generator prices will once again reflect their effective use of the grid.
The second factor is that OFGEM has long assumed that retailers would implement a 12-18 month forward hedging programme. Immediately it implies the wholesale cost they allow reflects futures prices over the preceding period. These assumptions utterly failed during the energy crisis, because hedging on such a scale was impossible (and potentially bankrupting). The collateral required shot up because of the huge increase in market volatility. The natural providers of hedge sales such as nuclear could not afford the collateral, or the risk that their units might be forced offline by maintenance or even closure, exposing them to massive losses on forward sales.
Many smaller retailers never hedged anyway, having been happy to undercut the majors with their high cost rear view mirror hedges during a period of mostly falling wholesale prices culminating in the lockdown lows. They soon went bust in droves. The Big 6 were also badly hit because they had been unable to hedge on the assumed scale, and had to be bailed out with government loans during the height ofthe crisis: the OFGEM cap left them with large losses, added to when taking on SOLR business of failed retailers. Recent cap levels have been set to allow them to recoup losses.
I have long argued that pricing should be much more transparent, based on much prompter markets such as by futures delivery month in the month ahead. There should then be separate markets for seasonal borrowing to allow an even cashflow for a bill payer with clear debit and credit interest across seasons, and a separate market for price insurance via caps, collars and fixes, with proper standards for these complex financial products. As with commercial traders that might entail posting collateral or at least liability to exit fees.
Kudos David, another great example of well considered and accurate analysis
I’m so impressed with it, I’ve posted it out, in the hope of educating as many people as possible, as to what is happening in our nations energy system
It’s clear Ofgem have become the net zero Stasi, happily rinsing consumers with supplier protective price caps, whilst hiding its true costs in a plethora of camouflage documents and dodgy graphs
It is also clear the vast majority of our 650 MPs are either ignorant to, or unaware of, how net zero is crippling our grid and consumers, with its upmost scam like rinsing of hard earned funds
As for moving costs from electricity, to gas bills, to make electricity (hence battery vehicles & heat pumps) look cheaper and gas more expensive (again to force the masses onto inept heat pumps), that is nothing short of legalised fraud and it is incumbant on all we realists, to challenge and hold to account, all forms of State sponsored greenfoolery
There is no doubt in my mind, that the climate con, decarbonisation grift and nonsense net zero are simply enforced, regressive policies, that are designed to erode living standards of the prole masses and must be resisted at every level, with analytical data, fact and common sense
What can the average person do?
https://www.netzerowatch.com/all-news/more-fantasy-energy-policy
I’m sure you’re aware of this David, yet more incoming bill hikes & stealth taxes to feed the greenfoolery monster