""We need to consider gas & electricity price rises separately!""
Let me explain...
As OVO Energy stood up against the big six (http://www.bbc.co.uk/news/uk-24606614) and shared an honest and accurate view on the wholesale gas market there was some info that was missing from the arguments...In honesty I believe it was left out as it would over-complicate the argument and dilute the point Stephen was making (so nothing negative to be said about OVO here- I like them and I'm a domestic customer!
I think one of the big issues is that energy prices are complex. They are made up of the wholesale energy price, the cost of delivering the energy from source to use, plus a tax for using a fuel based on how carbon intense it is.
So when you are looking at the end user price it's not just the wholesale market.....A wholesale market could stand still and yet the consumer could still see a price rise that out-strips inflation.
Some people will find that hard to believe but the wholesale element only contributes to around 60-65% of the total energy bill. This means the other elements do have the power to increase and pull the pricing upwards in excess of inflation..
Now what needs to change? For me, it's blanket statements on energy. If you make a statement that energy prices are going up by 8 or 10% your assuming that all fuels are being treated in the same way? That they are moving in line with each other and they will continue to do so?
Well...actually, it's not completely true. I think this is where Stephen is coming from. The wholesale price of gas is actually on it's way down, and it's a cheaper commodity in 2015, 2016 & 2017 when considering wholesale prices. Fact! So why would you put up the domestic price of gas to consumers?
Well the carbon tax on gas has gone up a little year on year but I would say the 5-8% increases in the gas price for domestic consumers is not one that is true to the market conditions.
We've purchased 8 years of gas for a large food manufacturer in the UK, you would know them but I won't name drop, and we've reduced their price of gas for 8 years on the bounce.
However, the price of electricity is in truth going up. And it's going to continue to do so when you take the impacts of electricity market reform. The markets are already trading up year on year by around £5/MWh (to a domestic consumer this is about 0.5p/kWH (unit of energy)), representative of say 3% of your energy bill.
The other increases in the electricity prices are the carbon taxes, and so in my opinion a price rise for electricity for domestic consumers does make sense. I would actually go as far as saying this will happen for the next 5 years every year or every other year and the magnitude of price rises will be in the region of 3-10% dependant on how long the governments energy market reform takes (and the reaching of each milestone along the way).
So what should the price rises have said? Well they should have said: "Electricity Prices up 5-8%" "Gas Prices down 3-5%"
I'd then expect this trend to continue but not for your total home energy bill to remain the same. This is simply because with the price of electricity and your use of it both being higher it makes up much more of your total energy bill.
So a reduction in the price of gas might only mean a fractional reduction in the total cost of your energy bill.
So what can be done and what does the future look like?
Well, I can tell you one thing for certain and that's that the green agenda, the politics of energy, and the on-going argument for price fixing, protecting consumers, and ensuring we have a reliable energy supply have only just started. The 'can of worms' has been opened and I actually think politics is going to ruin what could be a straight forward conversation..
You will fund yourself chatting Nuclear vs Renewables in the pub before you know it and I'd suspect in the next 5 years your mate will be turning off his heating on his smart phone & within 10 years will be turning on his home-generator to support the grid when it is straining to support the national energy requirement.
It's exciting because we are on a journey to something better. To a cleaner energy system and to a more interactive and democratic energy bid system. I'm all for it.
The bit I'm not in for is for politicians who quite frankly don't understand the energy mix, a DUoS from a TNoUS or a CRC from a CCL, or the wholesale markets. They keep getting up and saying I can't believe that an energy supplier would put up prices by 10% and what are they basing their argument on I ask?
You may be able to tell I'm frustrated but for me it's never been so clear that politics and achieving votes for the party is going to cause a real mess of the clear direction we need to take...
The journey is going to outstrip any political run and as the 'baton' changes hand, the direction may change for the worse or the better so how are we going to ensure that consumers are protected and can avoid their taxes going into new initiatives that then flop?
Well, as consumers I think we are going to have to suffer some of the consequences of this and start to think about being self-generators. Being 'off the grid' is the only way to truly protect yourself and to be able to turn the energy dynamics on it's head. Become a net exporter and profiteer is what I say. Lobby for the changes that are needed and protect your own position whilst doing it....