Are OVO hedging against future price rises?

Many thanks for your response.  It’s re-assuring to think that OVO are hedging their price risk by buying energy in advance when costs are cheaper.

You have mentioned the Energy Price Guarantee and I recently noticed on Martin Lewis’s Money Saving Expert website that there were some tables published showing unit costs and daily standing charge costs per UK region from 1 October 22.

However, when you emailed me a couple of days ago advising of the new prices from October onwards, I noticed that OVO’s unit costs and daily standing charge cost appeared to be more than what was published for the Southern/South East region.

Are OVO’s new prices exceeding those recommended by the Government and OfGem?

Hey @newjerseyminx,

Thanks for another great question.

OVO’s prices aren’t exceeding the Governments Energy Price Guarantee.

As you’ve stated, unit rates and standing charges vary regionally. Also prices for customers who pay on demand instead of by direct debit are higher. It may also be that the prices you were sent were including VAT. 

Can you send a screenshot of the prices you’ve been given and a link to the Martin Lewis page? Then we get get to the bottom of this!

Hope this helps. 

Hedging cuts both ways - its a good idea when prices are rising but not when they are falling.  But this is really an internal matter for OVO and has no impact on the prices you are charged which for the next 2 years are fixed by the EPG floor.

Also the reply didn’t say how much hedging was going on.

Info from Martin Lewis web site: https://www.moneysavingexpert.com/news/2022/09/energy-bills-price-freeze-cost-of-living-government-liz-truss-/

However, unit rates vary depending on where you live, so see our Regional direct debit rates and charges round-up for full information. We'll also update this story once our How much will I pay under the price cap? calculator has been updated with the new rates.

Then go to the below link for all the individual rates per region:

https://www.moneysavingexpert.com/utilities/what-are-the-price-cap-unit-rates-/#unitrates

And these are the prices I was told I was going to pay:

Can you help us out here with a bit more detail, @newjerseyminx? It’s interesting and relevant for lots of people to be confidant that any info from these MSE charts are clear and accurate. 

What region are you in, what payment method do you have with OVO? Are the prices in the table above from OVO? 

Hi Tim.  I live in Chichester, West Sussex.  To be honest I don’t know what region I would fall into because the regional tables shown on the MSE website quote prices for a Southern region and a South East region but what is not specified is what towns/cities fall into each region.  Presumably OVO classifies its customers by region so what region does West Sussex fall into?

The prices on the above table were taken from the email that OVO recently sent me.  I don’t know if other consumers monitor their energy consumption & prices but I keep my details on a spreadsheet which I update when change happens.  This helps me to clearly see what my consumption is and what price changes have taken place from year to year.  

To help me keep control over my household budget, I pay by monthly standing order then make up any shortfalls when I get my bill.  Currently carrying a large credit ready for the winter months.

If you changed to paying by Direct Debit @newjerseyminx you would be charged a lower figure per kWh I believe.

Yep if you’re not paying by Direct Debit, the prices will be different, @newjerseyminx. Only slightly, but Direct Debit gets you the cheapest Simpler rates. Find out the region here to correlate the MSE (are these for payment on receipt or Direct Debit?) prices with those listed above:

Thanks everyone for all the feedback.  Yep, to direct debit or not?  It’s a tricky dilemma.  Is it better to get cheaper prices or keep control over your household budget?  I’ve seen many posts on this website where customers on DDs who have large credits on their accounts have seen their monthly payment amounts increased beyond what it sounds like they can afford.  Whilst this arrangement may adequately cover energy costs, it leaves little cash to cover the rest of your monthly bills including shopping and car fuel/public transport costs etc

Part time workers on low salaries like myself are already facing challenging times ahead trying to ensure a meagre wage covers everything so for now, I’m sticking with the Standing Order payment method as then I know I’m still in control of my finances but thanks for all the helpful advice.

Also just to add further to the above post, energy companies still get money up front via standing orders so really in my view, no real reason to not give a discount to anyone who prefers to pay by standing order.

Except that Standing Orders carry more risk and require the same kind of manual actions that paying by manual bank transfer involves. The only method that can be totally automated with no human involvement at all is Direct Debit, followed by credit/debit card payments because the customer still has to take a manual action.

Strictly speaking, Standing Orders are really designed more for making regular payments to an individual rather than a business, or potentially making regular payments to a small business or charity. For anything else, Direct Debits are much easier and safer for all parties!