Price cap increases- To fix or not to fix?

Am usually fairly confident about using the Cornwall Insight figures, but very wary of risk right now. The probability of further wholesale price rises has increased IMHO since the last Cornwall Insight press release 

Wholesale prices not unsurprisingly on the up today.

But probably won't go bananas like it did in 2022 when Europe started to cut itself off from Russian gas supplies and Europe is now oriented towards the US in a big way.

On the other hand wholesale day-ahead electricity prices are very strongly negative tomorrow (paying to take energy off the grid) and my guess is that this is because of large scale dumping of demand by utilities which they bought on the futures market quite a while ago but I would be interested to hear views on what the actual reason is though.

High wind drove the day ahead prices lower, double the seasonal average. But these odd days only really help octopus tracker and Agile customers at the moment. As you say energy suppliers buy most of their energy in advance and trade if they  need a bit more or less. Also the CFD contract for difference process mean wind turbines get paid a fixed price at the end of the day anyway, a netting out payment is added to our bills to cover when the price is higher or lower than the fixed price. All the energy suppliers that tried to game the market by not buying ahead when bust. We all paid for this with a levy on our bills. OVO Anytime can make use of low 30min slots in terms of pricing which is good.

Like you, I also think it is unlikely we see the huge spike we saw coming out of covid and the start of the Ukraine conflict, none the less forward electricity prices have risen since the Cornwall Insight figures from the low they were at

This shows the forward electricity prices for next winter and summer and how it has changed over time.

It is just I think the expectation that prices will fall feels a bit out of date to me.

Be interesting to watch the fixed price offers from suppliers over the next month and how world events unfold.

Hi @Jeffus and thank you for coming back.

This is the difference between two different markets. The Futures Market which will fluctuate slightly over the year/years but at least once source had suggested no real drop back to pre-2021 prices for the next 10 years at least. The day-ahead wholesale market will have its ups and downs but if you track this year’s average whole-day rate against 2023 there is a scarily close relationship that has been operating over the past six months almost down to the timing and the depth of the price plunges which is just beginning to suggest that these are not as random or as ephemeral as might be thought. Time will tell on that.

As a summary, if you are a customer who likes price stability then Fixed-rate Prices or even the SVT is definitely for you. If you can flex your usage out of the peak slot then Power Move is a good, zero risk, add on to have. There is plenty of good guidance from the forum volunteers and other users on here on how to meet the targets

My question is: Will more utilities offer a more wholesale/flexible pricing option like **Power Move (and more) to customers who want more than price stability.

Peter

** Even Power Move is a type of flexible pricing as the total bill for the month depends on when you use your power which is the same type of result as wholesale day-ahead but more predictable and no risk.

Power Move is OK but is very simplistic as the power move period is fixed every day and there is no downside. Also as you say it doesn't take any account of wholesale prices or pay high usage users any more which would make the most difference longer term. It isn't bad as the high use of fossil fuels and high prices is usually  around the same time every day. But in the future this may change. Even now some local areas (sub stations) have peak usage overnight due to a concentration of EVs. So a move to zonal and nodal (your local substation) load balancing and pricing is on the cards for the future. Without things like this the investment in infrastructure will be eye watering. A level of central control like Intelligent Octopus, OVO Anytime is likely to become more widespread which will also help. This functionality is already mandatory in new EV charges to prepare for the future. This central control may be by supplier, regional or national with some clever tech managing load in many of our homes. The challenge with anything like PowerMove as it scales up is that you can end up with a large peak load in some substations just after the powermove period.

There are a few things like Power Move offered by other suppliers and of course the National Grid Demand Flexibility scheme which is much more targeted.

If this is a subject you are interested in then have a read of this and input to the consultation.

https://www.ofgem.gov.uk/publications/ofgem-launches-discussion-future-price-cap

We may not be many years away from everyone being on some sort of peak/off peak tarrif as a default option.

I certainly agree with the introduction of flexible tariffs but I also have concerns about people’s abilities to manage their demand on such a tariff and I think this is where a good support team from Ovo would help enormously and I see the need for able volunteers becoming more important.

By fixing, you can lock in your current standing charge rate and potentially save money in the long run, especially if Ofgem's changes to standing charges don't happen before your fixed term ends.

Well l have fixed it has got to be cheaper then last time round. just got an email to say l didn't hit my target for this month. but sometimes l find it harder to use less. but if you eat at eight like we do. so you are using the oven and hob. why would eat after nine a bit late. we got use to that time any way. l do use essentials like appliances washing machine. just done a bit of ironing now so that uses less.

For anyone following this, I noticed yesterday a new 1 Year Fixed Loyalty plan, dated 09/05/2024. It represents a significant saving for me over the current SVT and even more over the year using Cornwall’s predictions. It’s a 5.5% saving on the unit rate and 7.1% on the standing charge for me compared with my current SVT, and it’s about 7.5% cheaper overall than what Cornwall is predicting. They would have to have got it very wrong if rates were to change so much as to make it worthwhile for me to switch back at a cost of £75.   

This plan is a lot more generous than the 1 Year Fixed plan dated 18/04/2024, so I’ll be keeping a close eye on it for a few days.

[ETA] … bearing in mind that the Q3 price cap will be announced in a couple of weeks’ time.