Ofgem are increasing off peak rates more than peak rates- This penalizes Economy 7 customers

Hey @EverythingNeedsAUserName,

I understand your point. I’ve had a look on the OFGEM website and can’t see anything that explains this in more depth. 

We have had this point made a few times on the Forum, in relation to customers not feeling like their being rewarded financially for moving usage to off peak on the Economy 7 plans. 

Maybe our Community Volunteers might have some rational explanations? @BPLightlog @Jeffus @Firedog @Blastoise186 

This is quite a good write up.

A word of caution, the rates in the table are the 1st October rates, and they are the average so your regional rates will be different

https://www.moneysavingexpert.com/utilities/economy-7/

Peak vs Off Peak 

As the article says it is worth shipping around to see which supplier would be cheaper for you based on your actual split of peak and off peak usage.

Have you done that, if so what was the cheapest?

What is your peak and off peak usage?

In the future it won't be as simple as shifting daytime to night to balance the grid, hence the new tariff we are gradually seeing.

Gas vs Electricity standing charges

There are a lot of costs added onto the electricity standing charge like Warm Home Discount, Feed in Tariff, Heat Pump Grants, supplier failures etc. 

The government have historically loaded this sort of thing onto electricity so everyone contributed.

Electricity vs Gas

Unfortunately it is what it is right now.

The government could decide to load some costs onto gas in the future rather than electricity.

Also tweak the split between unit rates and standing charges, but there will always be winners and loosers. 

We haven't yet got to the stage where the government wants to actively penalise Gas users via their energy bills.

Your best bet may be to investigate Octopus Agile and other time of use tariff as they are launched over the next few years. Have you looked into these? 

Up to now I've stuck with OVO having had too many poor experiences with other suppliers (me and friends). Last time I checked in 2022 there was little difference. If I ever moved, Octopus is most likely.

If I'd compared a month ago "which supplier would be cheaper for you based on your actual split of peak and off peak usage" it would now be a completely different calculation. That is what is so annoying.

The cost to me is a minor issue compared to the Ofgem loading of off-peak electric and standing charge compared to more polluting gas. I'm scared for our planet. 

Sorry, but there’s nothing rational about it. Price fixing is a commercial decision, nowadays within the constraints laid down by Parliament and its servants like Ofgem. 

Ofgem does its sums to work out a reasonable pricing level, balancing the ability of the consumer to pay against the supplier’s need to conduct a successful business. This exercise results in the price cap, which eventually lays down the maximum prices a supplier can charge per unit and per day. 

Ofgem doesn’t lay down differential prices for peak/offpeak tariffs. It merely assumes a ratio between offpeak and total usage for Economy 7 consumers of 42%. So long as the cost of electricity for the average E7 consumer doesn’t exceed the price cap, the supplier is at liberty to set peak/offpeak prices as it sees fit. Ofgem does lay down a maximum equivalent single rate for E7 customers to reflect its assumption.

The figures quoted on my Renewal page are allegedly the rates for 2024Q1, but they appear to be the same as the current ones. Using these rates, I see that my ‘break even’ level is at about 34%, meaning that I will be paying less on E7 so long as I use more than 34% of my electricity during the offpeak period. This is much more generous than Ofgem assumes, so it may just mean that my calculations are wrong 🙂

I actually look at all the pricing in the same way as I do for vehicle fuel. Encouragement to use a particular fuel often results in additional price increases as it becomes more popular. You could say just like supply and demand, even with the regulator in place (no doubt constantly hearing about low margins from various suppliers).

I have long thought that as we move towards more renewable energy being supplied, coupled with an ever increasing demand from various devices, EV’s and the like, energy is likely to become a more ‘pay for what you use - and when you use it’ commodity bringing with it pricing depending on time of use. 
Wanting to be greener in our household energy consumption, we have moved to Octopus Agile which is priced by the half hour and so I can balance our usage together with our solar PV and battery system. I would have stayed with OVO but they currently don’t have such a tariff. 

You have a number of options if you are annoyed, just a few examples:

Taking part in the ofgem consultations etc, for example https://www.ofgem.gov.uk/publications/ofgem-opens-conversation-energy-standing-charges-ahead-winter

Talking to your MP

Starting a petition https://petition.parliament.uk/

I hadn’t realised that it was down to the energy company to decide on the split for E7. That is a surprise. Looking at the Ofgem website, it shows there is a very marginally different cap rate for “Electricity - Multi-Register Metering Arrangement” compared to “Electricity - Single-Rate Metering Arrangement”.  That’s the only reference I can see.

In November my 12 month average was 85% off-peak usage. Prior to getting the batteries, it was around 33%.

Thanks, more investigation required.

Thanks. I’ve found the consultation. @Firedog has educated me that the split is not Ofgem, but down to individual energy companies, so that is an avenue for exploration.

The 42% cut-off is quoted here: Economy 7 consumer guide

Ofgem did consider changing the percentages but decided not to

There is some commentary about the subject here

https://www.ofgem.gov.uk/publications/decision-typical-domestic-consumption-values-2023

The great thing about this forum is how helpful everyone is.  Thanks for all the information.

There have been a lot of government documents and consultations published over the last few days. You may find something interesting in there about the journey to net zero, including consultations

https://www.gov.uk/search/all?organisations[]=department-for-energy-security-and-net-zero&order=updated-newest&parent=department-for-energy-security-and-net-zero