I pulled a [bunch of data together](https://docs.google.com/spreadsheets/d/e/2PACX-1vR-T2nUPjEksq0zXVlt59n5O4EONJkxvJJ3hR0Bp63NBjNdQB16LLNADtP5ka9-xIBR4wXAZ3XMLET1/pubhtml#) and estimate that if only the wholesale cost (how much it costs to generate) of electricity and gas were to change our energy prices, we’d be looking at averages approximately of 43.27p per kWh for electricity and 10.38p per kWh for gas.
Instead, in October, estimating the cap based on newer fixed tariffs, means we’re going to be looking at somewhere around 58p per kWh for electricity and 17.7p per kWh for gas, leading to extra revenue of between £7 billion and £49 billion for the UK gov and energy suppliers.
If the increase isn’t just wholesale then, where’s the rest going?
According to [Ofgem](https://www.ofgem.gov.uk/information-consumers/energy-advice-households/costs-your-energy-bill):
* Environmental and social obligation costs: larger suppliers have to help pay for government energy policies
* Operating Costs: customer service, billing and the general costs of running an energy business)
* Network costs: gas pipes and electricity cables that carry energy across the country into your home or business
* Other: meter installs/maintainance, smart metering programmes, sales commissions and brokerage
I doubt the cost of getting electric gas/electric places or the meter aspects have substantially changed in the last year, that leaves operating costs (aka. energy company profits) and the government (via “energy policies” and tax).
Using 3,100 kWh of electricity and 12,300 kWh of gas will, per year, equates to:
* £1,798 for electric
* £2177.10 for gas
* £3975.10 for energy
* 5% VAT = £198.75 (last year it was \~£52)
* £4,058,800,000 extra in VAT for the UK gov (27.8m households)
* £828.94 of electricity generation/wholesale cost (using today’s electricity wholesale price of 26.74p per kWh)
* £969.24 of gas generation/wholesale cost (using May 30th gas wholesale price of 7.88p per kWh)
* £2176.92 “other” (last year it was \~£539)
* £45,508,600,000 extra for the UK gov and suppliers (27.8m households)
So in total, an increase of about £1,780 (300% / 4x increase) per year for the average household, which equals about £49 billion extra for the UK gov and energy suppliers.
If we be really conservative (and likely realistic) with that estimate and suggest that that only 80% of the 20m working households will contribute that increase and actually take off the remaining 11.8 million households, leaving *only* 4.2 million households to pay the increase, that’s still a cushty £7.47 billion extra.
Hopefully, I’ve got all the figures and calculations about right so I’d be keen to see what others come up with!
9 comments
Yes, my Shell shares are doing incredibly well. It’s a shame that it took soo long.
Your calculations are based on today’s spot price (the price for immediate delivery of energy). Unsurprisingly, the spot price for energy in the middle of summer is fairly low because very few people are heating their homes right now in the Northern hemisphere. In the winter, it skyrockets because demand is high across the board.
This isn’t how energy suppliers buy most of their supply, and for good reason. They buy on the futures market, which is buying energy in advance (e.g. committing now to buying X kWh worth for delivery in January).
To be a valid calculation, you would need to be working it out based on prices for the futures market for the period when the price cap will rise. By using the summer spot price you’re vastly overestimating how much suppliers will be making this winter (their margins will in reality be razor thin, like they are right now).
“in October, estimating the cap based on newer fixed tariffs, means we’re
going to be looking at somewhere around 58p per kWh for electricity and
17.7p per kWh for gas”
That’s an approx 145% increase and nowhere near what is predicted, which around 70%
Can someone explain why the standing charges were raised last time and why they will rise again? To me that says its not about wholesale costs.
Yay! With everyone on reddit suddenly revealing they’re electrical engineers and energy economists we’re all saved!
/s
In comparison, how much are their costs increasing?
Revenue isn’t profit
Energy suppliers are going out of business and other energy suppliers are refusing to take on their customers.
Surely if they are making massive profits there would be a bidding frenzy to acquire the millions of customers from bulb energy/etc.
The fact there is no interest in taking them on suggests the spread between the price paid for gas and the price they are allowed to sell at isn’t profitable.
I’m surprised some people are think this is anything, but theft, greed…and “because they can”.