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tyres

Big Six Energy Companies Slammed For Not Passing On Price Cuts

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Their inability to drop prices right now is a direct result of Labour's gift to Hedge Funds.

Faced with the risk of having a price freeze forced on them, the energy companies have had to buy a lot of power in the futures market. So they're paying last year's (perhaps even 2013's) prices for today's power. For example, SSE announced a price freeze back in March 2014. To do that, they must have secured their supply on the futures market at the prices prevailing a year ago.

The power suppliers are operating with their hands tied behind their backs by this threat. Nimble speculators, operating without the encumbrance of having to supply anyone with energy, get to cream off the profits.

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Their inability to drop prices right now is a direct result of Labour's gift to Hedge Funds.

Faced with the risk of having a price freeze forced on them, the energy companies have had to buy a lot of power in the futures market. So they're paying last year's (perhaps even 2013's) prices for today's power.

Sounds right. In fact it sounds like déjà vu.

Before them it was the FSA trying to micro manage the energy companies which completely distracted them from what was going on in the loan/mortgage markets. Just before they collapsed.

Unless they want to nationalise them, governments and quangos should STF away from the utility companies and let them get on with it IMO (any criminal activity excepted).

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Heating oil is coming down nicely though. It is nearly half the price of this time 2 years ago.

Of course, the increases were felt acutely too back in 2008. I suppose that is the cost of not asking energy companies to hedge for you. I suspect there is more competition for heating oil delivery too, as you need far less infrastructure, leading to smaller players coming in scuppering cartels.

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Their inability to drop prices right now is a direct result of Labour's gift to Hedge Funds.

Faced with the risk of having a price freeze forced on them, the energy companies have had to buy a lot of power in the futures market. So they're paying last year's (perhaps even 2013's) prices for today's power. For example, SSE announced a price freeze back in March 2014. To do that, they must have secured their supply on the futures market at the prices prevailing a year ago.

The power suppliers are operating with their hands tied behind their backs by this threat. Nimble speculators, operating without the encumbrance of having to supply anyone with energy, get to cream off the profits.

Confused.

How does a proposed (and not implemented) opposition policy do that exactly?

Also, even if the big companies are tied in to fixed prices, there should still be smaller companies that should be offering something very competitive right about now.

I like a good conspiracy theory as much as the next person, but I think occam's razor is the way forward here.

Private companies will charge as much as they can get away with.

A market without adequate competition will result in monopoly.

Prices won't come down because they don't have to basically.

Even if what you say is correct, a price fall because of falling oil prices would only be delayed.

Okay so we're paying higher bills now because of the higher prices energy companies paid to stockpile oil and gas at higher prices last year. That makes sense.

But by that rational next year our bills should halve because we will then be paying relative to what energy companies paid to replenish said stockpile with oil and gas bought this year.

I understand what you're saying, but technically it wouldn't actually result in a price rise itself. More a delay in any price drops feeding back to consumers.

Edited by byron78

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Confused.

How does a proposed (and not implemented) opposition policy do that exactly?

It's a threat. A huge threat. It threatens all the energy companies with bankruptcy of their prices were to rise sharply and they could do nothing to recoup them. They have to protect against that risk.

Also, even if the big companies are tied in to fixed prices, there should still be smaller companies that should be offering something very competitive right about now.

That's very probably true. Though it's also plausible that a smaller company who took the risk might now be raking in the profits instead, in a way the "big six" could never get away with.

Even if what you say is correct, a price fall because of falling oil prices would only be delayed.

Yes. Until 2016, when the threatened price freeze was due to expire.

But don't take my word for it. Follow the links in my previous post. SSE are clear about the timetable of their freeze. And note the date of the blog entry: an I told you so from 15 months ago.

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Eon reported to be cutting gas tariff prices. Whether they all follow suit should feedback into the CPI. Are we looking at CPI deflation in the near term ?

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Eon reported to be cutting gas tariff prices. Whether they all follow suit should feedback into the CPI. Are we looking at CPI deflation in the near term ?

http://www.bbc.co.uk/news/live/business-30748407

David Bird, customer operations director at E.On on Radio 5 live says the company has passed on the full extent of the savings it has seen from falling wholesale energy prices. Like all big energy companies it hedges against volatile swings in the energy markets. So at the moment it is buying as far out as 2017.

E.On says today's price cut is a "risk" because Labour has promised a price freeze if it wins the general election. Chief executive Tony Cocker urges political parties to recognise the "realities" of the energy industry.

E.On cuts gas price

Energy giant E.On is reducing standard gas prices by 3.5%. It says the cut will be "applied immediately". The move reflects a drop in wholesale prices this winter, it says.

Although it does highlight an interesting point about how far out the predictions are for future prices, as the assumption is clearly they will always be higher, yet the price of oil has always been hugely volatile with big increases and then be decreases.

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E.On to cut gas prices by 3.5% New

Energy firm E.On is cutting standard UK gas prices by 3.5%, equivalent to £24 off an average annual household gas bill.

A whole £24!!!! A huge saving....

BOOM this is massive really massive great news to start the year well done E on ,now what do i spend my extra £2 a week on ooh wait a min I'm on fixed 3 year deal :(

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At a guess ... maybe they've bought less than average at the prices of a year ago, and are taking advantage of that to pile pressure on their competitors.

It's the threat from politicians that ties their hands behind their backs, and makes their business a sitting duck for speculators (amongst whom hedge funds are the Big Boys nimble enough to take advantage).

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At a guess ... maybe they've bought less than average at the prices of a year ago, and are taking advantage of that to pile pressure on their competitors.

It's the threat from politicians that ties their hands behind their backs, and makes their business a sitting duck for speculators (amongst whom hedge funds are the Big Boys nimble enough to take advantage).

Not sure about that. The energy companies have internal trading desks, and they're not just offering power to the market and hedging. It's difficult to know relative profits because they're not required to give breakdowns on retail vs generation vs trading. But how much they hedge price risk is their choice. If a price freeze, or expectations of one, leads to a significant fall in profits then they're not hedged suppliers they're speculators. In which case they took a bet and it went wrong. However, as a group I'd assume recent energy price falls have lessened likelihood of higher tariffs more and more pushback. It is a market, but they're competing with less competitive European power monopolies. They could have invested in greater storage capacity and relied less on just in time delivery, instead of paying out profits. But they haven't. I'd guess the biggest problem is that everyone assumed demand growth would undoubtedly lead to ever higher prices. That's gone wrong.

Whoever makes makes money - and it won't be the consumer - it's mostly due to things other than any price freeze talk. All markets are rigged to an extent, otherwise few would bet on them and make any money, but rigging works both ways and so do consequences. I reckon most energy and commodity hedge fundshave lost a lot of money of late. As your linked article says I'm not sure financialisation and pure speculation contributes anything of value here, but it's likely the evaporation of speculation is playing a big part in why prices are trending as they are. In the interim from public to private ownership shareholders and investors have done rather well.

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That means if they are forward trading buying at todays prices for tomorrow which they should be doing....we will or should lookforward many months of much lower bills...wait and see what more excuses they come up with.

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That means if they are forward trading buying at todays prices for tomorrow which they should be doing....we will or should lookforward many months of much lower bills...wait and see what more excuses they come up with.

That depends on what the futures market thinks the cost will be over a longer period + risk premium.

Just because the oil price is $45 today, doesn't mean they will promise to supply you at that flat rate for the next 3 years

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That depends on what the futures market thinks the cost will be over a longer period + risk premium.

Just because the oil price is $45 today, doesn't mean they will promise to supply you at that flat rate for the next 3 years

Their excuse was they bought at last years prices......well forward thinking and buying at future prices may help keep bills down for everyone....and I don't buy all this investment in green, subsidies,eco etc blah, blah ....things carry on we will be chopping our own trees and collecting our own sun and wind....and not to put back into the grid, to use ourselves. ;)

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