[prawlin]

Standing charge of 48p/day is outrageously high. I don't think it should have doubled, even if per kWh costs have.

It is outrageously high, but It’s not Octopus to blame on this. It’s Ofgem who have enforced the higher standing charges (across all energy vendors). Supposedly to help cover the extreme high admin costs of multiple failed companies and their customers enforced transfers.

Yet ironically, it’s the existance of the Ofgem fixed price cap that literally caused so many of the companies to fail. They were effectively forced to sell energy to retail at lower than the actual buy in costs. These had suddenly soared to unprecedented highs. Whilst the price cap may seem to be protecting customers, It’s unsustainable in these strange and volatile times. Peter

 

[tom66]

The blame for Ofgem in my mind lies more on allowing the (now-failed) energy providers to treat the market like a casino. To keep rates low, they avoided long hedging, which meant that if prices suddenly shot up (e.g. due to Covid lockdowns ending) then they had no way to handle those costs.

It worked fine for a few years, but ultimately was not sustainable, and suddenly all that debt from failure gets loaded on the responsible companies who did it right.

Having an energy market with 50 odd companies was also a terrible idea, that's not taking advantage of efficiencies in capitalism at all. An ideal market would consist of e.g. the big six and a challenger six. And I would have enforced a strict ban on marketing on TV, radio, billboards and print, these companies should not need to market so aggressively, it just inflates the cost for everyone else.

 

[Pmholling]

The blame for Ofgem in my mind lies more on allowing the (now-failed) energy providers to treat the market like a casino. To keep rates low, they avoided long hedging, which meant that if prices suddenly shot up (e.g. due to Covid lockdowns ending) then they had no way to handle those costs.

It worked fine for a few years, but ultimately was not sustainable, and suddenly all that debt from failure gets loaded on the responsible companies who did it right.

Having an energy market with 50 odd companies was also a terrible idea, that's not taking advantage of efficiencies in capitalism at all. An ideal market would consist of e.g. the big six and a challenger six. And I would have enforced a strict ban on marketing on TV, radio, billboards and print, these companies should not need to market so aggressively, it just inflates the cost for everyone else.

The big issue is there are no portfolio effects in the energy spot markets, so you cannot create non-covariant risks without hedging. Ofgem would have known this, but not necessarily have the power to be proactive.

As for banning marketing, for all its faults if you have no marketing at all it becomes very hard to have an efficient market, the consumer will not have the necessary information. The challenge is to figure out a way to market/provide information to the consumer that minimises asymmetries in knowledge.

 

[tom66]

As for banning marketing, for all its faults if you have no marketing at all it becomes very hard to have an efficient market, the consumer will not have the necessary information. The challenge is to figure out a way to market/provide information to the consumer that minimises asymmetries in knowledge.

Maybe not a total ban on marketing, but a limit of say £1m per financial year expenditure on marketing then. The problem is energy is something everyone uses, so if every competitor has to spend a large sum on marketing to bring customers in it raises the price for all. This applies to a few other goods too where differentiation between products is almost entirely on price, e.g. car insurance and the worst offenders, comparison sites, who themselves are taking a cut for making the market even more obtuse. Middlemen the whole way.

But either way I do not think the consumer benefits from wall-to-wall ads for British Gas and the like. I guess the issue is for cross-selling services, e.g. boiler service, then you have a shared brand. Not sure how you'd manage that.