I think that @beschizza is trying to say that the price cap will be lifted without having to explain the price cap.
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My gas central heating was costing me around £1 a day last winter, including hot water.
It now costs more than that before I even use anything.
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and it must be born in mind that it isn’t just energy bills skyrocketing ( there’s a verb I never thought I’d be using in a sincere fashion), EVERYTHING is a lot more expensive today than it was on Friday. I don’t know about anyone else but I find eating food can be conducive to longevity so me not happy about that)… it would be nice if there were information out there to explain how the fk this has come about because, otherwise, one might think we are enslaved to a ( very small) group of avaricious cts. Believe me when I say I am going to have to work really hard to prevent death from hypothermia or plain old starvation this winter. And I am nowhere near as badly off as so many other unfortunates at this wonderful time.
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I am effectively poor with no wiggle room on expenses, yet still not quite at the bottom of the pile.
These energy prices and the food price rises are going to kill a lot of people by January.
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Yeah the article is a bit misleading. I tried to think of a way to word it better, but it’s difficult to get across what’s actually happening without knowing a bit of background history to all this.
So here goes with a bit of an explainer for all you outside the UK who don’t have to deal with this:
In 1989, electricity supply in the UK was, from the point of view of the consumer, relatively straightforward. Your local electricity board would set the rates you had to pay, send your, bills, take your meter readings and payments- generally be the point of contact for anything to do with the system.
Then in 1990, everything was privatised.
In line with the Thatcher government’s view that everything had to promote competition, the system was split up into multiple parts You had:
Generating companies- who ran the power plants and sold their power onto the grid.
National grid- who ran the power grid infrastructure, managed the operation of a complex market for power that ensured that generation was matched with demand at all times (Including dealing with the massive spikes in demand whenever popular TV programmes came to an end . (look, I got another chance to post this video!)).
Supply companies- Who sold the power on to end users- businesses and households.
Confusingly, some of the Generating Companies were also Supply Companies.
Why does this matter- This now means that the UK population have a choice of supply companies to get their electricity from. Gradually over the course of the next couple of decades,a market in switching your energy supplier builds up, as the existing companies try to poach customers from one another (sometimes with terrible doorstep sales techniques), and new Supply Companies are set up to enter the market, buying energy from the grid and selling it on to consumers. What could go wrong?
Well, a lot, as it happens- Most people only care about price when it comes to electricity supply, so in order to compete, the supply companies end up producing an array of different tariffs to entice new customers. Deals are introduced to allow you discounts if you pay by Direct Debit (saving the company money on processing your bills), some deals sell you renewable power, and some of these deals allow you to fix your prices for anything from 1-5 years. So to navigate the market that has now developed, and get the best deal, customers now need to be able to compare hundreds of different offers, and to understand futures pricing. Unsurprisingly, when faced by this complexity, a lot of people don’t bother switching and just stay on whatever tariff their supplier is already using.
This gives the suppliers a chance for some easy profit. They hike up the cost of the “standard variable tariff”- what you revert to if you’re not on any other deal, or have never bothered to switch, and now we have the standard market situation where people have to watch like a hawk to make sure they’re on the best deal, and the most vulnerable customers who are not able to do this- mainly the elderly, and those on prepayment meters (these get fitted if the address you’re in has not paid its bills in the past). People are not exactly pleased about this.
Enter the price cap.
The price cap was a mechanism proposed by the Labour party when they were in opposition- the right wing press promptly called them communists for suggesting it. Then the conservative government picked up the idea, whereupon it became a sensible bit of regulation. But I digress (more). The price cap was supposed to stop that phenomenon of really high “standard tariffs” for people who didn’t change supplier regularly, by putting a cap on how much companies could charge on these rates.This price cap was reviewed every six (now three) months to keep it in line with market prices.
Then wholesale prices for gas (and electricity generated from gas) went through the roof, and the price cap turned into something that it was never meant to be- a way of saving people from sudden huge increases in prices. So currently, anyone who is stuck on a variable deal - (that’s most UK domestic consumers, who were on a variable deal or have seen their fix expire in the last year (because with the market like this, nobody is offering affordable longer-term fixes any more))- the price cap is protecting you from the current sky-high rates in the wholesale market.
Until it resets again.
On October 1st.
When it will do this, then rise again in January:
All of which is why having no functioning government to make any decisions about this is really infuriating right now.
Final notes- Gas went through a similar privatisation and deregulation at the same time, just with minor differences, and there’s some more complexity that I’m missing out, but you really don’t want to get into that.
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Just remember that in very rare circumstances piles of wet leaves can spontaneously combust when heated by the sun…which is more likely inside a garbage bag, especially when it is black.
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That’s the real human cost hiding behind the dry economic term of “price elasticity” that the pundits will be blathering about on the UK networks over the coming months. The goods and services required to fulfill the lowest levels on Maslow’s pyramid tend to be highly inelastic, meaning you’re gonna pay what you have to or starve and freeze.
Ever since Russia invaded Ukraine I’ve been saying it’s going to be a rough 2022-23 winter for the people of Europe. Count on the Tories to make it even worse for most of the UK’s population.
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Excellent summary!
Added to which, much UK electricity is generated by gas-burning power plants.
Not so long ago the privatised Centrica (used to be British Gas) who owned the UK’s largest offshore gas storage facility went to the govt and said 'give us some money to maintain/upgrade it cos we can’t afford it. Govt said no. So Centrica closed it. So there was a much limited capability to buy gas in advance and store it for winter. So most of the gas we now buy is at today’s Putin-inspired market-shortage prices.
PLUS - lots of those supply companies went bust recently, unable to service their debt and not being able to maintain the cheap prices they had enticed customers in, and having not bought forward gas (no working capital for that - many were off-the-shelf sales companies that the regulator - OFGEM - was warned about but let multiply anyway) they were basically stuffed. But the market has to cover the cost of their collapse and extant suppliers have to take on those customers. The suppliers all pay a levy to fund these rescues, so they all get that back by passing it on to customers, so standing charges (the price you pay for connection before using a single therm of gas) are going up sharply - which is, of course, a regressive tax on the poorest.
Organised spivvery.
ETA PLUS - the UK spot price for electricity is linked to the price of gas (remember those gas-burning plants) so even the wind-generators get spiky high revenues for their electricity when the gas price spikes. Pundits have pointed out this linkage needs to be broken, which would help a little. A complexity that didn’t matter with relatively stable prices. Now it must be seen as a market mechanism put in place simply to try to regulate an entirely false market.
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This must be a classic Maine thing. My great-grandparents did this every autumn (the bagged leaves, not hay).
Here’s a good all-around resource:
https://www.energy.gov/energysaver/weatherize
Here, too. And it blows my mind that, somehow, the gov’t happily spends $billions every year on what is essentially a pass-through payment to energy companies (it’s called low-income home energy assistance program, and is unfortunately needed) but in a ‘typical’ year only $75-250M on the low-income weatherization program which actually fixes their homes, making them more efficient, durable and healthy (ETA: and creates lots of jobs that cannot be outsourced), and basically nothing improving or enforcing the energy efficient building codes that would stop this madness from being perpetuated. 
If governments did more to incentivize building or rehabbing buildings to be more energy efficient, and with passive survivability in mind, the citizens would have a much bigger cushion to weather the kind of supply and distribution issues we’re only going to see more of.
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The U.K. is about to deregulate energy pricing, just in time for Christmas.
The UK is not deregulating energy prices. The wholly-captured state regulator is raising the ceiling on permissible prices.
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Well explained.
The other thing that privatisation did was it destroyed any prospect of long-term planning in energy. The role of Energy Secretary was once a Cabinet position, it was gradually reduced until now it is a minor role in the Department of Business, Energy and Industrial Strategy.
Prior to privatisation, there was the massive Central Electricity Generating Board which planned, constructed and operated power stations - this was gleefully smashed to pieces by the Conservatives and all the profitable bits sold off - often to foreign companies such as EDF, Vattenfall and RWE. The nuclear stations were initially retained, but then the AGR fleet and sole PWR were privatised as British Energy (now part of French-owned EDF), with only the Magnox fleet and their massive decommissioning costs being kept by the taxpayer.
The end result was that no one bothered thinking about energy security. In the 1990s when this was all going on, we couldn’t burn gas fast enough such was the scale of the North Sea development. Gas turbine plants were quick and cheap to built (they also, politically conveniently, displaced coal fired power), renewables and nuclear couldn’t get a look in.
From about 2006 onwards, there was a realisation the gas boom wasn’t going to go on forever, Labour began to work towards a new nuclear fleet, but this was pretty much put on hold as soon as the Tories came back into power, so several proposals - including Hinkley C, Bradwell B, Wylfa B and Moorside were all variously delayed or cancelled outright when they could all have been producing energy by now. And of course, Tories being Tories, it’s all Labour’s fault.
Not forgetting that the Tories oppose any new onshore wind developments despite it being the cheapest source of energy right now. They are much more excited about the prospect of fracking despite the UK probably having relatively small reserves of expensive gas that will take decades to bring up to large scale production. Still, the tax breaks for their backers in drawing up every last drop in the North Sea are nice.
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I bet if Brits just start burning Tories for heat, these uncontrollable “elastic” costs will suddenly, magically, go back down!
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I only hesitate because of the pollution that will be produced by burning those horrible relics.
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We can’t, we need something to eat too.
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Anaerobic digester! (For the win!)
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