This may annoy more than some, but my leccy bill has gone up by only 10% in 10 years. In fact, that's the cost of the electricity, but as I am using less that 10 years ago (not sure why) I actually pay less. So I have strictly nothing to complain about. But then, I don't live in the UK.
But how much do you pay per unit (converted to £/p UK !)? It seems a common misapprehension that we pay a very high price here, yet stats I've seen suggest that we pay less than in various other European countries. I must get around to checking/switching, but to be honest I don't regard electricity as a particularly worrying or massive expense, when compared to, say, Council Tax or the various forms of insurance that I feel obliged to buy. It's also exceptionally useful stuff.
Not sure. I'd have to check the bills (if I haven't thrown them away). Last bill says that in the last year, I consumed 18'226 units at a cost of 0.2002 CHF a unit. At current rates of exchange, that makes 13.7p a unit. Does that make any sense?
Afraid not. Each supplier will buy electricity from a range of generators and gas from a range of suppliers. There is an open market so speculators can also play the market if they wish....which many do. Also large users can buy direct from generators, for example steel companies etc. Now, you'd think that if you had generation and supply (supply is the term for sellers of electricity to consumers) you'd be OK, but it'll never be in balance (your generation equals your supply) and you might not be able to, for example I believe that when EDF Energy bought British Nuclear some of the generation had to go on the market. Also, the regulator forces suppliers to sell a certain percentage of "renewable" energy, which is one of the drivers of price increases as wind/hydro/solar is quite expensive. In the UK there are many owners of generation plants, wind farms etc. Which does mean that there actually is quite a competitive market for electricity. However, energy companies stagger their purchases to remove risk, for example they might buy 50% of demand 3 years ahead, 25% one year ahead, 15% 3 months ahead and 10% on the spot market. They're just example percentages as I can't believe any major suppliers leave 10% to the spot market, as it's too expensive and too risky. However all companies will have different hedging strategies. Also bear in mind that the electricity market is balanced every 30 minutes so you have to forecast demand and buy the energy in 30 minute blocks so there is constant buying and selling taking place. If you do not balance your demand and supply then you'll be hit with really exceptionally expensive energy to make up shortfall or have to sell for peanuts at a loss to make up for a long position. This is how the market works to try to force energy companies to balance effectively, and you'd be surprised how good they are. Balancing would be a long essay on it's own. I'm not going to comment on the privatisation debate as that's a political debate not a pricing debate. However, I would comment that I have no doubt that energy bills would be lower if the energy market was still nationalised as it'd be a vote winner, but you'd be paying for it with increased taxes. At least privatisation has led to transparency of cost and enabled consumers to take control (i.e. the part covered by taxes wouldn't be influenced at all by reduced consumption). To go back to the opening post I still think we're unfair on the energy companies. Where's the enquiry into why the motor industry is price fixing, as are the motor cycle industry, white goods, etc. etc.? They must be as their prices are so similar..........or is it just the energy market that is uncompetitive if prices are similar?
I've just seen on the news that Centrica's share price has dropped following today's announcement of lower profits. They're moaning that this will affect pension returns as a significant volume of shares are held by pension funds. So the guy running Centrica is supposed to sell energy cheaper to consumers yet make more profits so the share price goes up for the pension funds. I don't envy him that task!! Still think that there's a balance in reporting on energy companies?
Thanks for taking the time to explain something of how the market works. The only thing I would take issue with the suggestion that transparency of cost has been achieved by privatisation. Anyone reading your post will see this is far from the truth Anyway, you have described how the market works, thanks again - but can you also explain why it works that way and why it is a good idea it does so? I'll just touch on the privatisation issue to say that energy generation is a national infrastructure issue. You don't have competing police forces, you don't have competing armed forces (inter-service rivalries notwithstanding), you cannot sensibly have competing rail services (even though they have been privatised) and likewise, placing the energy industry in the hands of the shareholder arena is unwise. A long term investment-requiring industry placed in the hands of folks who work by reference to quarterly P&L reports is not a good fit.
not much of a gamble tho is it? mm will i have steak and chips tonight? nah, maybe next week. mm will i do without lecky tonight? got you by the short and you know whats. if joes caff has a bad year they go bust. if sseb has a bad year, they bump up the prices and or get a bail out plan. meh
I will admit to not understanding, at all, how the electricity market works. Stangs posts are very interesting, but I still can't get my head around it. I don't understand how the grid works, I don't understand how, or if, you can stock electricity. If I plug my light into a socket, the same stuff powers it up no matter who I am paying for the privilege and it's come from the same place. This is obviously very different to say, buying furniture. Furniture is stocked in warehouses. If I choose to buy company A's furniture, I am clearly not buying company B's. Or with petrol, I can choose to go to Esso garages or Shell garages. But I just don't understand electricity supply at all.
@Stang I agree with a lot of what you say. However to quote Centrica's profits yesterday is disingenuous IMHO, we are going through an exceptional period with energy being cheap God knows if we'll see it again, or if so it will be a long time coming. Centrica and the rest have been on a very big gravy train a very long time. Loz also beat me to the transparency, I don't think anybody who has even a passing interest would say the industry is transparent, quite the reverse its been well documented that's the case. Once again the companies use complexity as the argument that they cannot give a breakdown of costs in the various sectors of the business. Once BG went to a flat rate this went away but at one time, just as an example, they had gas at 2 different tarrifs. They would not tell you when the second tariff kicked in. Therefore it was actually impossible to calculate your bill. On generation the politicos have themselves well and truly tied up in knots and the energy companies have them by the balls. "You won't give a subsidy to build an un-clear power station?" Ok toys outta the pram, and we won't do it. What will happen is the usual thing that privatization specializes in, total short termism. What will probably happen if the lights start to flicker? Joe public will grumble, posh boy politico will go apoplectic and throw huge government subsidies at the energy companies, who will in turn build stations that can be built ASAP. In all probability phased CCGT plants. These can go up in a couple of years and provide huge amounts of generation. However the companies who supply the tech, will stuff the energy companies as they want it in a hurry. Energy companies in turn will stuff the government (with an added percentage for themselves of course) and who pays?????? The rest of the good news, CCGT are fossil fired, your green house gas tree huggers will not be best pleased and some wriggling will be required to get out of green house gas targets. Everybody will pay more for lecci as fossil fuel prices go up, because the big 6 won't let their profits fall. Its dead simple profit slides shareholder unhappy, bosses bonus gets tanked or he gets the boot. Customer he can go fuk himself he has no choice, well he does but it more or less boils down to whose logo is on the bill the costs will be much of a muchness. That is unless as I said originally he makes deal following a crusade and we all just don't have the time and the companies know it. Its the same as the railways as Loz pointed out its a gravy train for the haves and most of the haves are foreign companies, who do not give a toss about GB just about sterling. Its not the companies I am gunning for here, what makes me absolutely livid is that we are all paying far more than we should to service a political ideal cast in Granite by the Hammer of the Scots...................ladies and gentlemen I give you MARGARET THATCHER!!! (and personally I think she did a lot of good things too, but you know what is said about too much of a good thing)
it's quite easy, think of a big dam of water, you buy 10 buckets but you don't want it till next year, you get thirsty you buy a bucket to tide you over simples.
That's why its a political construct. You don't and never will know which plant excited your particular electrons. You can only store electrical power practically at this scale using pumped storage. You turn it back to mechanical energy, and throw water up a hill. When you need it as lecci you let that water run down the hill. The UK's particular grid structure is very centralized which does not help. This was because the electricity was generated by humugous power stations (most in Yorkshire) you wanted a power station in the past you needed 2 things coal (to burn) and water (to cool) that's why the old large stations were built at or on top of coal mines. Denmark for instance I think probably Switzerland too has far more localized systems. This makes it a lot easire to build small efficient combined heat and power plants. As far as generation you put too much energy (electricity) into the system the frequency will rise, too little it will fall (yer washing machine goes faster or slower). All generators on a grid have to turn at the grid frequency (this is why its easy for rolling blackouts to happen). The generators all share a given load demand called droop control (usually set at 4% as I recall although its actually hugely bloody complicated). EDIT What I mean by this is 0-100% MCR (in the industry parlance maximum continuous rating) equates to a 4% drop in the speed of the prime mover if the same load were supplied but the machine was not locked to the grid. This means that no matter the size of the machine the load is distributed throughout all the machines by the same percentage regardless of machine rating. However most plant is at its most efficient when running at MCR hence the requirement to guess/predict the load and have only the minimum plant required generating at any one time. In reality of course there are plants running part load, spinning reserve plant (almost no load but breakers closed and on the grid) ready to take the shortfall in emergency and fast start plant (usually simple cycle gas turbines) and hydro, which can come on line in the space of a few minutes. As demand rises frequency (speed) drops, when this happens the generator (well the prime mover driving the generator) responds by pumping in more fuel to try to pick up speed which it turn places more energy on the grid, the grid frequency picks up and the prime mover cuts back the fuel and stability is attained.
It's becoming increasingly clear that we need a 4 part BBC documentary series to try and understand all this. A good idea, I think, seeing as electricity affects everyone.
Thanks, that makes complete sense. I assume you are on a tariff with no "standing charge". I checked, and that's the kind of tariff I have at the moment, and I'm paying 14.19p per unit (comes to an end in April though, so a useful reminder to me to look into what to do next). In this case I think we can say that the difference between UK and Switzerland is very small. However, I do find it tedious (as with insurance) to have to shop around every year - are you in the same situation? I'm sure that I will lose out by being switched to some "standard" higher tariff at the end of April, unless I decide to do something about it. A proportion of the population lose out in various ways: - Not being up to "shopping around", for whatever reason - laziness is no excuse, but not having a computer is for some oldies for instance. - Some people can't use Direct Debit, and/or want bills mailed out on paper. It's right that they should pay some premium for the extra cost of administering paper payments etc, but it should not be an excessive amount - I think it is though. - Some people have to have "pay as you go meters". Again, there are extra costs associated with this, but it's not fair for that to be translated into an extortionate tariff. All of this can be dealt with by regulation; one extreme might be to compel the companies to have a smaller number of tariffs - perhaps just a standard one and whatever is needed to give "Economy 7" style savings for nighttime usage. I don't think nationalisation is the answer.
There may be a standing charge. What I have done in my Excel file is to take the complete bill and divide it by the number of units used to get a cost per unit. Of course, there are all sorts of different and incomprehensible unit costs. I aggregate them to end up with something intelligible. So the cost I have indicated to you included absolutely everything (possibly even VAT). The £ is worth diddly squat against the CHF, so that you can reckon that electricity is proportionately more expensive in the UK. Salaries tend to be higher in Switzerland too, so once again, electricity is a better deal here. The Swiss obviously benefit from quite a lot of HEP. As regards insurance, I have a simple rule: I buy it all from the same supplier, Zurich Insurance. That's car, motorbike, home contents, 3rd party (if a slate falls off my roof and kills someone, or a tree blows down on their house), travel breakdown and god knows what else. Is this the cheapest way? I think not. But it has several advantages: No hassle. I have one broker and he organises everything for me. No need to renew. I am allergic to insurance. Zurich think twice before pissing me off. I can hold out a threat of cancelling all my business and going elsewhere. This did come in handy when they wanted to cancel my bike insurance, after I had had one stolen, and put two in fields, within about 5 years. My broker intervened for me and they quietened down. Insurance is not just a sunk cost, like road tax. You are paying for a service you may need. When you do need that service, I have found Zurich to be very efficient and about as good as you are likely to find.
In the UK as far as I'm aware there is no electricity storage. Basically the only way to store electricity is in a battery which isn't going to work on a grid scale. This is the reason that balancing is required. Basically the supply companies must try to guess what energy they require and buy it. They will take into account customer numbers and profiles, weather, line losses, major events etc. in order to guess volumes (as an aside the weather forecasters where I used to work were normally more detailed and correct than the BBC forecast as money depended on it!). The generators are all committed to supply due to their sales contracts. However the controlling body (sorry can't remember) can shut down power stations if they chose to balance the grid or prevent overloading. They can also call more energy if they wish. Balancing is difficult as obviously a nuke must run flat out most of the time (unless it's on an outage), renewables can only generate when conditions are OK and so fossil fuels pretty much have to be the balancers. Firing up a power station is expensive hence if the suppliers under forecast they get hammered. Remember that this is done in 30 minute blocks with each needing to balance, it's no use having plenty of supply at midnight when everyone's in bed but none at 3:00pm when everyone's busy. The National Grid is the transmission network, this is the proper high voltage stuff direct from power stations to grid points. I think this is owned centrally but not sure as I was in the energy and supply division not networks. They "move" the electricity to grid supply points. Then you have the distribution network. This is the network that takes from the grid supply points and spreads it around an area gradually reducing the voltage (via substations) until it hits your house. These companies are regulated and are regional e.g. UK Power Networks for the south-east, London and East Anglia. These companies are only allowed a certain return on investment which is a little over bank rate as they're a monopoly. They charge to the supplier on a pence per unit (PPU) used. The generators obviously connect to the networks to put in their output, this is metered in a similar fashion to your house. A lot of generation is owned by the big 6 but there is also significant "independent" generation in the UK. The customers connect to the network to draw electricity. The suppliers buy from the generators and sell to the consumer. The metering companies do the metering reading (known as data collectors). A company will compile the data from all of the metering companies for each region (known as the data aggregator - I believe some Networks companies do this but not sure if it's always them although that would make sense). The complexity comes from the amount of parties involved and the data transfers between them. A supplier must register a customer which means all relevant parties get informed. I think in my day there were roughly 120-130 data flows to register a customer but I could be wrong as it was quite a while ago. In registering a customer the DC/DA get appointed, the Network Operator notified etc. So in your bill the costs will include energy generation, network distribution, meter reading, data aggregation, supply business costs (call centres, bill handling, VAT processing etc.), etc, etc. I was wrong when I said pricing was transparent. What I meant was profits are transparent. We all know what the energy companies earn as it's in the news, that's what I meant. The pricing debate is harder. Customers moan when there are too many options as it's confusing but in earlier posts here people said there was no differentiation. As the product can't be differentiated only the tariff can be e.g. economy 7 vs single rate, fixed price vs variable. These prices are all published so are visible and you can save money by getting on the right tariff (assuming your meter will support it). I fear @Old Jock is correct that the UK is heading towards panic CCGT builds. I'm not anti-CCGT but the UK needs a viable mix of generation, even coal has its place. All our nukes are getting on a bit and something should being done to get more new nuke in my opinion. When the nukes go offline then the prices will soar if we're reliant on overseas providers for gas. Nuke is the lowest carbon generation, yep it's lower carbon than windfarms/solar if looking at carbon output per unit so should have wider support. The "subsidy for new nuke" was actually they wanted a guaranteed price per unit. I'm not a supporter of that and believe it shows the breakdown in trust between the energy companies and political parties. If the energy companies were sure it'd be a free market then they'd build. The threat of government intervention (e.g. Labour price freeze) is the last thing the market needs, and I think is part of the reason prices aren't falling quickly now - but that's just a hunch and is unsupported. Sorry, another long one!!
