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Re: Fracking

In reply to JMW, the Coalition government is doing something about the confusing system of multiple tariffs by the energy suppliers. In the forthcoming Energy bill there is a requirement that the energy suppliers offer only four tariffs each for gas and electricity, and have to put customers on the cheapest available price by summer 2014 at the latest. So if the confusopoly theory is the explanation for the high retail energy prices, we should find out in the next year or so.

There is a graph of how the UK retail natural gas price compares with the wholesale price available on this link:


The retail price just keeps going up and doesn't have very much to do with variation of the wholesale price, and the situation is similar for electricity.

The peak in the wholesale gas price in 2008 is due to natural gas being sold at an oil-linked price. If you look at graphs of how oil price has changed with time, you can see that the wholesale natural gas price has the same shape as the oil price curve, which also peaked in 2008.


If I had to guess why the retail price of natural gas and electricity in the UK keeps going up, I'd say it is most likely to be the cost of Green measures - in the case of electricity the Renewable Obligation subsidy, and in the case of natural gas it could be the cost of loft and cavity wall insulation schemes. I've noticed that since the Coalition government came into power the amount of 'cold-calling' I get from home insulation installers seems to have increased substantially.

Re: Fracking

If people are going to let themselves get screwed by sticking with their supplier and not even checking that supplier's tarrifs, frankly that is their lookout. But then as an old-fashioned liberal I'm as against government mollycoddling of consumers as I am against government regulation of pretty much anything - within reason of course.

In the early days of electricity privatisation, it was easy - your default local supplier was always the most expensive, because of customer inertia. You got stuck with the default supplier when you moved, so simply cancelled the contract and changed to anyone else at the earliest opportunity you had to get out of the default contract. I don't know what it is like now as I no longer live in the UK, but generally similar conditions apply here in Germany, where the domestic energy market is still in early stages, relative to the UK, of liberalisation.

All utility tarrifs boil down to two components - standing charge and charge for the quantity used. It's quite straightforward to work out which is the cheapest, there are even websites that will do it for you.

Here there is a complicating factor introduced by companies that will sell you cheap energy if you pay a year up front, but the "cheapness" only comes because you effectively pay a bond and get it refunded at the end of the year. (And at the end of the year, if you don't cancel in time you get stuck on a much more expensive tarrif for a minimum of one year.) Of course, these companies allegedly never repay the bond absent a court order, and they know most customers will not go to court. They also have a nasty habit of going bankrupt as they are so cheap they have to fund existing customers consumption by getting more customers - a Ponzi scheme in other words. There I can see a case for regulation.