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British Gas to cut gas prices by 5%
http://www.x404.co.uk/forum/viewtopic.php?f=19&t=23224		 Page 1 of 1
Author:  pcernie [ Mon Jan 19, 2015 2:17 pm ]
Post subject:  British Gas to cut gas prices by 5%
http://www.bbc.co.uk/news/business-30880159

If it hadn't became a political issue they'd still be getting away with it.
Author:  hifidelity2 [ Tue Jan 20, 2015 9:11 am ]
Post subject:  Re: British Gas to cut gas prices by 5%
and they are only cutting it at the end of February - so after the worst of the winter is over
Author:  ShockWaffle [ Tue Jan 20, 2015 11:02 am ]
Post subject:  Re: British Gas to cut gas prices by 5%
hifidelity2 wrote:
and they are only cutting it at the end of February - so after the worst of the winter is over

Much (possibly most?) of the gas they are shipping in January and Feb would have been bought on the futures market the summer before last when few people were really expecting to see prices slump as they have.

If you want to switch to a supplier that buys wholly on the spot market and drops prices accordingly, perhaps there is somebody stupid enough to run a utility that way. But every now and then they won't have any gas to sell you because they will run out of money if the spot price heads up. They would also receive no stock if there was a temporary interruption to supply because holders of forward contracts would be first in line. So you would get prompt price cuts, but your house would be inconveniently cold from time to time.

Somebody has provided a handy graphic. In this chart, the blue line is the one that all the dog-whistle headlines are about.
The red line shows the forward prices being paid for the actual gas by the people who sell it to you.
Image
Author:  MrStevenRogers [ Tue Jan 20, 2015 11:58 pm ]
Post subject:  Re: British Gas to cut gas prices by 5%
but these companies put their prices up in the winter when wholesale gas prices normally rise
even if they have stocked up with gas in the summer at a lower wholesale price

but they don’t like lowering them for any reason and use every lie in the book not to ...
Author:  ShockWaffle [ Wed Jan 21, 2015 6:59 am ]
Post subject:  Re: British Gas to cut gas prices by 5%
Are you under the impression that they buy cheap in summer, sell high in winter, and then wait until next summer to buy again?
Author:  l3v1ck [ Wed Jan 21, 2015 2:51 pm ]
Post subject:  Re: British Gas to cut gas prices by 5%
MrStevenRogers wrote:
but these companies put their prices up in the winter when wholesale gas prices normally rise
even if they have stocked up with gas in the summer at a lower wholesale price

but they don’t like lowering them for any reason and use every lie in the book not to ...

You say that but the gas storage capacity in the UK is abysmal compared to many other European countries.
Author:  paulzolo [ Thu Jan 22, 2015 9:59 am ]
Post subject:  Re: British Gas to cut gas prices by 5%
l3v1ck wrote:
MrStevenRogers wrote:
but these companies put their prices up in the winter when wholesale gas prices normally rise
even if they have stocked up with gas in the summer at a lower wholesale price

but they don’t like lowering them for any reason and use every lie in the book not to ...

You say that but the gas storage capacity in the UK is abysmal compared to many other European countries.


According to this, we have about two week’s worth of storage -
http://www.carbonbrief.org/blog/2013/03 ... rgy-prices

And here’s a fun Ofgem report on such things if you’d like a read.
https://www.ofgem.gov.uk/ofgem-publicat ... report.pdf
Author:  l3v1ck [ Thu Jan 22, 2015 11:16 am ]
Post subject:  Re: British Gas to cut gas prices by 5%
Two week is hardly enough to stock pile cheap gas in the summer and sell it in the winter. You\d need a couple of months supply.
Author:  davrosG5 [ Thu Jan 22, 2015 12:33 pm ]
Post subject:  Re: British Gas to cut gas prices by 5%
l3v1ck wrote:
Two week is hardly enough to stock pile cheap gas in the summer and sell it in the winter. You\d need a couple of months supply.


When you had North Sea gas effectively on tap 2 weeks probably seemed like an adequate buffer but with the varrious different energy companies now there presumably hasn't been much incentive to build large storage facilities.

There appears to have been a decision to use what amounts to a 'just in time' model for UK gas supplies on the assumption that we can import to meet our needs effectively on demand and thus far that's proved to be reasonably true and also effective.
It does mean we're perhaps more exposed to market volatility. I dread to think what it would cost to build enough storage capacity to ride out high market prices for an entire winter and I also suspect that having that much gas literally sitting around for several months would be expensive to manage without even considering the safety and security (as in nasty people trying to blow it up) side of things.
Author:  jonbwfc [ Thu Jan 22, 2015 1:59 pm ]
Post subject:  Re: British Gas to cut gas prices by 5%
davrosG5 wrote:
It does mean we're perhaps more exposed to market volatility. I dread to think what it would cost to build enough storage capacity to ride out high market prices for an entire winter and I also suspect that having that much gas literally sitting around for several months would be expensive to manage without even considering the safety and security (as in nasty people trying to blow it up) side of things.

Anecdotally, I think it's a case that they've gone for the just in time model by choice. On my journey into work I pass more than a few gasometers and I can't remember the last time I saw any of them anywhere near 'full'. Storage capacity for the whole UK for the whole winter would indeed be a major undertaking (hollow out a few mountain ranges..) but you never actually need that much. All you need is enough in store to allow you to 'smooth out' the variations in the price. Say the price of gas goes up by 8%. If you buy 8% less gas (give or take) you've kept your costs roughly equivalent. You don't need 100% of your supply requirement saved, just the fraction by which the price has gone up. if you have a week's capacity on tap and the price goes up by 8%, then you can last 3 months before you have to start paying any more for your gas.

In any case, this is just the sort of situation the executives and management of these massive companies are paid enormous wages and bonuses to both anticipate and deal with. If as soon as the job gets a bit tricky they wave their arms in the air and shout 'It's not our fault!' what the hell use are they?
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