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I think my issue is that current wholesale costs are someway below the cap. That's why the Octopus tracker is consistently cheaper at the moment and requires zero EPG support to achieve that.
I suppose the cap is set over a longer term to reflect hedging by suppliers - but right now energy is cheaper than the fixed tarrifs most people are on. I think.
Scrabble-
Kind of, if you just look at the cost of energy alone and not the cost of supply. A similar analogy would be that because oil prices have fallen busses should be cheaper to ride, but there’s a lot more than just the cost of diesel that goes into the cost of a bus journey.
Also the price cap (as it was) was set quarterly as of 2021, and is taken at a point in time looking both backwards at historic prices and forwards based on markets. This is a change to how it was done pre 2021, and yes is there to stabilise the market and prevent large suppliers that are appropriately hedged to recover some of their costs when wholesale prices fall. Otherwise we end up where we were in 2020/2021 with lots of competition, but lots of unstable competition and many smaller firms going bust due to lack of appropriate hedged supply that they are at the mercy of the markets. Whether you agree this is good or bad probably depends if you’re an ardent free market economist or not, but from a consumers point of view having stable suppliers for a key part of their life is probably quite important!
C4r1s
The cap is only going up because govt support is lessening. At the moment the “cap” as it used to be called should be at £3.5-£3.7k when it was last set in November 22 for Jan-Mar 23, however because of govt intervention (called energy price guarantee or EPG), the price we pay as consumers is subsidised by the govt to bring the representstive household price down to £2.5k. Come April EPG support from govt will be lessened which will feel like the “cap” is increasing however it’s not, just the govt being less generous with the subsidy to households.
However with the fairly rapid fall in the past few months of wholesale energy prices there’s a lot of talk that suppliers will soon be able to offer fixed rate tariffs again that’s less than the EPG rate of £3k. April may be the trigger, as that’s when EPG support lessens.
On the “are energy companies making a killing”; only if you’re a produce of energy (BG, Shell, EDF etc) who can sell energy at a higher wholesale rate. Energy suppliers still need to buy energy from someone and they are still paying wholesale prices, but are only allowed to charge the EPG price to consumers hence the govt subsidy to keep prices for consumers lower than they would be without support.