Cost pass through (CPT) tariff research report
Reports, plans and updates
This research project investigates the potential implications for consumers on default arrangements of introducing a “cost pass-through” (CPT) tariff as an alternative to the current default arrangements, which are generally poor value Standard Variable Tariffs (SVTs). The CPT tariff allows for full pass through of upstream costs. For wholesale costs, which are particularly volatile, price changes would be passed through to consumers in close to real time. This is in stark contrast to the longer term hedging that is often a feature of SVTs.
We have developed a “backcast” model, which covers the period from January 2013 – March 2018, in an attempt to understand if consumers would have paid more or less for their gas and electricity supply on our modelled CPT tariff than the counterfactual SVT. We also investigate the distributional impacts across different socio-demographic groups of consumers. Finally, we explore how consumers might trade-off lower average prices with more volatile monthly bills to understand if consumers would have been better off under a CPT arrangement.