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Energy Companies going under

Will yours?

I dont understand the point of multiple energy companies anyway, seems to me is all we are paying for is massively duplicated billing and purchasing processes.  Time to re-nationalise and charge everyone a fair tariff rather then charging those  IT literate and savvy enough to shop around less and everyone else (usually older and poorer people) more.  The current system is perverse.

appaz when they go under you don't "lose money" but Ofgem stick you on a deemed contract with EDF (which is not cheap) but you are free to shop around for another fixed rate (which, at the minute, won't be cheap).  So anyone who's supplier goes under is gonna be wearing coats in the house all winter.

There's talk about effectively a bad bank to take people on on their existing terms which may then be sold in the future.  A bit like Northern Rock borrowers finding themselves with HM Government as their mortgage lender.

The amount of energy companies is a sideshow.  The real problem is the suicidal energy policy we have been pursuing for decades now.  Gutting our own nuclear industry was fooking retarded.  Britain should be a net exporter of electricity not importing it from France.  This could supplemented by renewables. 

Is it 2006 again?  Had a small start up energy company client, which was buying its leccy in the spot market and selling to customers under contracts with a month's notice for pricing changes, go tits up then.  

wouldnt a single uk wide entity be able to bulk buy cheaper than lots of shitty little companies? wouldnt its costs be far lower with one billing and purchasing team instead of the dozens we have now?   We all get the same physical product, all these companies spaffing on advertising, paying their duplicated staff and buying relatively small amounts of power with less bargaining power  and handing over chunks to shareholders is totally nonsensical.

The current arrangement is unsustainable for providers and customers. People can keep changing to small cowboy suppliers who go pop then find their credit balances and supplies protected by the larger suppliers, in effect a subsidy from more prudent consumers who have paid slightly higher prices. 

What Guy said.

Efficiency sacrificed to the shibboleth of ‘Competition’.

Competition can be a useful tool in some markets. But is not a goal in its own right.

Network industries in particular should be regulated monopolies.

"wouldnt a single uk wide entity be able to bulk buy cheaper than lots of shitty little companies?"

That would be common sense but the clever dicks in the government continue to believe that we can have a competitive market in gas and electricity - the same as for mobile deals. This is high level intelligence that should make Baldrick wince. 

Guy - the tories believe competition drives prices down. It does, if you've got differentiated products, but electricity, gas and broadband are all the same.

Broadband is the biggest difference from supplier to supplier, as there's a router in the mix.  It's nonsense.  They're trying to do the same with water.  So Thames Water or UU or whomever will own the pipes, and the treatment, and you just have an annual headache to shop around for the best deal on backoffce billing services - which tends to prejudice those less savvy.  

"The current arrangement is unsustainable for providers and customers. People can keep changing to small cowboy suppliers who go pop then find their credit balances and supplies protected by the larger suppliers, in effect a subsidy from more prudent consumers who have paid slightly higher prices."

I'm not feeling particularly prudent having allowed by EDF tariff to switch to the variable rate for a bout a year (price capped?) having learnt that gas prices have gone up 5x in the same period. I suppose I must be one of the good guys. 

"The current arrangement is unsustainable for providers and customers. People can keep changing to small cowboy suppliers who go pop then find their credit balances and supplies protected by the larger suppliers, in effect a subsidy from more prudent consumers who have paid slightly higher prices."

I'm not feeling particularly prudent having allowed by EDF tariff to switch to the variable rate for a bout a year (price capped?) having learnt that gas prices have gone up 5x in the same period. I suppose I must be one of the good guys. 

"Broadband is the biggest difference from supplier to supplier, as there's a router in the mix." 

I think broadband, like phones probably does work, because you can differentiate product.   I think we have some of the cheapest broadband in the world because of intense competition so I have no problem with that (imagine if it was the old state monopoly BT supplying broadband we would all probably still be on the waiting list).

 

As you say for energy and water there is no benefit to consumer.

it's the same cables leading up to your house.  You pay BT or Vodafone or Sky or TalkTalk for their router you choose the speed cap you want.  They buy the bandwidth from BT Openreach.   You can cap your speed ay 38mbps with TalkTalk or BT or anyone.

The only difference is BT may have better routers.  if the BT service goes down because of a cable strike by workmen outside your house, BT broadband call BT Openreach to get it sorted and BT Openreach cannot give preference to BT broadband over a similar call from Vodafone.

what if we take green levies out of energy bills and move them into a subsidy from general taxation, that would cut about a quarter of energy bills (granted still need to find the cash from general taxation)

in any event, this does not look sustainable 

There's a difference with broadband in that cross-subsidy with TV packages and mobile phone contracts and similar means there's more scope for competitive pricing. 

Also there are legitimately separate networks (Virgin most obviously but also increasing numbers of fibre providers). 

Purposely didn't mention Virgin's fibre offering, because that's a special case.  But Sky don't get a better rate on wholesale broadband capacity for those customers who are also dish owners. Assume we have just enough suppliers in the market to avoid abuse of dominance (netscape navigator, anyone).

wouldnt a single uk wide entity be able to bulk buy cheaper than lots of shitty little companies?

If you've got one entity that supplies electricity to consumers and another that actually generates it then you run the risk of the generator holding the supplier to ransom and setting a price it chooses.

There are two types of energy companies. Those that sell energy they have already bought and those that supply in an ad hoc way, which is most of them. Predictably all of the latter type are going to fail imminently and only a handful of the bigger suppliers will remain. How is the average customer supposed to know which are the good companies and which are the precarious ones? This suggests a failure of regulation.  

"If you've got one entity that supplies electricity to consumers and another that actually generates it then you run the risk of the generator holding the supplier to ransom and setting a price it chooses."

What difference does it make how many suppliers to consumers there are in this scenario?   the producer could could hold 100 companies to ransom just as easily as one.

That's my point to an extent.  To achieve what you are suggesting the producer and the supplier need to be one and the same.  If you have one main producer then you have a monopoly supply.  Also with only one supplier to customers you are also creating a second layer of monopoly.  

Do we actually have multiple producers of power or do all the suppliers effectively by from National Grid?  Yes we have wind farms owned by third parties but do they sell directly to suppliers or do they sell to National Grid who then sell it on?

Sails there are a huge number of generators in the UK so that’s not a problem in the slightest. I don’t understand why the small supply companies didn’t hedge their energy purchasing. On the UK v EU it’s unlikely to have anything to do with renewables given a number of European countries have heavy exposure there. Laura K was regurgitating the government’s message on this earlier (simply too many people wanting a cup of tea at the same time), which is utter nonsense. 

Scottish power are refusing to reduce our direct debit even tho our useage is less than a third of what we are paying. I know you're supposed to overpay in the summer to offset the winter, but the difference was never that much in the old house 

presume they will not go under...

Asimov - the russian gas that is supplied to germany and france is still cheaper than whatever we may produce. Russia and Germany have us by the balls. 

This apparently is not true.  The UK doesn't import much Russian gas and isn't particularly reliant on Russian supply.  We get our gas from North Sea, Norway and Middle East and have very good LNG infrastructure. 

What jello said. 

Also I should add for clarity that the market gas prices are impacted by more global events (and speculators). it is largely swayed by those buying bulk in advance of the winter but those are usually a year or three years in advance and by the commodity speculators who are going to mint money in the short term - ahead of the winter season. 

The small gas suppliers failing (as without hedge - as buzz said) was inevitable. 

Exactly. And to hedge for physical supplies you need infrastructure to store - which most don't have. They also can't do the paper hedge as it will be difficult for them to fund on a significant scale. 

I'm very tempted to look at a solar array in the field by my house as could probably install something big enough to be largely self-sufficient.

Linda I stay away from those direct debit deals as tried one a few years and they constantly owed me money as I never used as much energy as they expected.  These days I have to send in my meter readings as when Eon estimate my usage it's invariably less than I've used which also doesn't make sense.

you know that gas from russia is used to generate electricity in the EU, which we used to buy from France.

70% of French electricity is generated by nuclear power.  Why are so many so keen to do Putin's propaganda for him?

Certain European countries are scarily dependent on Russian gas.  The UK is not one of them. 

is direct debit credit ringfenced in event of insolvency?  If not, the government needs to emergency legislate- it is a big scandal coming over the horizon.

yeah, there's no gap in supply.  you take a meter reading and any credit goes to the new supplier.  So you don't lose, but next month's bill (and those that follow) will be frickin' massive.

the UK's gas imports are mainly from Norway, but Germany relies on Russian gas for about 55% of its needs.  Russia could up supply but is choosing not to (because there's a new Baltic pipeline that Germany isn't using and Russia's in a pisser about that - it would increase Germany's reliance on Russian gas, so they're not keen).  That's push the price up, and the UK is a third country, so we get to pay more.

Fence - I think most of the rabid brexiteers have long known now that they have lost brexit benefits argument. there is no sunlit upland and the costs are going to be huge (in addition to the existing rises). 

They are looking at a crippled society riven with strikes. I doubt though that they will accept it is their fault.

There are a lot of reasons why gas prices are currently high but one is the current maintenance programme on North Sea platforms which has shut down some supply that we presumably rely on more than, e.g. France.

Jellymonster20 Sep 21 10:52 Reply | Report

Purposely didn't mention Virgin's fibre offering, because that's a special case.  But Sky don't get a better rate on wholesale broadband capacity for those customers who are also dish owners. Assume we have just enough suppliers in the market to avoid abuse of dominance (netscape navigator, anyone).

 

How strange - parents just had an email from sky saying that their bundle tv+broadband+phone package is now being unbundled and treated as standalone contracts. 

Those of us who have paid more than others in the last few years because we used a reputable older company should not now through tax or because our provider is forced to take on 500,000 customers now pay in a sense to help those who had the better deals with the dodgy providers. However as ever those of us who pay more pay more and more rather than getting something back in return.

Has there been some massive collective failure of hedging strategy or something? Don’t energy retailers forward purchase at a price that matches their on-sell, or retain the flexibility to increase consumer prices to match wholesale? It’s like the forward market was never invented.

Larger suppliers all hedge, yes.  Many smaller suppliers don't.

I'm sure Lydia's point was about the mutualisation scheme for credit balances under the SOLR rules.  As you will all know, under the scheme the costs of credit balances are met by remaining suppliers.   (They are not, as some have suggested above, "ringfenced" as if in client account.)  

So Lydia wants the benefit of not shopping around? 

That's just idiotic. Free market. Use the cheapest one for as long as possible then move to the next cheapest one. 

Peric - thanks.  Was trying to find out if the cash was ringfenced - but every single source is written in a way to avoid answering that question.  

 

I would expect that they all hedge, but that smaller players just didn't hedge enough?  Cheap rates draw in 10% more customers than they modelled, then it was cooler in August so people (mad fookers) used the heating a bit, then the war chest they had for a spike could bear (e.g.) a 200% jump for a shorter period.

 

What happens if no-one steps in as a SoLR?

I must admit I am surprised that a degree of hedging isn't mandated by the regulator. Is this because of fvckwittery or is there a reason for it? I was reading an article the other day quoting one of the small suppliers that was about to go bust and he basically said "we're not really hedged and we've not really got any cash reserves". 

Seems like an obvious area for the regulator to regulate. 

Alan - quite.

Hedging is essentially buying in advance. And what do you need to buy in advance?  Capital. 

And what do smaller suppliers not have?  Capital.

So:  why is there not a financial resilience requirement for supply licences.  

Ask Ofgem.

Yes of course.  Hedging doesn't necessarily protect you from the average market price over a given period.  It smooths the peaks and troughs and if done well will generate competitive advantage too.  But ultimately the market price will feed into the cost base somehow.

Will there be a big shake-up in Ofgem now, and we see them derisking the sector (undermining the business model of those trying to play fast and loose to generate additional income.

Yes but just so. 
 

The current system isn’t working. Why should customers of insolvent suppliers have their credit balances protected by the customers of larger more stable suppliers? If you want to go round saving every last penny by switching to unknown “disruptive” companies then that should be at your risk. 
 

Im not actually against being back regional utility boards. 

Scottish Power, fixed rate until March 22. 

Went online to check the price of a new fix to Dec 22  - the rate was 60% higher than the current fix.

Who on earth would be idiotic enough to sign up to that?

Their variable rate, even with 2 hefty increases in the cap coming up, will only be about 25% higher.

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