The energy crisis

[nomadking]

Originally Posted by ianch99

Privatise the profits .. Socialise the losses:

UK government sets aside £1.7bn to support Bulb customers

Garbage.
The problems have been caused by "socialising" the industry with people not paying what it actually costs. The businesses are being forced to provide energy at a LOSS.
The £1.7bn represents the extra that Bulb customers should have paid. It is the CUSTOMERS who are being subsided by the taxpayer.

Pretty sure that the customers didn’t set up the business model, or decide the prices…

[nomadking]

Originally Posted by Hugh

Pretty sure that the customers didn’t set up the business model, or decide the prices…

The Government did, via the regulator.
Link

As a result of a cap limiting what companies can charge their customers, some businesses have been forced to sell energy for less than they bought it for.


Bigger companies tend to buy their gas further in advance, helping them avoid large hits from the price spike. However smaller firms that are less able to do that have come under pressure.


Since the beginning of September, 22 energy suppliers have failed following a spike in gas prices.

Not at the time the business model was set up…

[nomadking]

Originally Posted by Hugh

Not at the time the business model was set up…

Precisely. The business model etc was ok and sustainable, until the government got involved.
What business can possibly survive when regulations are heaped upon it, and it is ruled that they have to supply at below the actual cost.

[ianch99]

Originally Posted by nomadking

Garbage.
The problems have been caused by "socialising" the industry with people not paying what it actually costs. The businesses are being forced to provide energy at a LOSS.
The £1.7bn represents the extra that Bulb customers should have paid. It is the CUSTOMERS who are being subsided by the taxpayer.

I think what is "garbage" is that we, the tax payer, has to pay £1,000 a customer to keep Bulb afloat.

£1,000 a customer? Why the UK is counting the cost of keeping Bulb’s lights on

“Pretty much all the suppliers still able to operate had sourced gas and electricity from the wholesale markets at least a year ahead of time to hedge against a major market shock,” another industry source said.

“In short, Bulb came undone because it hadn’t bought its energy in advance, it didn’t have enough investment to cover the costs and the government’s price cap meant it couldn’t push bills higher either,” the source added.

If they want to be a private company, they should be wound up when they get it wrong.

[Carth]

Will they have any profit(s) between now and April?
Who's keeping score?

[nomadking]

Originally Posted by ianch99

I think what is "garbage" is that we, the tax payer, has to pay £1,000 a customer to keep Bulb afloat.

£1,000 a customer? Why the UK is counting the cost of keeping Bulb’s lights on



If they want to be a private company, they should be wound up when they get it wrong.

If they were a private company, they could've charged the customers the proper rate.
Are you suggesting that Bulb customers should be cut off? It is the customers being propped up and subsidised.

They could only pay in advance, if they had been allowed to make actual profits to pay for it.
Even with paying in advance, the price increases still catch up with them.

[Inactive Digital]

We're at the point now where, even if suppliers did hedge their supplies for the duration of a fixed tariff, in the coming months more and more customers will be coming to the end of their fixed deals and suppliers will be forced to provide energy at a significant loss because there's no competition. Even the best run companies could struggle on the months ahead.

[ianch99]

Originally Posted by Inactive Digital

We're at the point now where, even if suppliers did hedge their supplies for the duration of a fixed tariff, in the coming months more and more customers will be coming to the end of their fixed deals and suppliers will be forced to provide energy at a significant loss because there's no competition. Even the best run companies could struggle on the months ahead.

Which only shows what happens when you apply free market dogma to national infrastructure services. When companies that are motivated by profit and shareholder returns are created in an artificial "free" market, it can never end well. The same story is seen in the water sector where it is probably worse.

[nomadking]

Originally Posted by ianch99

Which only shows what happens when you apply free market dogma to national infrastructure services. When companies that are motivated by profit and shareholder returns are created in an artificial "free" market, it can never end well. The same story is seen in the water sector where it is probably worse.

How on earth would a publicly owned company have performed better?
Same costs involved. The taxpayer would've had to subsidise consumers long before now.

The bigger companies are surviving because they are bigger and have the "cash", which a publicly owned company wouldn't have.

How much money do you think the taxpayer would have to splash out with a publicly owned company with 20 times the customers, rather than one with 1.7m customers.
Link

Justina Miltienyte, an energy policy expert at Uswitch, said the failure of Bulb signalled the "tipping point" of the UK energy crisis. "Ultimately this demise wasn't caused by a badly run business model. Instead, Bulb was choked off by the way the government decided to structure the current energy market with the price cap."

Profits?

According to Bulb's latest available accounts, in the year to 31 March 2020 the company made losses of £63m. It also had a £55m loan facility due for repayment on 31 December this year.

So they were running at a loss before the price of energy surged?

Not a sustainable business model.

[nomadking]

Originally Posted by Hugh

So they were running at a loss before the price of energy surged?

Not a sustainable business model.

So there wasn't a government imposed price cap before then?
£63m against £1,700m is quite a difference.

[1andrew1]

Originally Posted by Hugh

So they were running at a loss before the price of energy surged?

Not a sustainable business model.

Exactly. As the boss of Octopus Energy commented, power companies should be obliged to purchase power in advance to match the fixed tariffs they charge customers. Otherwise, they will be caught out by upswings in prices.

The price cap might be an issue for all power companies in the future if it is not increased but the likes of Bulb acquired customers with multi-year fixed tariffs. They do not have many legacy customers on variable rates like the incumbent power companies British Gas or Scottish Power do.

---------- Post added at 02:54 ---------- Previous post was at 02:40 ----------

Originally Posted by nomadking

How on earth would a publicly owned company have performed better?
Same costs involved. The taxpayer would've had to subsidise consumers long before now.

The issue is that some of the newer companies did not buy their fuel in advance. This was ok when wholesale prices were falling but was a one-way bet when they rose. Compare Bulb to Octopus and you'll understand why one exists without subsidy and why the other has been effectively nationalised.

[Sephiroth]

Originally Posted by ianch99

Which only shows what happens when you apply free market dogma to national infrastructure services. When companies that are motivated by profit and shareholder returns are created in an artificial "free" market, it can never end well. The same story is seen in the water sector where it is probably worse.

Indeed, and I am a paid up Conservative. The water sector is a disgrace because there is no competition that I can find.