Is your energy supplier going bust?

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Gfamily
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Re: Is your energy supplier going bust?

Post by Gfamily » Mon Nov 22, 2021 2:25 pm

shpalman wrote:
Mon Nov 22, 2021 1:59 pm
The Bulb has gone.
Yup - meter readings taken (and photographed) and uploaded via the website - though it seems we're too many to be simply reallocated to one or other of the Big 6.
My avatar was a scientific result that was later found to be 'mistaken' - I rarely claim to be 100% correct
ETA 5/8/20: I've been advised that the result was correct, it was the initial interpretation that needed to be withdrawn
Meta? I'd say so!

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Re: Is your energy supplier going bust?

Post by IvanV » Mon Nov 22, 2021 3:21 pm

"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." Source: Uswitch analyst, quoted in BBC article
The price cap has been brought into disrepute in precisely the way that many people said it would be when it was proposed. It was a surprise that it happened just now, but no suprise that it happened. And now the government is going to have to put its hand in its pocket to take on some of the losses that it has imposed on suppliers.

It's actually rather similar to how lots of businesses went bust in Venezuela, when the government imposed widespread price controls to try and tame inflation and prevent "profiteering". The government than nationalised them, but couldn't make money under its own rules either. So lots of them quietly closed down, after being looted.

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Re: Is your energy supplier going bust?

Post by Sciolus » Mon Nov 22, 2021 4:32 pm

IvanV wrote:
Mon Nov 22, 2021 3:21 pm
The price cap has been brought into disrepute in precisely the way that many people said it would be when it was proposed.
Specifically, the way the tories said it would when Corbyn proposed it.

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Re: Is your energy supplier going bust?

Post by plodder » Mon Nov 22, 2021 4:50 pm

Sciolus wrote:
Mon Nov 22, 2021 4:32 pm
IvanV wrote:
Mon Nov 22, 2021 3:21 pm
The price cap has been brought into disrepute in precisely the way that many people said it would be when it was proposed.
Specifically, the way the tories said it would when Corbyn proposed it.
Why did they implement it then?

lol.

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Re: Is your energy supplier going bust?

Post by monkey » Mon Nov 22, 2021 4:56 pm

Sciolus wrote:
Mon Nov 22, 2021 4:32 pm
IvanV wrote:
Mon Nov 22, 2021 3:21 pm
The price cap has been brought into disrepute in precisely the way that many people said it would be when it was proposed.
Specifically, the way the tories said it would when Corbyn proposed it.
Milliband, and it was in the Tories Manifesto in 2017, when May was campaigning against Corbyn. clicky

(I'm pretty sure Corbyn supported it, but he also had some other ideas about energy supply)

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Re: Is your energy supplier going bust?

Post by IvanV » Mon Nov 22, 2021 5:02 pm

plodder wrote:
Mon Nov 22, 2021 4:50 pm
Sciolus wrote:
Mon Nov 22, 2021 4:32 pm
IvanV wrote:
Mon Nov 22, 2021 3:21 pm
The price cap has been brought into disrepute in precisely the way that many people said it would be when it was proposed.
Specifically, the way the tories said it would when Corbyn proposed it.
Why did they implement it then?
Because it went down well with the electorate.

The electorate often really likes the sound of certain bad policies. Price regulation is often a popular policy, because people think they will be protected by it. The downsides are complicated to understand.

Having popular but bad policies is my definition of populism.

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Sciolus
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Re: Is your energy supplier going bust?

Post by Sciolus » Mon Nov 22, 2021 5:46 pm

Correction by monkey acknowledged.

plodder
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Re: Is your energy supplier going bust?

Post by plodder » Mon Nov 22, 2021 5:47 pm

That’s true but I think it’s more likely they were getting their ears bent by a bunch of city fly boys.

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lpm
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Re: Is your energy supplier going bust?

Post by lpm » Wed Nov 24, 2021 11:10 pm

Lol. £1.7 billion. Thanks tax payers for keeping my energy cheaper a few more months.
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bjn
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Re: Is your energy supplier going bust?

Post by bjn » Thu Nov 25, 2021 7:51 am

Yay for weirdly regulated markets. Not that lightly regulated markets don’t fall over now and then, c.f. Texas last winter.

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Re: Is your energy supplier going bust?

Post by IvanV » Thu Nov 25, 2021 12:17 pm

lpm wrote:
Wed Nov 24, 2021 11:10 pm
Lol. £1.7 billion. Thanks tax payers for keeping my energy cheaper a few more months.
As a tax-payer, this seems to be one of the biggest wastes of my money I have ever heard of. I'm utterly livid. Think of all the things that could do with £1.7bn.

I always knew it was a stupid system. But even I am astonished it has got the government into such huge losses. That they failed to see this disaster coming and did not modify the system in good time. If they still don't take action to change it, it might be far from the end of it, or they could be losing a lot more money.

The amount is extraordinary. £1000 per customer. Is that really the loss per customer to keep the price down until the price cap becomes realistic? I can only think Bulb must have spaffed the customers' credit balances big time, and the government is in effect going to have to compensate for that large scale legalised theft, if that is what has happened. That risk should have been realised too, and action taken to prevent it.

What we have seen, to be fair, is quite close to the worst course of events possible in terms of tipping suppliers into failure. I know this because around about 6 years ago I built a simple simulation model of what kind of events can make energy suppliers go bust. I used Monte Carlo methods to find out what kind of situations would be the worst. This was for the purpose of demonstrating that Ofgem's non-intrusive accounts monitoring system was not going to pick these events up before they happened, especially not the worst ones. I like to think that contributed to Ofgem's realisation shortly afterwards it needed a system to protect customer monies. I know why they put in place a socialised losses system. It was slowly dawning on them recently that the risk was too much. But their adjustments - some slightly tweaked financial strength rules - were largely cosmetic and did nothing to prevent or ameliorate what we have just seen happen.

Since I wrote my model, the price cap makes supplier failures even worse than could happen in my simulation model. Because at the time of my model, suppliers could rapidly adjust standard variable tariffs (SVT) to input cost changes. At that time, It was fixed tariff customers that made them go bust. But with the price cap, the SVT is very dangerous too.

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Re: Is your energy supplier going bust?

Post by lpm » Thu Nov 25, 2021 12:38 pm

IvanV wrote:
Thu Nov 25, 2021 12:17 pm
lpm wrote:
Wed Nov 24, 2021 11:10 pm
Lol. £1.7 billion. Thanks tax payers for keeping my energy cheaper a few more months.
The amount is extraordinary. £1000 per customer. Is that really the loss per customer to keep the price down until the price cap becomes realistic? I can only think Bulb must have spaffed the customers' credit balances big time, and the government is in effect going to have to compensate for that large scale legalised theft, if that is what has happened.
I don't believe there's any problem with credit balances. £1,000 is indeed the current loss per every customer until April.

It applies to every energy supplier. All of them have the £1,000 difference between cap and wholesale, and hence all are bust on the retail side. Obviously if they've got generation they raking in supernormal profits to compensate. And some will be better hedged or have a different mix of fixed and variable customers, allowing them to scrape through for a few months more.

Ofgem figures on the price cap are so opaque. Hard to convert "average house" into price per kwh. I've done it for electricity - I pay Bulb 20.5p per kwh and the cap is about 21p to 22p (varies by region). Wholesale prices have hit 250p. No idea what the forward prices are to buy the period now to April but a hell of lot higher than 22p.
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Re: Is your energy supplier going bust?

Post by tom p » Thu Nov 25, 2021 12:43 pm

IvanV wrote:
Mon Sep 20, 2021 2:22 pm
lpm wrote:
Mon Sep 20, 2021 8:08 am
We burn that down every year or two. We've still got the Norway ones, wonderful country, best people in the world, please send us some electricity.

Amusingly, I'm on a 100% renewables tariff. Which is, of course, a sham. My provider puts prices up because gas prices have gone up, but obviously can't admit that, so has to invent a little fake explanatory email saying it's due to overall market conditions. And now it's going bust.
Utterly delicious how these sham 100% renewables tariffs get exposed when the gas price goes up. I read the other day that the Dutch railways run 100% on wind power. But I haven't noticed the trains stopping when the wind stops blowing.

The 1.4GW North Sea Link Norway-UK electricity interconnector is more or less built but not open yet. First trial operations expected next month with full operations expected in Q2 2022.

But links to Netherlands, Belgium, and a 2nd French link are all up and running at the moment (3.0GW). Also 2 links to Ireland (1GW), which is managed as an all-island single electricity market, but those mostly export.
Have you ever been to Holland? The sodding wind never stops blowing.

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Re: Is your energy supplier going bust?

Post by lpm » Thu Nov 25, 2021 12:47 pm

IvanV wrote:
Thu Nov 25, 2021 12:17 pm
lpm wrote:
Wed Nov 24, 2021 11:10 pm
Lol. £1.7 billion. Thanks tax payers for keeping my energy cheaper a few more months.
As a tax-payer, this seems to be one of the biggest wastes of my money I have ever heard of. I'm utterly livid. Think of all the things that could do with £1.7bn.
Its not a cost. Nobody is spending £1.7b of resources. Its just a transfer from government to energy customers.

As Bulb is now nationalised, it's better seen as a tax cut for Bulb customers. Or rather an avoidance of a tax rise. All energy customers, ie the entire population, are getting subsidised energy right now, and as is now proved this subsidy is underwritten by the government. It would clearly be unfair to remove that subsidy for a random set of customers. The best response would be to remove the price cap for Everyone while simultaneously nationalizing.

The root problem is the silly faux privatisation, when it fact it's clearly a government controlled market.
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IvanV
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Re: Is your energy supplier going bust?

Post by IvanV » Thu Nov 25, 2021 1:05 pm

tom p wrote:
Thu Nov 25, 2021 12:43 pm
Have you ever been to Holland? The sodding wind never stops blowing.
As of 2020 they've got 6.8GW. It generated 13,900 GWh. So that's a capacity factor of about 23%. Though that calculation might be distorted by the fact that a very large amount of off-shore capacity opened just recently, so not all of it may have been available for the full year. So I checked the figures for the previous year and got 27%.

Meanwhile in Britain, we achieved 35% in 2020 by the same simple calculation. That's in part because we have built out off-shore wind more quickly. But even onshore capacity factors in Britain are comparable to these Dutch figures, typically in the range 24-28%.

I have been to the Netherlands a fair bit. It might seem windy in comparison to the places where many people live in Britain. But these are not the places we put wind turbines. Britain has the best wind resource in Europe. I examined the paper that made that claim, and it was a convincing exercise, considering not just the wind itself, but the potential for siting turbines. I was surprised it wasn't Norway. But the problem in Norway, for example, is the relative shortage of sensible sites to install the turbines, because of much steep terrain both on land and underwater. Though it didn't anticipate floating turbines.

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Re: Is your energy supplier going bust?

Post by IvanV » Thu Nov 25, 2021 1:15 pm

lpm wrote:
Thu Nov 25, 2021 12:47 pm
IvanV wrote:
Thu Nov 25, 2021 12:17 pm
lpm wrote:
Wed Nov 24, 2021 11:10 pm
Lol. £1.7 billion. Thanks tax payers for keeping my energy cheaper a few more months.
As a tax-payer, this seems to be one of the biggest wastes of my money I have ever heard of. I'm utterly livid. Think of all the things that could do with £1.7bn.
Its not a cost. Nobody is spending £1.7b of resources. Its just a transfer from government to energy customers.

As Bulb is now nationalised, it's better seen as a tax cut for Bulb customers. Or rather an avoidance of a tax rise. All energy customers, ie the entire population, are getting subsidised energy right now, and as is now proved this subsidy is underwritten by the government. It would clearly be unfair to remove that subsidy for a random set of customers. The best response would be to remove the price cap for Everyone while simultaneously nationalizing.

The root problem is the silly faux privatisation, when it fact it's clearly a government controlled market.
Good points. The rest of us benefit too, in effect. So it amount to a kind of tax reduction. But rich people use more energy, so there are probably transfers that are better for reducing inequality than this one.

That is one good reason why countries that routinely keep energy prices low by subsidising them from government funds are told it is poor policy. There are others.

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Re: Is your energy supplier going bust?

Post by lpm » Thu Nov 25, 2021 11:48 pm

lpm wrote:
Thu Nov 25, 2021 12:38 pm
Ofgem figures on the price cap are so opaque. Hard to convert "average house" into price per kwh. I've done it for electricity - I pay Bulb 20.5p per kwh and the cap is about 21p to 22p (varies by region). Wholesale prices have hit 250p. No idea what the forward prices are to buy the period now to April but a hell of lot higher than 22p.
For gas the price is capped at about 3.9p per kwh. Bulb charge me 3.86p. Wholesale prices are around 12p to 15p.
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IvanV
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Re: Is your energy supplier going bust?

Post by IvanV » Fri Nov 26, 2021 2:51 pm

lpm wrote:
Thu Nov 25, 2021 11:48 pm
lpm wrote:
Thu Nov 25, 2021 12:38 pm
Ofgem figures on the price cap are so opaque. Hard to convert "average house" into price per kwh. I've done it for electricity - I pay Bulb 20.5p per kwh and the cap is about 21p to 22p (varies by region). Wholesale prices have hit 250p. No idea what the forward prices are to buy the period now to April but a hell of lot higher than 22p.
For gas the price is capped at about 3.9p per kwh. Bulb charge me 3.86p. Wholesale prices are around 12p to 15p.
This Ofgem page on market prices might be useful, though its a little bit behind.

Electricity prices have hit numbers like 250p/kWh (usually presented as £2500 per MWh in the wholesale market) but only for short periods. Typical current prices, averaged over a whole day, seem to be around €200 per MWh. https://www.epexspot.com/en And similar prices persist over the core adjacent European area of Fr/De/Nl/Be/CH. It depends on the wind situation, but GB can be cheaper than Fr/De. That's possibly why its like that just now.

But that is still about 3 times normal, as the gas price likewise indicates. So we can understand that unhedged suppliers can be losing something like 10p/kWh on price-capped sales. Still doesn't seem quite enough to add up to £1000 per household over 6 months.

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