Could anyone form a gas/electric cooperative?

Lakelady_2

This thought has puzzled me for awhile. Why do we have to go to the large companies for our gas/electric if there were enough of us couldn`t we form a coop and buy and supply our own energy. After all BG and all are only retailers aren`t they.
*** End of bright idea I would have no idea how to do this- but I know there are alot of very savvy people on these boards who could***

Cardew

To a certain extent that is what Ebico have done, a non-profit organisation.

However even though they have a huge customer base, they still have their accounts run and are administered by Southern Electricity.

Also although not a co-op, lots of small distribution companies started up after the regulations were changed. Most of these have folded because quite simply the distribution side of energy is not profitable. Even BG with their high prices lost hundreds of millions of pounds. They only survive, with the other major companies, because they belong to large groups.

Even non profit making Ebico can only get their prices down to the lower end of the industry average. Being cynical, do you think they would last long if they drastically undercut all their competitors?

Wig

I would also like to know what are the rules involved for this, Ebico and Lloyds TSB and must be others are secondary suppliers meaning they buy their energy from the big boys before selling it on to the customers. There must be rules for doing this, like I wonder if the big boys are compelled to sell at trade rates? and what those trade rates are? Are they for example set by agreement with OFGEM.

When the market opened initially back in the old days, I heard a story of some guy who was in the news for being a con man he had created a farming cooperative & sold energy to them, but there was something about it which was a con.

But this is a great question. Just how difficult is it? and could we make a go of it like Ebico has done? are the trade prices fixed etc. If I won the euro millions it's certainly one of the things I'd look into.

tripled

The energy markets are very complex beasts. Setting up a co-operative buying gas and electricity direct would be difficult because
1) You would have to gain access to the regional gas and electricity distribution networks.
2) You would need a sufficiently large co-operative to buy the gas and electricity at a reasonable price - if it was just say, a couple of hundred households, the gas producers probably wouldn't give you the time of day. The only way to buy gas would be on the highly volatile spot markets. As a result you wouldn't be able to negotiate long term, discounted contracts.
3) 'Imbalance' - You have to negotiate and agree how much gas being lost as it is transported across the gas networks is yours and pay for it.
4) Gas would have to be bought in advance, not in arrears. You would need someone to forcast consumption.
5) Debt - what would happen if one of the co-operative refused to pay? Or wanted a prepayment meter?
6) Legality - would the project need to be licensed by Ofgem (as the gas isn't being sold on)? Again, an expert would be required to set up the co-operative and make sure it didn't fall foul of regulations.
7) Then there would be organising agencies to do meter readings, issuing bills, sorting out the dozens of problems we see every day posted on MSE, etc.

There's probably a whole load more things I haven't thought about too.

However it might be possible to form a co-operative to negotiate with the big suppliers, ie they give x amount off gas and ele prices and gain 5,000 accounts. Whether the savings would amount to more than you could make switching through quidco every few months though is a different matter. The profit margins the companies take are typically less than 10%.

So basically as to buying gas/ele direct, it's almost certainly not possible without a huge number of members and plenty of financial backing. Whether a co-operative could make savings buying in bulk from one of the big six is a different matter. Not much, I would have thought, but it's possible small savings could be made.

BexTech

When there was just British / Scottish Gas supplying the UK, British Gas would be buying in gas from many different companies, such Texaco, ExxonMobil, Conoco, Total and around 20+ other companies, all this would be combined and sent down the pipes, BG just billed you for what you used and they paid the companies whatever their rates were.

When it was opened up, BG was split and the distribution of the Gas was then under Transco. People who worked for Transco couldn't mention anything about the business to the retail side, which was awkward as often Transco and British gas retail side were in the same building / on the same site and friends and family worked in one and other friends and family worked in the other.

The various companies would then buy in gas from the same companies as before negotiating different rates, you would get billed, you energy company would pay what they negotiated with the likes of Texaco, and these companies (exaco, ExxonMobil, Conoco, Total etc) would send the gas to Transco, just like they would before.

So the same gas is coming down the pipes in the same way, just that the company that bills you may be different, the company that bills you may only be buying in from certain suppliers, but the gas you get could be any that supplies the UK.