Council owned energy suppliers and Private Eye report and risk/strategy

LittleGreyCatUK

Quite a long title.
We are looking at switching suppliers and Bristol Energy and Robin Hood (via Ebeco) are in the mix. Looking for a fixed rate deal, for 2 years if possible.
There was an article in Private Eye this week saying that Bristol Energy was losing money, Robin Hood had only just eased into the black.

My understanding is that if you take out a deal with one of these small companies and the company folds you will retain your deal and you will be transferred to another supplier. If you are on a fixed rate deal and energy prices are rising, this will not be attractive to other suppliers if they are guaranteed to make a loss for the remaining term. How does this work, then?

My understanding, also, is that with stable or falling energy prices the small suppliers without their own generating/production capacity can undercut the big players who have to hedge long term. However if the energy prices are rising then the small players take the hit first and have to raise prices because they don't have the capital to hedge.

Apart from the B word, the USA flexing muscles at Iran could signal a major disruption in oil and gas supplies, forcing prices up. A major drop in the UKP could also make anything traded in dollars more expensive in the UK.

Based on that, a couple of questions:

(1) Is a sound (if immoral) strategy to go for the lowest priced fixed rate deal in the knowledge that if the supplier fails you will be allocated another supplier?

(2) What happens if a supplier fails and no other energy supplier wants you as a customer?

anniecave

LittleGreyCatUK wrote: »

My understanding is that if you take out a deal with one of these small companies and the company folds you will retain your deal and you will be transferred to another supplier.

This is incorrect. Another supplier will take you on, but they will not (usually) honour your current deal, you will be offered new prices with the new supplier, and you can chose to switch to a different supplier if you want.

Lyncj01

Hi,

I have some experience of this as a) I have worked in the energy industry for many years and was involved in a 'supplier of last resort' process and b) I am with Outfox the Market (and considered your questions at the point I made a decision to switch).

If your supplier goes bust; based on historic events (4 have gone bust this year), any credit you build up will be protected. Ofgem will be seeking a supplier to pick up the pieces who promises this to be the case. As a rule they will also honour your current fixed price to the end of it's term. I guess this is NOT guaranteed but 'case law' suggests this is a highly likely outcome.

As an absolute last resort Ogem can enforce the supplier of last resort so someone will take over your supply AND in this case there is a central pot which would protect some/all of any credit balance you have. The new supplier may not promise to keep you on the same tariff though.

It's probably true that some of the very small suppliers may not get full credit lines with commodity suppliers so may go unhedged; causing them problems in a rising market.Some of the problem though is that they have 'wanted' to take price risk and/or don't have good hedging teams so have just got it wrong.

I'd switch to the lowest cost provider you can find.

Added update: I've just had a quick look at 2 of those who went bust. In one case the current tariff was maintained by the new supplier and in the other it wasn't (but the customer was put on the new suppliers lowest tariff). So I think I'm wrong in saying you are likely to be maintained on your tariff if someone takes over. it may happen/it may not. Make hay whilst the sun shines though!!

molerat

Lyncj01 wrote: »

Hi,

I have some experience of this as a) I have worked in the energy industry for many years and was involved in a 'supplier of last resort' process and b) I am with Outfox the Market (and considered your questions at the point I made a decision to switch).

If your supplier goes bust; based on historic events (4 have gone bust this year), any credit you build up will be protected. Ofgem will be seeking a supplier to pick up the pieces who promises this to be the case. As a rule they will also honour your current fixed price to the end of it's term. I guess this is NOT guaranteed but 'case law' suggests this is a highly likely outcome.

As an absolute last resort Ogem can enforce the supplier of last resort so someone will take over your supply AND in this case there is a central pot which would protect some/all of any credit balance you have. The new supplier may not promise to keep you on the same tariff though.

It's probably true that some of the very small suppliers may not get full credit lines with commodity suppliers so may go unhedged; causing them problems in a rising market.Some of the problem though is that they have 'wanted' to take price risk and/or don't have good hedging teams so have just got it wrong.

I'd switch to the lowest cost provider you can find.

The latest, Iresa taken on by Octopus, has blown that "case law" out of the water.

anniecave

Yes, to clarify, I was assuming the situation would be the "supplier of last resort" option, which does usually mean new prices.

matelodave

When GB Energy went bust and the Co-op took over they did honour the tariffs of the GB customers.

That's not the case with IRESA and Octopus, as those customers have been put onto Octopus's SVT, which in my case costs £220 a year more than I was paying with IRESA.

I'm guessing that Octopus will be losing a fair proportion of those customers in the very near future - me being one of them.

Lyncj01

If you read my post you'll see I made a comment at the end that 1 had (Co-operative Energy is offering GB Energy Supply’s customers the same price as they were paying before, both for customers on fixed deals and on standard variable tariff) and 1 had not honoured prices (Octopus Energy is offering Iresa’s customers its "Flexible Octopus" tariff.

LittleGreyCatUK

All good information, which seems to boil down to the fact that if the supplier goes bust you may or may not keep your tariff.

Which eliminates the "take the cheapest and shonkiest" option and means that whoever you go with (apart from the Big Six) carries an element of risk. Either they may not survive a long fix or they may be forced to increase prices if a crisis happens.

Polishing a coin to aid my decision making.

matelodave

I'm guessing that the likelihood of keeping your tariff if a supplier goes bust is pretty slim so you may just as well go for the cheapest.

IMO it's not worth paying extra in the hope that you'll either get better service or that the company wont go bust. I've been with a couple of companies that have gone bust (GB and now IRESA).

Apart from the minor aggro of having to sort out another supplier I've saved a big heap of money certainly over £500 and not had any real problems with my billing.

I reckon that providing you keep a careful eye on your consumption, read the meters regularly (at least monthly) send the info into your supplier and check your DDs and online account monthly to ensure that it's correct then you shouldn't have a problem.

I'd recommend keeping your own records rather than just relying on the suppliers info. Download and save a copy of your statement or bill every month. DO NOT ACCEPT ESTIMATED BILLS, get them corrected immediately. Most trouble seem to stem from people accepting multiple estimated bills and losing track.

Even the bigger or more expensive suppliers can manage to have computer malfunction or upgrade glitches so paying extra doesn't actually guarantee you a trouble free experience

LittleGreyCatUK

Past performance doesn't guarantee future performance. Oil prices have been low ($50 a barrel) then slowly climbing.

My current view on the next two years of fuel prices is pushing me towards a fixed price tariff. I am by nature cautious and pessimistic so I am tempted to pay extra for a known expenditure over 2 years.

PixelPound

The OP was looking at council owned energy suppliers - surely less likely to go under than small suppliers?