Energy Companies going bust

[Deleted User]

New regulations came into force last month:
https://www.ofgem.gov.uk/system/files/docs/2020/11/201117_-_slr_decision_doc_final_v.2.pdf

phillw

[Deleted User] said:
If Ofgem was to get involved then I suggest that the first thing that would happen is that customers would leave in droves. Most suppliers fail because they have set tariffs that are financially unsustainable.

Some energy companies lose more money the more customers they have, so it might not actually be a bad idea.

phillw

Phones4Chris said:
It's very simple really, OFGEM need a much stricter set of rules about financing, capital, directors, and so on BEFORE issuing a licence!

And then there would be complaints about the rich profiting by keeping everyone else out.
What next? You can't sell holidays unless you can cope with a year long pandemic?

UnclaimedEnergy

phillw said:

Phones4Chris said:
It's very simple really, OFGEM need a much stricter set of rules about financing, capital, directors, and so on BEFORE issuing a licence!

And then there would be complaints about the rich profiting by keeping everyone else out.
What next? You can't sell holidays unless you can cope with a year long pandemic?

Even without Ofgems intervention this is what the current market conditions will lead to in the long run.

The rich are those backing Octopus and Bulb who are currently sweeping up customers left right and center. The suppliers going bust are the ones who aren't rich and don't have the financial backing to keep companies going at a loss.

The question then is, should these suppliers be allowed to enter the market in the first place if they don't have the financial backing to grow to a point where they could make a profit in the future?

[Deleted User]

UnclaimedEnergy said:

phillw said:

Phones4Chris said:
It's very simple really, OFGEM need a much stricter set of rules about financing, capital, directors, and so on BEFORE issuing a licence!

And then there would be complaints about the rich profiting by keeping everyone else out.
What next? You can't sell holidays unless you can cope with a year long pandemic?

Even without Ofgems intervention this is what the current market conditions will lead to in the long run.

The rich are those backing Octopus and Bulb who are currently sweeping up customers left right and center. The suppliers going bust are the ones who aren't rich and don't have the financial backing to keep companies going at a loss.

The question then is, should these suppliers be allowed to enter the market in the first place if they don't have the financial backing to grow to a point where they could make a profit in the future?

Some of the failed suppliers did have what one would think are sound backers; that is, the NfP Council-backed suppliers such as RHE; Bristol Energy; Victory Energy etc. Councils saw energy supply as a sound investment with little need for taxpayer oversight: unfortunately, once the losses started to accrue, they got cold feet. Given that Octopus lost £36M; Ovo - £106m, and Bulb - £121M in 2019, I doubt that many Councils will be tempted back into the market anytime soon.

bagand96

phillw said:

Phones4Chris said:
It's very simple really, OFGEM need a much stricter set of rules about financing, capital, directors, and so on BEFORE issuing a licence!

And then there would be complaints about the rich profiting by keeping everyone else out.
What next? You can't sell holidays unless you can cope with a year long pandemic?

Companies selling package holidays do have to front up an annual bond to the CAA ATOL scheme. That bond bill landing in September can be the straw that breaks the camel's back (Monarch)

UnclaimedEnergy

Dolor said:

UnclaimedEnergy said:

phillw said:

Phones4Chris said:
It's very simple really, OFGEM need a much stricter set of rules about financing, capital, directors, and so on BEFORE issuing a licence!

And then there would be complaints about the rich profiting by keeping everyone else out.
What next? You can't sell holidays unless you can cope with a year long pandemic?

Even without Ofgems intervention this is what the current market conditions will lead to in the long run.

The rich are those backing Octopus and Bulb who are currently sweeping up customers left right and center. The suppliers going bust are the ones who aren't rich and don't have the financial backing to keep companies going at a loss.

The question then is, should these suppliers be allowed to enter the market in the first place if they don't have the financial backing to grow to a point where they could make a profit in the future?

Some of the failed suppliers did have what one would think are sound backers; that is, the NfP Council-backed suppliers such as RHE; Bristol Energy; Victory Energy etc. Councils saw energy supply as a sound investment with little need for taxpayer oversight: unfortunately, once the losses started to accrue, they got cold feet. Given that Octopus lost £36M; Ovo - £106m, and Bulb - £121M in 2019, I doubt that many Councils will be tempted back into the market anytime soon.

It's not that they got cold feet. The market had changed massively between the decision to start an energy supplier and entering the market. When the plans for RHE and BE were put into place the market was still relatively small and suppliers were actually able to make a profit.

However you then saw a massive influx of energy suppliers all trying to beat each other on price, making it impossible for suppliers to make a profit, that along with the price cap (although council backed suppliers shouldn't have been thinking about milking some of their customers, but they would had done if able to).

Instead of giving up on the suppliers, the councils decided to double down on the losses and put tax payers money into the failing suppliers. After £35m was wasted on BE and £43m on RHE they finally decided that it wasn't getting any better and gave up. Victory Energy didn't enter the market at the same time at BE and RHE and therefore were able to pull out of it before the sunk costs got too big.

Saying they got cold feet wouldn't be the right wording as it was more like they became oblivious to the losses and were in denial that they could still make a profit. Both suppliers were shut down mainly due to the public outcry and pressure from opposite council members.