OFGEM Needs to be More Proactive

inspectorperez

Another week with news of more failed energy companies and the ensuing traumas for customers experiencing the vagaries of transfer to SOLR.

A number of these failed companies all have the same or similar profiles with their financial accounts in that they have not filed any for some considerable time (e.g. Avro - 2 years) and the last filed accounts showed an insolvent position.

In the AVRO situation OFGEM did actually issue an order with a deadline in August 2021 for accounts to be provided further to last filed accounts made up to 30 June 2019.

It all seems a little too late!

Regulators in other industries require current financial information to be provided at regular quarterly intervals to keep tabs on solvency and early warning signals of problems.

Would it not be too much to ask or require OFGEM to adopt a similar approach thereby reducing the amount of distress which customers experience when their supplier fails?

[Deleted User]

Under new Regulations, suppliers are required to give Ofgem visibility of their accounts and cashflow projections. That said, Ofgem is not the FCA. Equally, it has to be careful about the signals that it sends out. It can, for example, stop a supplier taking on new customers: how would this be message be read by existing customers? 

All that said, we are in unprecedented waters. Consumer energy debt is high; nuclear power stations are on maintenance or being de-commissioned; gas fields have been closed down and gas storage is considerably less than it was 10 years ago, and the windspeeds have been well below average for the past three months. We are using gas to produce electricity (50% plus over the last couple of weeks) and because of the high demand and shortage of supply, the wholesale price of gas has risen exponentially.

Because of gas use for electricity generation, the spot price of electricity has also risen exponentially. Last evening, the wholesale price reached over £2.50/kWh - yes, over £2.50/kWh. Ofgem looking at supplier cash flows is not going change the number of supplier failures. We are suffering the consequences of some very poor Government decisions going back many years. We are going to see very many more supplier failures which Ofgem can do little about.

Ofgem could remove the Cap but there would be widespread outcry when energy prices increased even more. They could remove all the green levies which would help suppliers in the short term, or they could do nothing. My money is on the latter. 

niktheguru

I get that people are unhappy with ofgem, but what do they actually think will be achieved if ofgem are more proactive regarding smaller suppliers.

At the moment people are getting cheaper tariffs which are usually loss leaders with these small companies. A number of these small companies are going bust as they are not sustainable.....all the meanwhile the consumer is getting cheap tariffs, their balances are being protected (albeit sometimes with a delay in getting it back) and their supply is not affected.

The alternative is these small companies not existing in the first place, prices being higher to start with and consumers paying more throughout.

Already many people are whinging and moaning that "my tariff is 50% higher than my current fix" etc etc, not willing to acknowledge that wholesale prices are going through the roof and that cost needs to be passed onto the consumer.....if it was just the big companies then we'd all be paying the "price cap" prices and there would be no competition.

Ofgem and the government need to spend more time looking out how our energy is generated and find ways to bring the wholesale cost down. Thats how the overall prices will stabilise.

Yes I know in the end we all pay for the small companies going bust, but i'm not convinced that if they didn't exist we'd be better off in the long run. would we?

inspectorperez

Having always been an advocate of privatisation and capitalism throughout my adult life, I do just wonder whether there is a sound economic case for the energy industry to be brought back under state control?

So many failed companies this year and what must be approaching 1M affected customers is pretty desperate by any stretch of the imagination and whatever the prevailing reasons are for the situation.

In the meantime, highly paid directors will have continued to be rewarded while their companies have been on the slippery slope and I would guess, ultimately without any form of sanction!

Wilt

inspectorperez said:

Having always been an advocate of privatisation and capitalism throughout my adult life, I do just wonder whether there is a sound economic case for the energy industry to be brought back under state control?

I suppose it depends how much exactly it is costing to pick up the pieces of these failed suppliers vs. how much is being saved across the industry due to the competition introduced by these smaller suppliers, even if some fail.

Even full state control wont protect consumers from price elasticity - fuel will still need to be bought from international markets. The only question then would be would the direct energy prices rise or would it come from general taxation? I'd prefer the former, I can think of better things to spend tax money on than subsidising those who use the most energy.

Gerry1

inspectorperez said:

Having always been an advocate of privatisation and capitalism throughout my adult life, I do just wonder whether there is a sound economic case for the energy industry to be brought back under state control?

For privatisation and capitalism to work properly you need to have a large number of suppliers, cf. corner shops.  You can vote with your feet, so the good drive out the bad.  But when there is a limited number of suppliers then it's important to have effective pro-active regulation.

Unfortunately almost without exception all the UK regulators are useless.  They're either dozy fat cats with a far too close and cosy relationship with those whom they are supposed to regulate (Ofgem, Ofcom), or they're under resourced and funded by them (e.g. the ASA).  We have the worst of both worlds.

The_Green_Hornet

Spain are introducing emergency measures to cut spiralling energy bills.

Greece is promising subsidies to consumers.

Italy has already injected €1.2bn into the system over the summer to reduce bills.

France is considering whether their energy grant scheme should be extended.

https://www.bbc.co.uk/news/world-europe-58556073

The UK? Well the regulator has warned that the soaring cost of fossil fuels would feed into customers' energy bills. That's nice.

[Deleted User]

The_Green_Hornet said:

Spain are introducing emergency measures to cut spiralling energy bills.

Greece is promising subsidies to consumers.

Italy has already injected €1.2bn into the system over the summer to reduce bills.

France is considering whether their energy grant scheme should be extended.

https://www.bbc.co.uk/news/world-europe-58556073

The UK? Well the regulator has warned that the soaring cost of fossil fuels would feed into customers' energy bills. That's nice.

You are being a tad unfair. Ofgem has asked suppliers to look kindly on consumers that are struggling to pay their bills. BG has brought in a ban on DD changes. Sadly, this is another ill thought through policy. Suppliers end up with a cashflow problem and customers accrue a bigger debt.