Four more small energy firms could go bust next week (c. 20/09/21)

tghe-retford

inspectorperez said:

Another failed government initiative on the cards by the sound of things. Excellent objective to widen the market for competition, but entry to market far too easy and OFGEM regulation far too reactive and always too late.

Hopefully the "Big 6" will react positively and provide good customer service like in the old days when each region had its own dedicated supplier and problems were sorted out face to face in the local office. Hmmmm - somehow I doubt it!

That won't happen. What we could potentially see with far less competition are cuts to customer services leading to worse outcomes for consumers (also another way to cut outgoings, likely services outsourced, self-service by consumers or automated), the potential for cartels to form and higher prices for consumers to the point where the only thing that changes is the name on the bill. Less choice means higher bills, ask anyone in rural America with Internet access.

Emergency meetings today and tomorrow according to BBC News. There is no way that current fixed rate deals are viable in the same way that virtually no-one offers no standing charge deals and I suspect that and the cap will be discussed at the emergency meetings as a way to prevent a catastrophe for suppliers, employees, industries and consumers.

I think four more going bust this week is only the beginning of a significant shrinking of the industry myself and I do think we will see no more than the big six and a small number of the larger minor suppliers.

Catslovelycats

Going by the problems I’m having with Avro (reminiscent of the Extra Energy fiasco) I suspect Avro is one of them have downloaded my statement and screenshot everything. I lost £400 with the EE debacle because they inexplicably altered one of my statements.

Catslovelycats

I’ve done a couple of these ‘involuntary switches now’. Have found them less stressful than being with the original company and surprisingly good with their tariffs. Lesson learned now.

QrizB

There are a couple of articles on this in the papers.

The Guardian:

https://www.theguardian.com/business/2021/sep/19/majority-of-uk-small-energy-suppliers-could-be-left-to-collapse-this-winter

The majority of the UK’s small energy suppliers could be left to collapse this winter, the Guardian understands, as the government’s crisis talks focus on protecting households rather than bailing out struggling companies.

and The Times:

https://www.thetimes.co.uk/article/competition-was-a-farce-fewer-energy-firms-is-better-vzss3n306?shareToken=7ec2974e7a66cdd8da6e91737ee49d90

Sometime in 2017 I looked for a new energy supplier, and the company that came out cheapest was called Iresa. I’d never heard of it, but I checked it out and chose to sign up.
In 2018 it went bust, and I was moved, along with 95,000 other customers, to Octopus. I liked Octopus, the customer service was excellent, but it wasn’t the cheapest, so I moved to the tariff that was — another largely unknown firm, Tonik. Then it went bust, and 130,000 other customers and I were moved to Scottish Power. Its service was hopeless, so, deciding that was what mattered most to me, I moved back to Octopus, which at least had a consistently cheap deal, even if it wasn’t the lowest.

masonic

Companies that have been irresponsible and failed to secure energy to supply to their customers on a fixed rate contract should be allowed to fail. The taxpayer or industry should not be subsidising the sale of energy at a loss. The aspect that is more problematic here is the cap on prices, which is now forcing suppliers to sell energy on variable contracts at a significant loss. The cap does need to be on average greater than the reasonable costs of supply together with a reasonable profit. Suppliers should have the resilience to survive a temporary disconnect, so it will be interesting to see what happens to the cap beyond October.

It is bad enough that credit balances and costs from the SoLR process are paid for by customers of other energy firms on more sustainable (expensive) contracts. We don't need them subsidising the shareholders and creditors of failed enterprises.

No doubt when these suppliers fail and the process kicks in, Ofgem will proclaim that customers' credit balances have been protected and their energy supply has been assured. Evidence that the safeguards are working. Meanwhile the costs will be quietly picked up through even higher future energy prices. Every year we have the same problem, only this year it is on a bigger scale. It's becoming clear that this sector cannot continue to be driven by free market economics.

fisnik

I'm with Avro currently. Switched earlier in the summer and there's no exit fee.

If we assume that they're definitely going bankrupt in the next couple of months what would be the best thing to do?

Just wait until they go bankrupt and deal with it then or possibly try and switch now. I think EON is £300 a year more expensive but if it's less hassle in the long run is it best to start the switch to them now?

BUFF

poppellerant said:

I will be amazed if Green don't go bust, if not this month then next.  I got the impression that they were struggling and their staff were very stressed on the phone.

https://www.theguardian.com/business/2021/sep/19/i-dont-think-well-survive-the-winter-small-energy-suppliers-call-for-help

bristolleedsfan

masonic said:

Companies that have been irresponsible and failed to secure energy to supply to their customers on a fixed rate contract should be allowed to fail. The taxpayer or industry should not be subsidising the sale of energy at a loss. The aspect that is more problematic here is the cap on prices, which is now forcing suppliers to sell energy on variable contracts at a significant loss. The cap does need to be on average greater than the reasonable costs of supply together with a reasonable profit. Suppliers should have the resilience to survive a temporary disconnect, so it will be interesting to see what happens to the cap beyond October.

It is bad enough that credit balances and costs from the SoLR process are paid for by customers of other energy firms on more sustainable (expensive) contracts. We don't need them subsidising the shareholders and creditors of failed enterprises.

No doubt when these suppliers fail and the process kicks in, Ofgem will proclaim that customers' credit balances have been protected and their energy supply has been assured. Evidence that the safeguards are working. Meanwhile the costs will be quietly picked up through even higher future energy prices. Every year we have the same problem, only this year it is on a bigger scale. It's becoming clear that this sector cannot continue to be driven by free market economics.

UK energy groups ask for government ‘bad bank’ to weather gas crisis | Financial Times (ft.com)

The UK’s largest energy groups are requesting a multibillion-pound emergency package from the government to help them survive the crisis sparked by high gas prices, including the creation of a “bad bank” to help absorb potentially unprofitable customers from failing smaller rivals.

UK business and energy secretary Kwasi Kwarteng is holding emergency talks with regulator Ofgem on Sunday and is due to meet energy suppliers face-to-face on Monday, amid fears that dozens of smaller challenger companies could go bust in the coming weeks due to record wholesale costs of natural gas and electricity.

People familiar with the weekend talks say the largest energy suppliers are asking the government for substantial support to absorb potentially millions of customers from failing companies given the scale of the crisis, and may require the creation of a “Northern Rock-style bad bank” to house lossmaking customers they are unable to absorb.

While no decision has yet been taken, the proposals to the government reveals the scale of support the industry believes will be required to avoid causing long-term damage to the sector should a large number of energy suppliers fail in the coming weeks.

Kwarteng is said to be examining the proposals and has accepted that significant intervention may be necessary, fearing the existing contingency plans may not be sufficient, with allies saying he was looking at “Plans C, D and others”.

“We need a lot of contingency plans in place,” said one ally of the business secretary. Most household bills are not enough to cover the cost of supplying new customers, making large energy companies extremely reluctant to take them on without government support, potentially including state-backed loans or other measures.

Talks with the government had focused on three different approaches, four people familiar with the situation confirmed, while stressing that ministers were “keen not to reward failure”.

One suggestion is for the formation of a “bad bank” which would take on lossmaking customers from failed suppliers, in a move reminiscent of the peak of the financial crisis in 2008, and which would be designed to avoid weakening otherwise strong companies. # “This could get the industry through the current period of crisis,” one person familiar with the talks said.

By parking the problem in a bad bank, it would make it easier to sort out the immediate crisis and then take stock longer term. It would allow the government to handle several suppliers going bust at the same time.”

A second person, however, cautioned that such an approach could be difficult to manage in practice, especially given that suppliers all run on different operating systems.

There would also be a question of whether Ofgem would take responsibility for customer care and handling complaints.  Another option would see the government underwrite debt for the larger suppliers, if they were to incur losses by taking on customers.

A third route would see Ofgem stepping in and, instead of shifting the customers of the failed suppliers to another provider, it would administer the company through the immediate crisis, effectively leading to its nationalisation, with the government on the hook for any losses.

Two people familiar with the talks said the cost of the eventual package could run to billions of pounds for the government given the number of companies that are expected to fold in the coming weeks.

Five smaller suppliers have already gone out of business since the start of August as surging wholesale prices have left companies with insufficient hedging strategies or weak balance sheets unable to cover the cost of the energy they had committed to supply.

There are growing concerns among chief executives of the bigger suppliers that the five, including People’s Energy and Utility Point, with 570,000 domestic customers between them, are just the tip of the iceberg.

Further failures in the next seven to 10 days could see 1m customers needing to be transfe

rred to new suppliers.

The business secretary has been warned by the industry that out of 55 companies in the sector, only between six and 10 could be left standing by the end of the year.

Energy company executives say that each customer they absorb under Ofgem’s “supplier of last resort” system could lose them hundreds of pounds a year, making it unfeasible to take on millions of customers should the worst fears about the number of failures in the industry pan out.

The cost of buying enough wholesale gas and electricity in the spot market to supply an average household is estimated at about £1,600 a year, while the Ofgem-set price cap on energy bills is at present £1,277, having already been raised by £139 last month. Octopus Energy, one of the fastest growing energy providers in the UK — which is now considered a large supplier — said earlier this month that it was now effectively “subsidising our customers to the tune of over £5m a month”.

The company said on Sunday that a number “of less prudently run or less well-backed suppliers have folded with rising gas prices and some more are expected to follow”. It has joined other companies, including Eon, in calling for the government to move environmental levies from electricity bills to help lower customer bills.

While energy supplies for existing customers have largely been hedged in the futures market by the largest energy companies, allowing them to remain profitable, this is not possible for new customers as they have not been able to plan ahead for how much gas and electricity they will need to buy from the wholesale market

Energy suppliers have already provided hundreds of millions of pounds in financial assistance since the start of the pandemic,” said Emma Pinchbeck, chief executive of industry body Energy UK.

“The industry will continue that support this winter, during what is an extremely challenging time for the sector itself — as has been shown by more suppliers exiting the market this week.”

The gas crisis has reverberated across UK industry including threatening food supplies. The meat industry is facing an acute shortage of carbon dioxide after surging gas prices prompted CF Industries to suspend production at two large UK fertiliser plants last week. Kwarteng is meeting with CF Industries on Sunday to discuss options for restarting production at the plants in Cheshire and Teesside, allies of the business secretary said. Gas prices in Britain and Europe have hit repeated highs in recent weeks as traders fear the continent is heading into winter with low stocks following lower supplies from Russia as well as domestic sources as gasfield operators undertook maintenance delayed from last year.

Kwarteng said in a series of tweets on Saturday that he was convening a roundtable with industry on Monday “to plan a way forward”. He said executives had assured him security of the UK’s gas supplies was “not a cause for immediate concern”.

But he is said by colleagues to be worried about the impact of the crisis on consumers and also on future competition, if the fallout from the shock sees a return to a more concentrated market, once again dominated by big players

QrizB

BUFF said:

poppellerant said:

I will be amazed if Green don't go bust, if not this month then next.  I got the impression that they were struggling and their staff were very stressed on the phone.

https://www.theguardian.com/business/2021/sep/19/i-dont-think-well-survive-the-winter-small-energy-suppliers-call-for-help

Worth noting that the CEO quoted in the article runs https://green.energy/ and not https://www.greenenergyuk.com/ or any other company with "Green" in the name.

tghe-retford

Deleted_User said:

tghe-retford said:

There is no way that current fixed rate deals are viable in the same way that virtually no-one offers no standing charge deals and I suspect that and the cap will be discussed at the emergency meetings as a way to prevent a catastrophe for suppliers, employees, industries and consumers.

You don't seem to understand the concept of forward buying of energy, either. (As well as contract law, as mentioned on another thread.)

Why are you going in to bat for dodgy energy suppliers against consumers?

The majority of the UK’s small energy suppliers could be left to collapse this winter, the Guardian understands, as the government’s crisis talks focus on protecting households rather than bailing out struggling companies

Glad to see the government is getting this bit right.

In the slightly longer term, they should be planning to renationalize energy supply. Unfortunately, I'm sure they won't be doing that.

The inability of buying energy upfront and being stuck in contracts promising unit prices and standing charges that are simply unviable and that can not be revoked is exactly partially why we are in this mess in the first place. Just like with the financial crisis of 2008 when it came to the banks. The other aspect being the ideology of green energy, failure to invest in nuclear and rising gas prices. It's like having a growing tumour and instead of going to the doctor and getting treatment, you entrust to an ideology and hope you can pray it away. It won't work there and it won't work with energy. At some point, the Government and industry is going to have to swallow their pride and become more realistic on both parts.

Without functioning businesses and competition, consumers lose out and will pay a lot more for energy.

I look at this from a liberal consumer perspective rather than people with decades of expertise and people at the top of the field of the industry. It is clear from any layman that the current situation is unviable and my sympathies lie with those who face ruin, job losses and people who won't be able to afford to heat or eat.