Bulb to be Nationalised?

Ultrasonic

savers_united said:

Ultrasonic said

Also note my point above that consumers have made decisions to move to energy companies knowing that they would be protected if the companies failed. This protection can't just be removed without warning. We can discuss whether such protection should exist long term but it does right now and so there is zero debate to be had on customers not losing out when companies fail from my perspective.

Absolutely, I am talking longer term once the current crisis passes and we know what providers are still standing, in theory those left should be pretty resilient and well run / funded businesses. 


Ensuring that customer credit is not excessive it will also deter some of the practices we have seen where people's money was being used with no back up plan if the wholesale market soared. 

The other option is to do away with fixed DD and instead force all suppliers to accept as the default payment method variable DD based on each month's bill. So your getting charge each month for exactly what you use with no need for credit. 

Your point about people not being disciplined to use a savings account, these are adults. If they don't take care of their finances then again why should it be that we all have to pick up the pieces. I really don't see the issue in checking your account every now and then to keep an eye on the balance, if you can switch supplier surely you can keep your credit balance in check. 

It may sound cold, but it's not meant that way, it's the model I don't like and Ofgem have a big part to play here to ensure this crisis with companies falling like domino's is not repeated and whereby we all get loaded with the cost. 

Personally I don't see credit balances being accrued over summer to help fund bills over winter as a fundamental problem for those who may find it beneficial. I have a Santander 123 Lite account and so am very happy to overpay due to the cashback but if it wasn't for this I would choose to just pay for what I've actually used each month. I'm sure many would struggle with doing so though.

Better regulation and a more flexible or abolished price cap would get my personal vote for the way forward. And possibly a review of whether long term fixed price contracts remain viable.

newlywed

PegasusPJ said:

dbks said:

MWT said:

A little strange, but the article has been revised in the last few mins, the liabilities are now lower...

So if each of Bulb's customers were to be billed approx. £300, that would cover all Bulb's debts.

Customers could fund that one off payment in part or in full from their £50 referrers/referral credit they received (oftem much more)

I don't see why we, the taxpayer, should pick up the bill for this inevitable fallen pyramid scheme.

I never got £50, I just joined them because they were the cheapest green supplier.

Why should I pay for the way the market is linked to gas/petrol prices even for energy generated without either of those? 

I didn’t get any referrer fee either.

and all this talk of losing any credit…. I am on prepay and have topped up in case there is a time bulb goes bust and I can’t top up.  I can’t wfh with no electric because the meter ran out!

not everyone is on a smart meter and not everyone is on direct debit. Prepay is still a thing.

[Deleted User]

savers_united said:

Ultrasonic said

Also note my point above that consumers have made decisions to move to energy companies knowing that they would be protected if the companies failed. This protection can't just be removed without warning. We can discuss whether such protection should exist long term but it does right now and so there is zero debate to be had on customers not losing out when companies fail from my perspective.

Absolutely, I am talking longer term once the current crisis passes and we know what providers are still standing, in theory those left should be pretty resilient and well run / funded businesses. 


Ensuring that customer credit is not excessive it will also deter some of the practices we have seen where people's money was being used with no back up plan if the wholesale market soared. 

The other option is to do away with fixed DD and instead force all suppliers to accept as the default payment method variable DD based on each month's bill. So your getting charge each month for exactly what you use with no need for credit. 

Your point about people not being disciplined to use a savings account, these are adults. If they don't take care of their finances then again why should it be that we all have to pick up the pieces. I really don't see the issue in checking your account every now and then to keep an eye on the balance, if you can switch supplier surely you can keep your credit balance in check. 

It may sound cold, but it's not meant that way, it's the model I don't like and Ofgem have a big part to play here to ensure this crisis with companies falling like domino's is not repeated and whereby we all get loaded with the cost. 

How does paying monthly in arrears sit with the fact that suppliers have to pay their wholesalers in advance of supply?  Small suppliers would find it difficult to get credit and would incur high overdraft fees which, in turn, would result in higher energy costs. Sadly, consumers who in a Leeming-like way switch across to a small supplier on the basis of cost alone are part of the problem. No one foresaw the massive increase in gas prices nor did we foresee the timing or impact of Covid. How are suppliers supposed to hedge/insure for these unknowns? More regulation, will inevitably result in higher prices.

doodling

Hi,

My view is that the provision of credit should be separated from the provision of energy, just as it is in almost everything else.  The monthly direct debit thing is an artifact of history.

Assuming smart meters are successfully rolled out (!), energy suppliers should receive payment via direct debit on a weekly (I'd like to say daily but that might be too many transactions) basis for the energy actually used and if that isn't paid then the customer should be cut off within a short (e.g. 1 week) timescale.

Customers would have the option of either contracting directly with the energy supplier on the above basis, or going through a credit supplier who would offer the level billing / pre pay / whatever facilities that energy suppliers currently offer. Such credit suppliers would be regulated as finance institutions.

This would also externalise the costs of the social activities the energy suppliers carry out (e.g. managing those less able to pay) so that they are clear and can be directly funded (so I can guarantee that governments won't like this idea!).

There would be nothing to stop these credit suppliers from offering a broader "manage your money" service which aimed to level the costs of other outgoings.

tghe-retford

savers_united said:

Ultrasonic said

Also note my point above that consumers have made decisions to move to energy companies knowing that they would be protected if the companies failed. This protection can't just be removed without warning. We can discuss whether such protection should exist long term but it does right now and so there is zero debate to be had on customers not losing out when companies fail from my perspective.

Absolutely, I am talking longer term once the current crisis passes and we know what providers are still standing, in theory those left should be pretty resilient and well run / funded businesses. 


Ensuring that customer credit is not excessive it will also deter some of the practices we have seen where people's money was being used with no back up plan if the wholesale market soared. 

The other option is to do away with fixed DD and instead force all suppliers to accept as the default payment method variable DD based on each month's bill. So your getting charge each month for exactly what you use with no need for credit. 

Your point about people not being disciplined to use a savings account, these are adults. If they don't take care of their finances then again why should it be that we all have to pick up the pieces. I really don't see the issue in checking your account every now and then to keep an eye on the balance, if you can switch supplier surely you can keep your credit balance in check. 

It may sound cold, but it's not meant that way, it's the model I don't like and Ofgem have a big part to play here to ensure this crisis with companies falling like domino's is not repeated and whereby we all get loaded with the cost. 

I don't know of any other utility that requires everyone to pay-as-you-go. Take mobile phones, I can get unlimited everything for £16 a month (and it still allows ID Mobile to generate a profit because I am not making calls, texts and downloading 24/7). If I had to pay for each minute, each text and each MB of data every month and companies could not accrue credit (just like what happens with pay-as-you-go customers), £16 would not get me far. Pay-as-you-go charging levied every month would be a lot more expensive. In my example, my £16 a month bill would (on the cheapest equivalent PAYG model) cost £320.20! That's the reality of paying for what you use without the need for credit.

It's the same with water and sewage (two separate bills here unless you are on metered billing) and their payments do not change every month (unless you read and submit a meter reading every month) and telecom/broadband (same situation as with mobile telecoms).

When I looked at the options for Symbio, they did have the very variable billing system you stated. And it was a lot more expensive if I recall correctly. Even more so if you fail to be disciplined and give a meter reading at the end of every month.

Fixed billing brings certainty for both the consumer and the company. Consumers will become cautious because it will be a lot more expensive and companies will be in trouble if consumers lose much less of a commodity.

[Deleted User]

doodling said:

Hi,

My view is that the provision of credit should be separated from the provision of energy, just as it is in almost everything else.  The monthly direct debit thing is an artifact of history.

Assuming smart meters are successfully rolled out (!), energy suppliers should receive payment via direct debit on a weekly (I'd like to say daily but that might be too many transactions) basis for the energy actually used and if that isn't paid then the customer should be cut off within a short (e.g. 1 week) timescale.

Customers would have the option of either contracting directly with the energy supplier on the above basis, or going through a credit supplier who would offer the level billing / pre pay / whatever facilities that energy suppliers currently offer. Such credit suppliers would be regulated as finance institutions.

This would also externalise the costs of the social activities the energy suppliers carry out (e.g. managing those less able to pay) so that they are clear and can be directly funded (so I can guarantee that governments won't like this idea!).

There would be nothing to stop these credit suppliers from offering a broader "manage your money" service which aimed to level the costs of other outgoings.

You are in danger of making an already complicated system even more complicated. How would Ofgem regulate credit suppliers as they sit under the FCA? Would consumer energy credit balances be fully protected if the credit supplier goes bust? Yes, the domestic energy sector is in a mess but I would advocate a 'slowly slowly' process to change to avoid unintended consequences. We can all come up with clever ways of making things better: for example, suppliers might come up with a scheme whereby consumers pay for a certain amount of energy each month - in advance - at a set price. If the agreed amount is exceeded, then the supplier would charge for the extra energy that it has to purchase from the market. But is all these complexity needed?

Paying in arrears will never work for small suppliers. For example, Avro had 570k consumers. Let us assume that each consumer uses 3000kWhs of electricity per year at a wholesale price of 10p/kWh. To satisfy its contractual requirements, the supplier would have to buy in 570,000 x 3000 x .1 or £171Ms worth of wholesale electricity each year. If it allowed consumers to pay for what they used monthly in arrears  then they would have to have a continuous overdraft facility of £14.25M. For a new supplier with no credit history or a larger SME which is not making profits, the cost of paying for this amount of financial cover would be well above market rates. These additional costs would have to be passed on.

doodling

Hi,

My proposal reduces complexity. Ofgem manages energy supppy, the FCA manages financial institutions and the two activities are carried out by separate companies so no dual regulation. Managing customer's money is a financial activity and energy companies shouldn't be doing it.

Energy has historically been paid for quarterly in arrears. It is only in the last few decades that the distortions introduced by "fixed" monthly direct debits have arisen.

Energy supply is a high cost business with with huge turnovers and significant barriers to entry. A £15m overdraft should be nothing to an adequately funded new entrant and if it isn't then they aren't adequately funded (and likely to go bust in adverse market conditions, I wonder if I could find any recent examples?). Note that my proposal only requires the supplier to carry a week's worth of arrears (and I want it to be a day) so at most a quarter of your figure.

prowla

QrizB said:

prowla said:

if any of the companies are nationalised and continue to provide their preferential prices, then that won't be fair on customers of the ones which were allowed to go under.

No-one has suggested that? And Bulb don't have any preferential prices, only their variable rate which is at the cap.

I didn't say they had, but thanks anyway.

QrizB

doodling said:

Note that my proposal only requires the supplier to carry a week's worth of arrears (and I want it to be a day) so at most a quarter of your figure.

Even paying monthly, unless you (foolishly) have every customer pay on the same day of the month, you'll only need half-a-month's overdraft.

An energy supplier with 500k average dual-fuel customers (£600M turnover) should have no problem securing the necessary loan. (A small supplier like Neon Reef, with 50k electricity-only customers (£30M turnover), will only need to borrow £1.2M - that could be covered by a mortgage on the owner-directors' homes.) Of course the bank might want to see your business plan, at which point the idea of selling energy at less-than-cost price might not prove persuasive.

savers_united

Personally I don't see credit balances being accrued over summer to help fund bills over winter as a fundamental problem for those who may find it beneficial. I have a Santander 123 Lite account and so am very happy to overpay due to the cashback but if it wasn't for this I would choose to just pay for what I've actually used each month. I'm sure many would struggle with doing so though.

Better regulation and a more flexible or abolished price cap would get my personal vote for the way forward. And possibly a review of whether long term fixed price contracts remain viable.

Provided your supplier does not fold neither do I, but that is what we are seeing at the minute and when they fold the customer credit often goes with it. 
Ofgem have safeguarded customer credits (rightly so), but that cost in recovering the money owed is then spread amongst all energy customers through bill increases. Why should these companies be allowed to use customer money with an unsustainable model and when they go pop so does the customers credit. Due to Ofgem rules we all then have to pay for it. It just means that energy for all of us goes up and as we know the poorest in society get hit the worst by that increase. Its grossly unfair that we are all funding these risky business models.

With smart meters variable DD month to month is better longer term for a customer as they are less likely to fall into debt, it's Pay as you go so no big shock at end of winter when you realise your fixed monthly payments have not covered you, or having that new garden Spa added an extra £30 a month to your leccy bill that you had not accounted for. It allows you to keep on top of your spending.