Is the energy price cap worth it in the long run?

Thrugelmir

Cardew said:

payless said:

If a company wound up “whilst in profit”  but effectively pulling out of existing contracts that should leave the door open for claims by those impacted “ as creditors”

Surely you have read of directors - for all sorts of firms, not just energy -  paying themselves huge salaries and bonuses before the firm becomes insolvent.

A fine line that is well covered in insolvency law. 

Cardew

Thrugelmir said:

Cardew said:

payless said:

If a company wound up “whilst in profit”  but effectively pulling out of existing contracts that should leave the door open for claims by those impacted “ as creditors”

Surely you have read of directors - for all sorts of firms, not just energy -  paying themselves huge salaries and bonuses before the firm becomes insolvent.

A fine line that is well covered in insolvency law. 

I think you are missing the point.

This is what I stated.

'I wonder how many directors have wound up their companies whilst still in profit, but knowing that the Energy Price Cap will mean inevitable lossess.'

Obviously if the firm have creditors that they do not pay, then your 'fine line' comes into play.

I am talking about a firm that has been making profits and the directors paying themselves handsomely. However they see that they will inevitably start to make a loss with the imposition of the SVT; so they wind up the company while still in profit.

No firm is under obligation to continue trading.

Castle

wittynamegoeshere said:

I know that "nationalising" has traditionally been seen as left-wing or communist.  But this is exactly what the tory government did to Railtrack - they allowed it to fail then somehow claimed all its assets and named it Network Rail.  This was entirely nationalising, so I'm reassured that there is no great principle against it where it's the best way out of a mess.

No it was Labour who "renationalised" it.

Castle

wittynamegoeshere said:

Castle said:

Sorry yes, you're right.  I was thinking it was more recent than it was - 2002, under Tory Blair.  Not that they were white knights, they privatised massive chunks of education, the NHS and other bodies with all their PFI contracts - privatisation under the radar.

So there's no precedent for a Tory government renationalising then, sadly.  Hopefully they are starting to see that some of the previous privatisations were a mistake though, the tide does seem to have turned generally.

On the contrary, in the last 3 years the franchises for both London North Eastern Railway (LNER) and Northern Trains have become publically run by the Department of Trade.

wakeupalarm

Profits are privatised and losses are socialised, just like the banks or the rail companies.

It has been no risk for directors setting up these new energy companies, £100 for the Avro Energy directors, they take huge salaries, directors loans, and give loans to family businesses from the companies advance payments from customers.

When they go bust, the losses are passed on to all other consumers in the form of higher bills.
The losses should never have been passed on to consumers but its unfair to pass on losses to other energy companies.

The new energy companies should have paid several millions pound joining fee to a customer protection fund and then paid a proportionate fee for the number of customers they have every month in advance.

Yes, it would have prevented most of these new firms from starting up and selling to customers unless they had well financed backers but it would have prevented this mess we have ended up with and customers would not have paid the price for the business failure of these new energy companies.

alsa1

wakeupalarm said:

Profits are privatised and losses are socialised, just like the banks or the rail companies.

It has been no risk for directors setting up these new energy companies, £100 for the Avro Energy directors, they take huge salaries, directors loans, and give loans to family businesses from the companies advance payments from customers.

When they go bust, the losses are passed on to all other consumers in the form of higher bills.
The losses should never have been passed on to consumers but its unfair to pass on losses to other energy companies.

The new energy companies should have paid several millions pound joining fee to a customer protection fund and then paid a proportionate fee for the number of customers they have every month in advance.

Yes, it would have prevented most of these new firms from starting up and selling to customers unless they had well financed backers but it would have prevented this mess we have ended up with and customers would not have paid the price for the business failure of these new energy companies.

It just seems to have all the hallmarks of the banking crisis, yet the government seems asleep again. It will be far more damaging for them to hope it goes away, as they seem to be, only to overreact once a big supplier goes under in the winter months ahead. 

However I don’t think nationalisation is the answer either. In my experience government run entities are very stubborn and difficult to deal with. I have had a case with the Valuation office which is now 9 months in and they are completely unresponsive, and other public bodies are also not great when they get something wrong. 

I think they should just get rid of the cap now, and instead encourage energy efficiency by significantly increasing grants for more households.

spot1034

Former Ofgem boss Dermot Nolan making a bit of a fool of himself on Moneybox today by stating more than once that customers of suppliers who go bust will have their existing contracts honoured by the SOLR. (from 16.42)
https://www.bbc.co.uk/sounds/play/m0010n7k