Millions of taxpayers cash to keep Bulb going

ad1927

I am sad that Bulb are in this mess, I was with them 2 years ago and they were a good company.  I never got the £50 refer a friend though, always felt a bit uncouth to beg strangers to click my link.  

The one impact with this is that Bulb are a green energy firm, so the energy was "technically" green.  

If the Government are being asked to bail out energy firms, then I think we will see, sooner rather than later, an end to the price caps.  They will wait for the NI rise to settle into people's psyche as being "a normal tax again" before they do this though.  

The market has failed because of the price caps put in place.  No-one expected gas prices to hit £3 a therm at the time the price caps were introduced (61p a therm or thereabouts).  No-one expected banks to fail in 2008 either.  And no-one expected a global pandemic.  Even though all of these things were possible, it was a case of "this is good, it may not always be this good, but we will surely know when it is about to get bad, and we'll have time to react".  Nope.  The next "disaster" will be equally shocking, but entirely plannable for.  

Government policy worldwide is to act on the now.  No lessons learnt.

Rich2808

pecuniam_hominem said:

Rich2808 said:

pecuniam_hominem said:

Rich2808 said:

emmajones1976 said:

oliverbrown said:

emmajones1976 said:

So your theory is that they would do that to 1.7m people, most of which would have paid their bills on time, if the worst came to the worst?

Who is scaremongering now?

Not me, read back to see who first brought this into the discussion. 

The issue doesn't arise because the Government has provided a bailout to keep Bulb going and supplying their customers.

If the Government had not Bulb would have ceased trading - as it essentially had run out of cash and its bankers weren't prepared to keep it going - and those 1.7 million households would have no supplier. And yes - that could have meant supplies cut off.

The whole point - which you seem again to be missing - is that this issue will not arise and no one will be cut off because the Government has stepped in to bailout the company and keep those customers supplied with gas and electricity.

Stop saying people would be cut off. If the government hadn't stepped in and Bulb went bust, people still wouldn't be cut off. No one at the national grid is just going to start pressing buttons to shut things down.

Stop scaremongering.

Its an entirely academic discussion - as the bailout has occurred!

Of course if the market was going to deliver a solution to avoid the situation you are concerned about - why does the taxpayer need to provide any bailout? Presumably the market would just keep supplying Bulb customers for free indefinitely (as Bulb wouldn't exist to pay them) - because they are nice charitable caring people of course?

No one is ever going to be cut off - not because of the nice caring sharing suppliers but because the Government will never let it happen. That is why they have stepped in - because the free market has failed!

The free market failed? How on earth is a government price restriction an example of a free market?

Honestly, did you think about that before you typed it out?

I was going to reply - but I couldn't have put it better than FeralHog did in the next post.

Markets are regulated to protect consumers and workers and prevent their exploitation. 

If the perfectly free market applied kids would still be being sent up chimneys! 

EssexHebridean

Rich2808 said:

I was going to reply - but I couldn't have put it better than FeralHog did in the next post.

Markets are regulated to protect consumers and workers and prevent their exploitation. 

If the perfectly free market applied kids would still be being sent up chimneys! 

Wait what, we're not meant to be doing that any more? Oh bug.....  

Bulb DID use to be a decent company to be with - but their principles and ethos meant that if prices rose they were only ever going to go one way - down the pan. And when they ran into trouble, the first thing they did was to try to use customer's money to bail them out - fine if the customer didn't really understand what they used and just meekly accepted a vastly increased DD, but more problematic when they fought back because they knew the amount they were being asked for was wrong.  I did get several referral bonuses from them - on all occasions because people knew we were with them, wanted to switch themselves and knew that because of the way it worked they to would make a saving with a bill credit, so asked if we would refer them. As far as I know all of those referrals (3) have now moved elsewhere. 

ihatetrump

Bulb in their 2020 accounts reflected a gross margin of £177M (11.6%) but with £236M of administrative expenses, it was always going to be tough - although better than the year before with an £8M (less than 1%) margin and £136M of administrative expenses.

£62M of the admin expenses (£57M in 2019) were spent on customer acquisitions and marketing. In 2020 they increased their customer base by 600,000 - so it cost them £103 for each and every additional customer - much more expensive than in 2019 when it cost them £70 for each customer they added - and they added over 800,000.

Bulb spent £120M over two years to buy over 1.4 Million customers (82% of their customer base) and in the process took a huge slice out of their already wafer thin margins - quite a risky growth strategy and probably one that the shareholders and directors now regret. 
 

IanManc

Deleted_User said:

pecuniam_hominem said:

The free market failed? How on earth is a government price restriction an example of a free market?

The perfectly free market only exists in economists' minds. All markets have rules. The market, as it actually exists in energy supply, has failed.

And it certainly wouldn't work better with lighter regulation.

The market hasn't "failed". When the price cap was introduced the market had been operating reasonably successfully for years, but the price cap has stopped the market from operating and effectively ended it, because it artificially forces sellers to sell energy to buyers on variable tariffs at below wholesale costs

You cannot successfully impose a cap on output prices if you do not have some form of control over input prices. That is simple economics, and is something that the government was warned about before they stole the policy from the Labour Party and introduced it.

Or to put it simply, the market hasn't failed - the government has destroyed it.

oliverbrown

IanManc said:

Or to put it simply, the market hasn't failed - the government has destroyed it.

I wonder if there is any scope for directors of failed companies to sue the goverment. 

ihatetrump

The energy price cap was introduced in January 2019 (the prepayment meter cap was introduced in April 2017) - and yes it's easy to be a 'Monday morning Quarterback' but here's what the Bulb Directors said in the 2020 report which was filed in March 2021:


They neglected to consider the impact of the price cap (love it or hate it,) some 2 years later in their report filing - it's been a fact of life in one form or another for over 4.5 years - they understand or should have understood how wholesale energy prices move (albeit maybe not to the unprecedented levels now seen) and how hedging/forward purchasing can soften the impact of price increases.

Their 'hedging' policy was to buy on a rolling four month basis (as per their 2019 accounts) - maybe just not forward looking enough to cover an entire winter.

If they'd spent some of the £120M on hedging instead of spending it on buying in customers, maybe they'd now be a lot better placed to weather the storm.