Energy providers' business model

Robint

To MSE Experts - please help

I am sure there are numerous financial experts here who may be kind enough to help naive and vulnerable consumers in understanding the workings of Energy Providers, with all the attendant hype around Smart Meters and Direct Debit Billing.  Without laboring the point, there is already a  huge volume of public dissatisfaction surrounding their quality of service. This is compounded by the frightening collapse of so many of shady enterprises which affected 6 million people who had to be bailed out by the Tax Payer.  It transpired that Ofgem had no power to oversee the financial conduct of said Energy Providers (which I prefer to call Billing Service Providers which I feel is more accurate).

I feel that the Public has a right to more formal protection as provided, for example, by the Financial Services Regulator, rather than the adhoc,  panic-driven recent Government intervention. To this end we need to know the substances of these BSP's who often hide behind opaque Offshore jurisdictions. Who are the shareholders and financiers.  What consumer protections are in place?  All that due diligent content should be open to Public scrutiny yet it seems mostly clouded in mystery.

The scandal has been exacerbated recently by the dramatic 3-4 fold increase in energy charges together with the ending of many fixed price contracts and enforced changeover to new BSP's.  These generally insist on Smart Meters and Monthly Direct Debits (with rates set by the BSP's).  This is resulting in Consumers becoming alarmed, not only about their bills (unavoidable presently) but at the size of credit balances built up in favour of the BSP's (£500 and even £1000+) for domestic consumers.  These large cash balances are not ring fenced as in banks.

For years. many consumers will have been paying their bills by quarterly Direct Debit.  They are now forced to change to a new BSP who will change you to a punitive Monthly Payment on Demand scheme by credit card supported by manual readings if you dont have a Smart Meter. There is also a strong pressure to sign up for a Monthly Direct Debit payment plan scheme where the rate is set and varied by the BSP.  This latter method has raised a storm of complaints - as above.

The Billing Cos stoutly refuse to accept the standard practice of Monthly Variable Direct Debit - where you pay for what you have used (on the principle you have provided a manual reading or have a Smart Meter).  All manner of excuses are used for not providing this (very basic and obvious) service.  I believe this is wholly unacceptable and BSP's must be forced to comply with consumer wishes.  This will need heavy duty representation as it is obvious how many billions in cash flow are at stake and unprotected.

I would like this forum to concur with my lay man's  opinion of Billing Cos as follows;

There are many such Billing Service Providers, its not a new concept eg credit cards etc

These Energy Providers are masquerading as Billing Service Providers.

They don't have tangible assets, other than Office equipment, unlike Energy Producers who have Power Stations, Wind Farms, Gas Field etc.

They buy energy supplies in the market place in future contracts and resell to consumers

They benefit from Government grants to push and install Smart Meters

They buy in any maintenance support consumers need for site problems

They use sophisticated aggressive accounting software for billing customers

They promote and support their services with lobbyists, aggressive PR and media presence playing the Green Zero Carbon cards (like a Charity does for Public sympathy) 

Ofgem have no oversight into their financial probity in the same way the Charities Commissioner is totally ineffectual with the rampant abuse of Charitable status of organisations

Sorry this pitch has been so long but I hope it makes makes a serious cause for concern.  We humble consumers are helpless against this Corporate greed. Remember Gas, Electric, Water/Sewage were all once responsible Public Utilities essential for daily life

Robin

jimjames

You seem to have mixed up a list of facts with a few rants about providers. I don't think anyone would suggest that EDF have aggressive billing software when it barely seems to work!

BTW the public do have formal protection. All credit balances are protected so customers with that company will not lose their money.

Mstty

Is the answer 42?

Merlin139

If its not 42, Don't Panic!

Robint

I am trying to be general as my rants concern these Billing Service Providers as a whole, some dozen or so currently survived. Ive got a serious issue with one of the top BSPs but dont want to degenerate into specifics.  These BSP's are still out of control and when things go wrong the poor consumer has very poor response and little redress.

Robint

jimjames said:

!

BTW the public do have formal protection. All credit balances are protected so customers with that company will not lose their money.

Can you show where this is enshrined.  With the current state of the market everythings up in the air

BTW my current BSP has trashed me for raising issues about its use of the Direct Debit system - I thought they had to publish their TnC's for using the system

Know anything about this?

[Deleted User]

Robint said:

jimjames said:

!

BTW the public do have formal protection. All credit balances are protected so customers with that company will not lose their money.

Can you show where this is enshrined.  With the current state of the market everythings up in the air

BTW my current BSP has trashed me for raising issues about its use of the Direct Debit system - I thought they had to publish their TnC's for using the system

Know anything about this?

Consumer credit balances are 100% protected by Ofgem. In the event of a supplier failure, all credit balances are honoured by the Supplier of Last Resort (SOLR) . In turn, the SOLR is paid a support payment which is recovered from all consumers via a consumer levy which is applied to the daily standing charge.

MikeJXE

Robint you have opened a can of worms, well said but many on here will not agree with you. As far as I am concerned the energy companies business model it to take as much money away from you as possible. 

I was paying £91 on direct debit that was and is covering my bills. That has now increased to £153 and I am further in credit. 

[Deleted User]

Ofgem have no oversight into their financial probity in the same way the Charities Commissioner is totally ineffectual with the rampant abuse of Charitable status of organisations

Wrong - if you going to make claims then a bit of research might avoid a bit of embarrassment. Ofgem has a legal right to ask suppliers for financial information. These obligations are stated in the Standard Licence Conditions and covered in a number of supplementary documents:

https://www.ofgem.gov.uk/sites/default/files/2022-05/Guidance%20on%20the%20Operational%20Capability%20and%20Financial%20Responsibility%20principles.pdf

 

Miser1964

The 'suppliers' live or die by juggling long/medium term contracts with the upstream generators and the short contracts they strike with retail consumers.

Those which have gone bust didn't have the arbitrage skills and/or software do do this and were caught in a liquidity crunch when wholesale prices rocketed.

Like the virtual network providers (e.g. GiffGaff) having the software to managing new accounts and billing is key. OVO appear to have the most sophisticated billing software of the 'big six'. OVO's Stephen Fitzpatrick has also played the 'green' card of course, but he's only exploited the opportunity that virtue signalling politicians presented by jumping aboard the climate change scam.

[Deleted User]

MikeJXE said:

Robint you have opened a can of worms, well said but many on here will not agree with you. As far as I am concerned the energy companies business model it to take as much money away from you as possible. 

I was paying £91 on direct debit that was and is covering my bills. That has now increased to £153 and I am further in credit. 

It might surprise you that in the last DD review undertaken by Ofgem that Octopus was criticised for setting some monthly payments too low. The suppliers sit between a ‘rock and a hard place’: they are under the cosh from Ofgem for allowing customers to get into debt, and criticised by consumers for not setting a DD that exactly matches consumption with the tariff. Often the call is ‘I will be using less energy this year’ suggesting that suppliers have Mystic Meg on their team.

I would bet a few £s that some of those switching to paying bills on demand (often complaining of high DD payments with little evidence to support their claim) are just kicking the proverbial energy bill can down the road.