Energy providers' business model

70sbudgie

A lot of the things you are unhappy about are actually imposed on the energy suppliers by the Government to protect consumers, not just in normal circumstances, but also from the extreme energy crisis that is affecting the whole world. Some of the energy suppliers that have disappeared have had their licenses revoked as it was determined that they weren't behaving as they should.

We are also now in a situation where many of the remaining energy suppliers are part of companies that also have generation assets. This may have slightly increased their ability to hedge against the rising energy prices and therefore not go bust. However, there is also regulation around the separation of suppliers and generators and it is illegal for a generator to sell it's supplier energy at a discounted price.

It is widely acknowledged that the current set up is no longer working particularly well under the new set of circumstances we currently find ourselves in. There is loads going on behind the scenes to try and make things better (smart metering is actually one of those things), but in the end, there aren't really that many people working in the energy sector and they are all human and all facing the same challenges as everyone else and there is only so much they can do to improve things. And big changes take time.

(I would suggest that the root cause of the issue is capitalism and that will be a difficult issue to solve. It also, probably isn't a discussion for this board.)

Miser1964

>I would suggest that the root cause of the issue is capitalism <

Please provide evidence that energy supply to the people is superior in the planned socialist economies of North Korea, Cuba, Venezuela, Laos etc.

MattMattMattUK

Robint said:

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.

That sounds like a total rant with very little connection to reality, the fact that you make up your own names for things does not help your case.

Robint said:

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

Unlikely the rational ones will, based on the content of your post, although the usual suspects will of course agree, as will likely a few short lived conspiracy theorists who seem to pop up to support these kind of posts.

Robint said:

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.

That would be your opinion, however legislation and regulation regards them as energy providers, I am not sure your opinion overrules that.

Robint said:

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

They do not, under the way regulation is structured they are not allowed to own power generation facilities, there is a separation of generation, network and supply, cross subsidy is not allowed, profit in the latter two is parts of the system is strictly regulated, with energy providers capped at 2%.

Robint said:

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

They buy on the futures markets, they buy on the spot markets, they engage in various business arrangements to secure supply.

Robint said:

They benefit from Government grants to push and install Smart Meters

They do not. The government, via Ofgem, require every home in the UK to be fitted with a smart meter, this is funded via the standing charge, though with some components of finance in place from the government.

Robint said:

They buy in any maintenance support consumers need for site problems

They have in-house teams directly employed, they sub-contract, they work with external companies, that is not unusual in any sector.

Robint said:

They use sophisticated aggressive accounting software for billing customers

I would not call it sophisticated, most of it is pretty basic and it has been a struggle to cope with the demands of the EBSS because the systems are far from sophisticated. How software can be aggressive is anyone's guess, but one thing we generally find on here is that many people misunderstand the billing process, combined with the fact that they fail to comprehend the extend of the cost increases, meaning that they deem energy providers "aggressive" when they want bills to be paid.

Robint said:

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) 

Their services being the provision of energy, people need that, people sign up for it, the rest of that sentence is inaccurate as well.

Robint said:

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

They have oversight, however what the Ofgem cannot do is stop a company going bust when the government forces them to sell their provision below cost, any company in that situation will always go bust.

Robint said:

Sorry this pitch has been so long but I hope it makes makes a serious cause for concern.  

It is not a pitch, it is a rant.

Robint said:
We humble consumers are helpless against this Corporate greed. 

Making a profit is not "corporate greed", the energy suppliers make a maximum of 2%, over the last two years most of them have made a loss as the government forced them to sell below cost.

Robint said:

Remember Gas, Electric, Water/Sewage were all once responsible Public Utilities essential for daily life

They were once publicly owned, they are all essential for daily life, they were very often not responsible. The government of the day was quite happy to take the private money when selling them off, they operate in heavily regulated sectors, they are far more efficient than they were under public ownership. Whilst I would like large government investment in energy generation that involves funding it from taxation and most people seem incredibly upset at the idea of having to pay enough taxes to fund the kind of investment needed. 

MikeJXE

Miser1964 said:

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.

I am not disputing OVO have the most sophisticated billing software of the big six but tell me what are they lacking ?

I have been with OVO for 2 months, moved over from SSE, not my choice. Their website for my account is brilliant. 

OVO have my billing history from SSE for the last 2 years that estimate my usage to be about 850kWh for electricity and 5600kwh for gas. 

Pray tell why as they inform me I am a new customer and must be evaluated as an average user about 2900kWh electric and 24,000kWh gas 

That to me stinks and is purely to increase my Direct Debit

[Deleted User]

Miser1964 said:

>I would suggest that the root cause of the issue is capitalism <

Please provide evidence that energy supply to the people is superior in the planned socialist economies of North Korea, Cuba, Venezuela, Laos etc.

You forgot communism. Look at how that is working out for many of the Russian oligarchs. Stairs, windows and private aircraft are best avoided.

MattMattMattUK

70sbudgie said:

(I would suggest that the root cause of the issue is capitalism and that will be a difficult issue to solve. It also, probably isn't a discussion for this board.)

The root cause of the issue is that the British public are not prepared to pay the required level of taxation needed to fund the provision of services and a properly functioning state. The bottom two thirds of earners in the UK have the lowest level of income taxation in the EU*, we have the lowest amount of tax collected as a percentage of GDP of the major European economies, we have the lowest percentage of net contributors of any major economy, any of the G7, G20, OECD etc. Our problem is not capitalism, it is the lack of people who pay enough tax.

*Oh and for reference, the top third of earners have the fifth highest rate of income taxation in the EU.

Robint

[Deleted User] said:

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

 

I stand corrected Dolor, thnx.  Now Concerned browsers may care to scan thru the ofgem position as of 22/5/22 having got their fingers badly burned for being too cosy and compliant prior to the crash affecting 6 million people.

Lets us know if you feel this doc gives you any confidence when you look thru the bureau-speak clap trap. 

Suppliers aka Billing Service Providers will use their best endeavors to ensure that they make loadsa money but if they go bust their problem will be dumped a competitor who will be paid to take over the poor consumers (conned in the first place).  The recovery costs will be Mutualised (hands up who knows what that means).  It means that the insolvency costs will be added to the standing charge of the new supplier BSP.

So guys you pick a dodgy snake oil Supplier BSP who fails you get screwed anyway but you keep your credit balance which is handed to the new guy - Good stuff?

IMHO Dont run up any credit balance with these BSPs.  Pay on Demand with a credit card.  When they go bust you havent lost anything.

These BSPs are gambling with billions of your money on the Commodities Exchange.

Dont you think your have a right to know so much more about these flashy BSPs  after all its your basic life support here guys.

Small businesses are in a far worse predicament given their 4 fold increases and no Government cap or support

GingerTim

Robint said:

Dolor said:

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

 

 

IMHO Dont run up any credit balance with these BSPs.  Pay on Demand with a credit card.  When they go bust you havent lost anything.

But you will have paid about 8-9% more for your energy from the majority of suppliers.

MattMattMattUK

Robint said:

Dolor said:

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

 

I stand corrected Dolor, thnx.  Now Concerned browsers may care to scan thru the ofgem position as of 22/5/22 having got their fingers badly burned for being too cosy and compliant prior to the crash affecting 6 million people.

Lets us know if you feel this doc gives you any confidence when you look thru the bureau-speak clap trap. 

Suppliers aka Billing Service Providers will use their best endeavors to ensure that they make loadsa money but if they go bust their problem will be dumped a competitor who will be paid to take over the poor consumers (conned in the first place).  The recovery costs will be Mutualised (hands up who knows what that means).  It means that the insolvency costs will be added to the standing charge of the new supplier BSP.

So guys you pick a dodgy snake oil Supplier BSP who fails you get screwed anyway but you keep your credit balance which is handed to the new guy - Good stuff?

IMHO Dont run up any credit balance with these BSPs.  Pay on Demand with a credit card.  When they go bust you havent lost anything.

These BSPs are gambling with billions of your money on the Commodities Exchange.

Dont you think your have a right to know so much more about these flashy BSPs  after all its your basic life support here guys.

Small businesses are in a far worse predicament given their 4 fold increases and no Government cap or support

Should a supplier go bust consumers will not lose anything as balances are covered by the SoLR process. However if you pay by credit card you will have lost out as you will have been choosing to pay 7.5-9% more for your energy than people paying by Direct Debit.

Robint

MikeJXE said:

Miser1964 said:

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.

I am not disputing OVO have the most sophisticated billing software of the big six but tell me what are they lacking ?

I have been with OVO for 2 months, moved over from SSE, not my choice. Their website for my account is brilliant. 

OVO have my billing history from SSE for the last 2 years that estimate my usage to be about 850kWh for electricity and 5600kwh for gas. 

Pray tell why as they inform me I am a new customer and must be evaluated as an average user about 2900kWh electric and 24,000kWh gas 

That to me stinks and is purely to increase my Direct Debit

Thanx Mikejxe

Someone else is getting my point

Sorry if I come across as a rant, I dont mince words  and there are many issues involved.  There will be many who will just jog along and pay up.  Your choice. Stay awesome.

IMHO Dont sign up to monthly direct debits controlled by them so dont give these BSPs your money to hold in credit.  Would you put your life savings in these dodgy wheeler dealers?