Is 8.1 Billion too much for energy firms to hold of customer money?

the_lunatic_is_in_my_head

ArbitraryRandom said:

the_lunatic_is_in_my_head said:

Is anybody suggesting this method of payment shouldn't be available anyway? 


Apparently if we don't build up credit the suppliers will be in debt or we'll have higher charges but @QrizB or @[Deleted User] didn't answer the question regarding how suppliers pay for their energy in advance, so I guess we'll never know. 

Yes, a few people on this thread (and others) have suggested that suppliers should not be able to hold balances and that the default should be variable DD or pre-pay. 

I'm not either of the posters you mention, but suppliers use customer balances as revenue - so use them to fund purchasing energy futures. Hence the suggestion that if they were not permitted to use the funds this way (because the funds were ring-fenced or customers could not annualise their payments) then suppliers would need to either pay the spot price or borrow the funds - both of which would lead to an increase in costs (either the interest on the loan or the rate paid). 

All I'm asking for the source of this information? 

I don't doubt that they use our money but it's not our job to bank roll private companies, or more importantly it shouldn't be suggested people should do so otherwise the suppliers will be in debt.

British Gas, as an example, have been privatised for 27 years, they've had plenty of time to build relationships with the wholesale market and build up cashflow to run their business. 

Qyburn

Netexporter said:

This also gives them a few extra months to dry out, if needed.

No need with these. Kiln-dried to a guaranteed maximum of 15% moisture. The latest lot were so dry I couldn't get a reading on the moisture meter.

Just out of interest who's the producer? All the KD suppliers I've seen just guarantee 20% or less, so they benefit from faster production but the end product is no different from air dried.

Anecdotally one of the KD producers whose campaigning brought about the "Ready to Burn" standard, was arguing for 16% rather than 20%.

Netexporter

Qyburn said:

Netexporter said:

This also gives them a few extra months to dry out, if needed.

No need with these. Kiln-dried to a guaranteed maximum of 15% moisture. The latest lot were so dry I couldn't get a reading on the moisture meter.

Just out of interest who's the producer? All the KD suppliers I've seen just guarantee 20% or less, so they benefit from faster production but the end product is no different from air dried.

Anecdotally one of the KD producers whose campaigning brought about the "Ready to Burn" standard, was arguing for 16% rather than 20%.

Certainly Wood.

ArbitraryRandom

the_lunatic_is_in_my_head said:

ArbitraryRandom said:

the_lunatic_is_in_my_head said:

Is anybody suggesting this method of payment shouldn't be available anyway? 


Apparently if we don't build up credit the suppliers will be in debt or we'll have higher charges but @QrizB or @[Deleted User] didn't answer the question regarding how suppliers pay for their energy in advance, so I guess we'll never know. 

Yes, a few people on this thread (and others) have suggested that suppliers should not be able to hold balances and that the default should be variable DD or pre-pay. 

I'm not either of the posters you mention, but suppliers use customer balances as revenue - so use them to fund purchasing energy futures. Hence the suggestion that if they were not permitted to use the funds this way (because the funds were ring-fenced or customers could not annualise their payments) then suppliers would need to either pay the spot price or borrow the funds - both of which would lead to an increase in costs (either the interest on the loan or the rate paid). 

All I'm asking for the source of this information? 

Let me google that for you... 

For suppliers, credit balances can be seen as a form of revenue. That is because if direct debits have been set correctly, a customer’s credit balance is money that will eventually be owed to the energy supplier. Until the credit is needed to cover higher bills later in the year it is available as a form of working capital (that is, capital used to meet short-term obligations). Credit balances can, for example, be used to cover expenses such as the forward purchasing of energy. Without this, suppliers would have to seek capital on the commercial markets from banks and investors.

https://researchbriefings.files.parliament.uk/documents/CDP-2023-0040/CDP-2023-0040.pdf

You may also wish to consider that energy companies are kept on tight margins (limited to less than 2% profits), and have recently been forced to sell energy significantly below cost... so you can guarantee that if they are required to borrow the money it's not them that will be paying the extra cost. 

the_lunatic_is_in_my_head

ArbitraryRandom said:

the_lunatic_is_in_my_head said:

ArbitraryRandom said:

the_lunatic_is_in_my_head said:

Is anybody suggesting this method of payment shouldn't be available anyway? 


Apparently if we don't build up credit the suppliers will be in debt or we'll have higher charges but @QrizB or @[Deleted User] didn't answer the question regarding how suppliers pay for their energy in advance, so I guess we'll never know. 

Yes, a few people on this thread (and others) have suggested that suppliers should not be able to hold balances and that the default should be variable DD or pre-pay. 

I'm not either of the posters you mention, but suppliers use customer balances as revenue - so use them to fund purchasing energy futures. Hence the suggestion that if they were not permitted to use the funds this way (because the funds were ring-fenced or customers could not annualise their payments) then suppliers would need to either pay the spot price or borrow the funds - both of which would lead to an increase in costs (either the interest on the loan or the rate paid). 

All I'm asking for the source of this information? 

Let me google that for you... 

For suppliers, credit balances can be seen as a form of revenue. That is because if direct debits have been set correctly, a customer’s credit balance is money that will eventually be owed to the energy supplier. Until the credit is needed to cover higher bills later in the year it is available as a form of working capital (that is, capital used to meet short-term obligations). Credit balances can, for example, be used to cover expenses such as the forward purchasing of energy. Without this, suppliers would have to seek capital on the commercial markets from banks and investors.

https://researchbriefings.files.parliament.uk/documents/CDP-2023-0040/CDP-2023-0040.pdf

You may also wish to consider that energy companies are kept on tight margins (limited to less than 2% profits), and have recently been forced to sell energy significantly below cost... so you can guarantee that if they are required to borrow the money it's not them that will be paying the extra cost. 

I understand it can be used for that purpose, the original question was is it or do supply companies not have the option of one form or another of credit, or have the general cash flow from years of running a business. 

The inferred idea was that without the credit balance they'd be in trouble and get in debt, I don't buy it. Octopus are blowing through money, they raise it through investment. 

I understand the tight margins but it doesn't have any relevance (other than the misconception that some have that the supply companies are making vast profits). 

ArbitraryRandom

What you're asking for is details of the accounts and business practices of the various companies - and I'm sure you could get at least some information via either their public filings or by contacting them each individually, as it's very likely the practices of individual businesses varies. 

One of the reasons for the crisis last year was the number of suppliers in the market who didn't have significant reserves, and couldn't access finance - but again, accessing 'one form or another of credit' isn't something I'd consider a good things for customers. 

dealyboy

So credit balances are used and allowed to be used by suppliers for futures, it is therefore in their interest to have fixed DDs with inflated annual estimates. The majority of customers are happy to pay up front for the energy estimated by their supplier, they consider it's in their interests. I'm in a minority.

If it's a free and informed choice to have either monthly fixed DD or monthly variable DD then I'm a monkey's uncle.

I like to pay for a commodity at the best price when I use it. I do not consider subscriptions, insurances or annual licences where people pay annually in advance or higher charges by paying monthly in advance, to be commodities.

subjecttocontract

Qyburn said:

QrizB said:

Netexporter said:

I bought my logs in July, to get the summer discount (and two free boxes of fire-lighters).

This also gives them a few extra months to dry out, if needed.

Bought in stuff should be ready to burn, isn't that a legal requirement nowadays? I still prefer to give mine a few Summer months as well. From green I give it two Summers.

I have never bought logs for my wood burner......it's one of the advantages of backing onto 10 acres of woodland.

ArbitraryRandom

dealyboy said:

So credit balances are used and allowed to be used by suppliers for futures, it is therefore in their interest to have fixed DDs with inflated annual estimates. The majority of customers are happy to pay up front for the energy estimated by their supplier, they consider it's in their interests. I'm in a minority.

Again, annual estimates are only inflated if customers accept them as such.

While some customers may have difficulties (especially when their usage is erratic or they have made recent changes to their home which will impact their future energy use), that's not the norm - at least based on my experiences and the majority of what I read on here. More often than not the problem boils down to people not knowing what they use or what their DD should be for their use - so not being able give a reason for the reduction other than 'it feels too high'. 

Some suppliers are certainly better than others, so if someone is having a problem then I'd recommend considering changing suppliers rather than payment methods... in my experience a supplier that is unwilling to review DD amounts is a supplier who will be difficult if there are ever any other problems. 

Grumpy_chap

the_lunatic_is_in_my_head said:

I wonder how people will feel if gets very bad and one of the bigger suppliers failed. 

Are there any smaller suppliers still standing?

If EDF failed, I would be dancing in the street.  I guess my "happy day" is very unlikely to come around as the French Government would bail them out before they failed.

ArbitraryRandom said:

I'd recommend considering changing suppliers
a supplier who will be difficult if there are ever any other problems. 

Easier said than done.
I never wanted to be with EDF but they stole my custom as SoLR.
They provide the most appalling customer service.
They block every attempt to move to another supplier.
Being with EDF is most definitely the last resort.
It is about time the regulator forced these suppliers to allow customers to leave.