OFGEM Announcement - Is That Even Legal?

24

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  • JSHarris
    JSHarris Posts: 374 Forumite
    First Post Name Dropper
    edited 19 December 2023 at 5:44PM
    One significant problem was that too many very poorly run companies were allowed to start up, make unrealistic offers to customers and then (rather unsurprisingly) they went bust, leaving others to carry the can for their incompetence.  Not sure what the current tally of failed energy suppliers is, must be somewhere around 20 over the past few years.
    The behaviour of these failed companies is reminiscent of the lack of regulation in the financial sector years ago, when there were "loads o'money" chancers inventing unsustainable investment products and reaping massive rewards.  They were chancers, just like many of the now-defunct energy suppliers.  Seems we didn't learn the lesson properly back then.
  • JSHarris said:
    One significant problem was that too many very poorly run companies were allowed to start up, make unrealistic offers to customers and then (rather unsurprisingly) they went bust, leaving others to carry the can for their incompetence.  Not sure what the current tally of failed energy suppliers is, must be somewhere around 20 over the past few years.
    The behaviour of these failed companies is reminiscent of the lack of regulation in the financial sector years ago, when there were "loads o'money" chancers inventing unsustainable investment products and reaping massive rewards.  They were chancers, just like many of the now-defunct energy suppliers.  Seems we didn't learn the lesson properly back then.
    Learn a lesson?!  That's not something we* do in this country, only say as a platitude before continuing with exactly the same bad attitudes and judgement as before.      [/moderate exaggeration for comedic effect]

    *By which I of course mean the people in charge and institutions in power


  • JSHarris
    JSHarris Posts: 374 Forumite
    First Post Name Dropper
    edited 19 December 2023 at 6:55PM
    JSHarris said:
    One significant problem was that too many very poorly run companies were allowed to start up, make unrealistic offers to customers and then (rather unsurprisingly) they went bust, leaving others to carry the can for their incompetence.  Not sure what the current tally of failed energy suppliers is, must be somewhere around 20 over the past few years.
    The behaviour of these failed companies is reminiscent of the lack of regulation in the financial sector years ago, when there were "loads o'money" chancers inventing unsustainable investment products and reaping massive rewards.  They were chancers, just like many of the now-defunct energy suppliers.  Seems we didn't learn the lesson properly back then.
    Learn a lesson?!  That's not something we* do in this country, only say as a platitude before continuing with exactly the same bad attitudes and judgement as before.      [/moderate exaggeration for comedic effect]

    *By which I of course mean the people in charge and institutions in power



    It's still shocking, though, isn't it?
    It's not rocket science to  do a proper risk assessment of a business model and develop risk mitigation measures that are reasonably robust.  Octopus were one of that group of new entrants to the market, one of the few that have survived and prospered.  They clearly understood that they needed to manage the risks carefully, and seem to have done so by a mix of robust business practices plus diversification so they were not reliant on a single income stream.
    The thing that annoys me is that I will happily bet that the chancers that started many of these failed suppliers came out on top when they went bust, retaining the income, bonuses and pensions accrued during the time they mismanaged their businesses.  I doubt any of them are in the lower income group now, paying out a disproportionate amount of their income to fund the debts they left behind, thanks to the joys of limited liability.
  • QrizB
    QrizB Posts: 13,822 Forumite
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    JSHarris said:
    It's not rocket science to  do a proper risk assessment of a business model and develop risk mitigation measures that are reasonably robust.
    You're assuming that the back-bedroom energy suppliers were looking to build an enduring business, rather than get-rich-quick by cutting corners and taking risks. "Move fast and break things" was (is) the tech bros' slogan.
    JSHarris said:
    The thing that annoys me is that I will happily bet that the chancers that started many of these failed suppliers came out on top when they went bust, retaining the income, bonuses and pensions accrued during the time they mismanaged their businesses.
    You and most of the other energy board users.
    See for exmple this thread.

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    Taking a break, hope to be back eventually.
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  • JSHarris
    JSHarris Posts: 374 Forumite
    First Post Name Dropper
    edited 19 December 2023 at 7:50PM
    Perhaps I'm too much of an idealist, but my view is that services that are pretty much essential to life (health care, water, energy supplies to keep warm in winter, etc) should have some degree of protection from exploitation by those selfish individuals only out to make a quick buck.  I'm ashamed to say that back in the 1980's I thought that privatisation would get rid of the inefficiency and reluctance to improve public utilities.  I was wrong, very, very wrong, but not for those reasons.  I hadn't appreciated the extent to which greed would drive amoral behaviour.  The first hint of this came with the impact of deregulation of the banking sector.  The extreme levels of greed and selfishness we saw develop very quickly then should have served as a warning that there was a need for control if millions of people weren't to be robbed blind.
    Although I'm not a fan of public ownership, because I still have strong memories of just how inefficiently the old electricity boards operated (and I taught a lot of their apprentices years ago and saw this first hand), there is a valid argument to be made for integrating the electricity supply industry, getting rid of the multiple layers than just add cost for no benefit, and reinventing electricity boards as properly regulated, not for profit, public services, driven by the key requirement that they must strive to provide high standards of service combined with fair pricing for all.
    Interesting to look around at regions or adjacent countries that didn't go down the extreme privatisation route.  We spend time in Ireland and there they still have an integrated supply system mostly run by ESB.  Ireland also has better (in my view) electrical safety standards then we do, and has battled with renewing and updating a pretty tired and limited network far better than we have in the UK.  Their prices aren't significantly higher than here, and they have a far simpler range of tariffs that are a lot easier for consumers to understand, in my view.  Proves (in my view) that state ownership can work, if properly managed (and the key is those last two words).
  • SAC2334
    SAC2334 Posts: 760 Forumite
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    Hoenir said:
    dave22 said:
    Surely it's the companies duty to recover debt from those bad debtors. 
    Any business is the same. Bad debt is unrecoverable. Written off. Good customers have always paid for those that don't pay up. 

    These days many people want a free lunch. Stuff anybody else. 
    Bad debt is recoverable .Suppliers have been recovering losses and debts for years since prepayment meters were installed. They have to take a little more care in who they fit a prepayment to but no problems at all in fitting prepay meters where they have to get a warrent to enter and fit . The warrant gets charged to the occupier along with locksmiths costs 
    There is so much meter tampering going off that it would be hopeless if they just allowed them to steal 1000 s of pounds worth of energy without installing new meters in smart prepay mode to collect a weekly amount based on estimates of what they have lost .
    The most debt I have seen owing on a meter is £6000 on a gas meter. Occupier who stole that amount of gas never paid it back though and just moved out to another rental place .
  • SAC2334 said:
    Hoenir said:
    dave22 said:
    Surely it's the companies duty to recover debt from those bad debtors. 
    Any business is the same. Bad debt is unrecoverable. Written off. Good customers have always paid for those that don't pay up. 

    These days many people want a free lunch. Stuff anybody else. 
    Bad debt is recoverable .Suppliers have been recovering losses and debts for years since prepayment meters were installed. They have to take a little more care in who they fit a prepayment to but no problems at all in fitting prepay meters where they have to get a warrent to enter and fit . The warrant gets charged to the occupier along with locksmiths costs 
    There is so much meter tampering going off that it would be hopeless if they just allowed them to steal 1000 s of pounds worth of energy without installing new meters in smart prepay mode to collect a weekly amount based on estimates of what they have lost .
    The most debt I have seen owing on a meter is £6000 on a gas meter. Occupier who stole that amount of gas never paid it back though and just moved out to another rental place .
    That final sentence seems to rather disprove the first…? 
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  • Scot_39
    Scot_39 Posts: 1,830 Forumite
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    edited 19 December 2023 at 10:13PM
    Andreg said:
    We are supposed to have a competitive energy market, where the price cap is only required to protect a few people who do not have the time or inclination to shop around.  The real question is why has the competition been knocked out of the market?
    Unprecedented increases in wholesale prices due to circumstances which were not entirely possible to foresee, coupled with a lot of Johny-Come-Lately companies who came into the market in the expectation of being able to make a quick buck, and who failed to take the correct steps to ensure that when those prices escalated, they were unable to continue to provide the service people had signed up for at the prices they had agreed. If you are going to promise X-hundred-thousand folk energy at knockdown prices, you'd best make sure you have enough of it at those prices to go round... 

    Except - in my opinion - arguably they were neither unprecendented or impossible to foresee.

    The UK and wider West has gone through 4 energy crisis and 1 financial crisis in I suspect many MPs and senior members of Ofgem's management's lifetimes.

    Energy Crisis - OAPEC, Iranian Revolution, Kuwait/Iraq and now Russia/Ukraine.

    So roughly one every 12 years now.

    And with Isreal and if the western navys don't get a grip on Iran / Yemeni rebels soon and the impact on shipping - a growing risk of full scale / mini crisis in coming months. (Some EU - maybe even UK - imported LPG flows through Suez)

    Allowing poorly funded players into such a risky sector was fool hardy - allowing them to gamble without fully hedging fixed contracts - even more so.  That then also arguably spread to variable tariffs with the Ofgem imposed cap.

    A model that deserved to fail - along with the switch to save policy messaging it was wrapped up in - and did so.

    Costing us all in bail outs - wrongly including those who hadn't switched to save.

    But Ofgem isn't there directly to protect consumers over all else - it is also there - arguably primarily there - to ensure there is a viable supplier base to serve consumers with the energy we need. (Edit)
  • SAC2334 said:
    Hoenir said:
    dave22 said:
    Surely it's the companies duty to recover debt from those bad debtors. 
    Any business is the same. Bad debt is unrecoverable. Written off. Good customers have always paid for those that don't pay up. 

    These days many people want a free lunch. Stuff anybody else. 
    Bad debt is recoverable .Suppliers have been recovering losses and debts for years since prepayment meters were installed. 
    Isn't the very definition of bad debt that it's unrecoverable?  That's what distinguishes it from just … debt.
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