How would nationalisation of energy companies work

MP1995

Caveat, this is not a politically motivated post just wondering what powers the biggest supplier Octopus would have to stop nationalisation?

I do like my smart meter tariffs lol

born_again

Pretty sure that courts would be the route & the cost of buying up all the energy suppliers would be so big that it is simply not feasible for any government.
Remember that most, if not all are owned by investment groups. So they will want back at least what they paid. Even National Grid is owned by investment groups, most of which are foreign owned.

MattMattMattUK

MP1995 said:

Caveat, this is not a politically motivated post just wondering what powers the biggest supplier Octopus would have to stop nationalisation?

I do like my smart meter tariffs lol

It will not happen, it would be far too expensive. What you may see is a GovCo created that owns generation which it builds, very likely wind, but hopefully also nuclear. Having government owned generation capacity would be sensible, together with reform of the internal energy market could lead to net savings.

They may also create a GovCo energy supplier which sells at a nominal profit, however profit on SVT is already capped at 3% so it would not make much if any difference overall. There would actually be no need to nationalise suppliers, they could just undercut them and drive them out of business, but the energy supply sector is actually in a pretty good place and would not be worth getting involved in.

The cost to renationalise the gas and electricity supply networks seems to vary wildly, from lows of £4.5 billion to highs of £80 billion, the reality is probably around £20 billion. The larget issue is the grid needs around £120 billion of investment over the next decade, that cost will either need to be added to the national debt or recovered via increased bills, whilst I personally favour the latter I am not sure many of those who bang on about nationalisation being the saviour would be pleased when their bills go up, even though they will be going up under the current privatised scheme anyway. If I were thr government I would nationalise the electricity grid but not the gas, largely on the basis that domestic gas should be beginning to be phased out anyway, so no point it buying what will be a worthless asset in the medium term.

BarelySentientAI

MP1995 said:

what powers the biggest supplier Octopus would have to stop nationalisation?

Directly - none, if a government decided to force it through..

But forcible nationalisation (which doesn't usually include paying the full market price of a company) would kill the prospect of any non-government investment in the UK economy for decades.

wrf12345

When the industries were nationalized there was a formula that ensured gas and electric prices fell over five or ten years, I think, so the govn could redo this with a formula that caused the gap between wholesale and retail prices to fall - it is currently somewhere between three and four times wholesale, so plenty of fat to play with and, of course, phasing out standing charges. If companies can't cope the govn could then pick them up for next to nothing and incorporate them into British Energy. More likely, though, it will be just another futile exercise where govn cronies get well paying jobs and they just go with the current dismal flow.

MattMattMattUK

wrf12345 said:

When the industries were nationalized there was a formula that ensured gas and electric prices fell over five or ten years, I think, 

Prices fell because they used cheap North Sea gas, it is no longer cheap to extract as all of the easy fields have been exhausted and most of the licenses have been sold now anyway, any new licenses need to be commercially viable and are also going to be much more expensive to extract, as well as sold in a global market. 

wrf12345 said:

so the govn could redo this with a formula that caused the gap between wholesale and retail prices to fall - it is currently somewhere between three and four times wholesale, so plenty of fat to play with and,

That difference is not profit, it is not money being "wasted" it is the cost of transmission, there is no "fat" to cut.

wrf12345 said:

of course, phasing out standing charges. 

Or not, as that would be irrational.

wrf12345 said:

If companies can't cope the govn could then pick them up for next to nothing and incorporate them into British Energy.

The only reason the energy suppliers could not "cope" would be because the government would be selling at zero profit, or even at a loss, which would mean that energy would likely end up being subsidised by net taxpayers anyway, so zero net gain and a pointless exercise. 

wrf12345 said:

More likely, though, it will be just another futile exercise where govn cronies get well paying jobs and they just go with the current dismal flow.

There is no reason a GovCo could not be created to sell energy, but it would be largely pointless as even selling at zero profit would result in a minimal saving for the consumer as profits are capped at 3% on the SVT. There are areas where nationalised industry makes sense, natural monopolies for starters, which is why it never made sense to privatise water and it did not make sense to nationalise the grid, but in terms of suppliers there is likely zero benefit to nationalisation and if anything it may actually be detrimental to the consumers. 

born_again

wrf12345 said:

When the industries were nationalized there was a formula that ensured gas and electric prices fell over five or ten years, I think, so the govn could redo this with a formula that caused the gap between wholesale and retail prices to fall - it is currently somewhere between three and four times wholesale, so plenty of fat to play with and, of course, phasing out standing charges. If companies can't cope the govn could then pick them up for next to nothing and incorporate them into British Energy. More likely, though, it will be just another futile exercise where govn cronies get well paying jobs and they just go with the current dismal flow.

You only have to look at how much the failed co's cost the Gov to realise that it is not "Next to Nothing"

https://committees.parliament.uk/committee/127/public-accounts-committee/news/198224/bulb-energy-will-billpayers-remain-on-the-hook-for-multibillion-pound-bailout/

Never mind the increase in S/C we all are having to pay as well. 

BarelySentientAI

MattMattMattUK said:

wrf12345 said:

of course, phasing out standing charges. 

Or not, as that would be irrational.

But needs to be shoehorned into as many threads as possible.

MattMattMattUK said:

There are areas where nationalised industry makes sense, natural monopolies for starters, which is why it never made sense to privatise water and it did not make sense to nationalise the grid, but in terms of suppliers there is likely zero benefit to nationalisation and if anything it may actually be detrimental to the consumers. 

Plus that nationalisation doesn't guarantee saving any money or making anything cheaper - it just allows people to imagine that someone else is paying and that makes them feel good.

wrf12345 said:

so the govn could redo this with a formula that caused the gap between wholesale and retail prices to fall - it is currently somewhere between three and four times wholesale, so plenty of fat to play with.

If companies can't cope the govn could then pick them up for next to nothing and incorporate them into British Energy. 

Yes, because we all know that public servants work for free and governments are exceptionally good at running cost-efficient purchasing regimes with top outcomes.

If it was easy to undercut existing suppliers because there's "plenty of fat", then it would get done.  In fact, you could set up a supplier yourself and start doing that tomorrow.

Many have tried, including not-for-profit and local government owned as well as the usual private companies.  All went bust or chose to leave the sector when they found it wasn't the easy scheme you think.

Eldi_Dos

MattMattMattUK said:

MP1995 said:

Caveat, this is not a politically motivated post just wondering what powers the biggest supplier Octopus would have to stop nationalisation?

I do like my smart meter tariffs lol

 so no point it buying what will be a worthless asset in the medium term.

There used to be a company in central London that provided air to companies who used pneumatic cash system's, when these systems stopped being used the network of pipes and their wayleaves lay dormant for a long time till someone had the bright idea of running Fibre Optic cables in them, saved millions on installation costs and the inconvenience of digging up the roads.
Suppose you do not really know if you are sitting on a assest or a liability when old plant becomes redundant.

MattMattMattUK

Eldi_Dos said:

MattMattMattUK said:

MP1995 said:

Caveat, this is not a politically motivated post just wondering what powers the biggest supplier Octopus would have to stop nationalisation?

I do like my smart meter tariffs lol

 so no point it buying what will be a worthless asset in the medium term.

There used to be a company in central London that provided air to companies who used pneumatic cash system's, when these systems stopped being used the network of pipes and their wayleaves lay dormant for a long time till someone had the bright idea of running Fibre Optic cables in them, saved millions on installation costs and the inconvenience of digging up the roads.
Suppose you do not really know if you are sitting on a assest or a liability when old plant becomes redundant.

I might take that view yes, but fibre optics are also being run through water pipes (whilst in use) so there is certainly novel usage going on. Personally I would not take on a short term liability in the hope that in the medium to long term it might become an asset, especially if I was in charge of taxpayers money as that is effectively gambling. 

Brie

If the government set up their own energy provider then when any company failed they would inherit all the clients.  That would at least chip away at the problem but never resolve it completely unless the gov tariffs were so attractive that most people switch.  Of course there will always be those that have always been with British Gas and will never change....