In the comments following “For Peat’s Sake” I expressed reservations regarding the planning process, and particularly the concept of “planning gain”, whereby in return for being granted a planning consent developers enter into a formal planning agreement in which they promise to provide benefits to the local community. In principle, this seems like one of those much-vaunted “win-win” situations. The developer obtains a valuable planning consent, and the local community enjoys net benefits at the end of the process.
The situation seems to me to be straightforward when the planning application is one where consent is obviously appropriate, with issues around the fringes, and the only real question being how much it is reasonable to expect the developer to provide to the community in return for the profits the developer stands to make.
It strikes me as being much more contentious when – as, for instance in the context of the Viking Wind Farm on Shetland – the application concerns a development of huge scale and significance, and is one which bitterly divides the community in question. In that case, although perfectly legal and proper under the current system, annual payments to the community from the developer going forward start to look suspiciously like a bribe in return for the planning consent. Asking whether the payment is big enough to compensate for the harm caused by the development is arguably asking the wrong question. The correct question, to my mind, is whether there is any place for such a system at all in a modern democracy. Given that in Shetland the local authority is in favour of – indeed is pushing – the concept of wind energy, there must be the perception (whether or not it is the reality) of a huge conflict of interest when the local authority also sits in judgment on the planning application (and negotiates the size of the “planning gain” payments too). As it happens, the Viking Wind Farm was granted planning consent by the Scottish Government. Had the Council objected it would have triggered a public inquiry, but by not doing so the Council in effect gave tacit approval. In addition, the Council (via the Busta estate) is the landowner of part of the wind farm site and will presumably receive payments from the developer for that. There have also been a number of supplementary planning applications concerning the wind farm that the Council has determined. It is strongly arguable that there is a real conflict of interest and there is certainly the appearance of conflict. This does not inspire confidence in the planning system in respect of grand projects of this type.
Speaking of asking the wrong question…
New Lords committee launches Call for Evidence on Ofgem and net zero
On 23rd June 2021 the House of Lords Industry and Regulators Committee announced the launch of its first inquiry, into the role of Ofgem, the UK’s energy market regulator. The link to the Committee’s call for evidence can be found here:
Given that it is written into statute (albeit the latest “net zero” version was sneaked through by statutory instrument*, not Act of Parliament) I suppose it was too much to expect the Committee to consider the crucial question, namely the appropriateness of “net zero” in the context of the UK’s wider energy system and Ofgem’s supervisory role.
And indeed, the Committee is not interested in such a question – how could it be, given this statement?
“Having initially focused on protecting the interests of consumers, Ofgem has increasingly been given responsibilities in relation to other areas, particularly the security of the UK’s energy supply and decarbonisation. In the Energy White Paper, the Government committed to including a requirement for Ofgem to carry out its regulatory functions in a manner consistent with securing the Government’s policy outcomes, including “delivering a net zero energy system while ensuring secure supplies at lowest cost for consumers”, in its proposed Strategy and Policy Statement for Ofgem.”
It seems that Ofgem’s priorities are being changed. The interests of consumers now seem to be of less importance than “delivering a net zero energy system”. In the course of this change, big questions are being asked, not least by the House of Lords Industry and Regulators Committee.
The Committee invites evidence on a number of issues including:
Ofgem’s role in the wider energy system
Ofgem’s statutory objectives, duties and powers
Ofgem’s relationship with Government and Parliament
The impact of Ofgem’s environmental objectives on the cost of energy, particularly for consumers
The security of the UK’s energy supply during the net zero transition
I would urge anyone interested and with sufficient knowledge of the subject-matter to offer their thoughts to the Committee, however much its deliberations may be a foregone conclusion. Guidance on how to make submissions can be found here:
https://committees.parliament.uk/call-for-evidence/512/ofgem-and-net-zero/
Ofgem – a Shetland Case Study
The Committee is seeking evidence on ten specific questions. It’s worth analysing these questions in turn against the recent Ofgem treatment of the application by SSE for approval of a subsea cable link from Shetland to the Scottish mainland. Not least since suspicions abound in Shetland that far from operating as an independent regulator supervising developments in an objective way, protecting the interests of everyone involved in, or affected by the Viking Wind Farm development in an even-handed manner, Ofgem has instead been working hand-in-glove with SSE. Perhaps, given its revised remit, it had little choice.
Here, then, are the Committee’s questions:
1. What role should Ofgem play in the transition to net zero? What changes, if any, should be made to its remit, responsibilities and resources?
Given the Shetland experience, Ofgem should play no role in the transition to net zero, since for it to take sides on that issue means it inevitably has to favour “renewables” developers over those putting forward other alternatives. The gas fired power station proposal for Shetland was a case in point, much less polluting than the existing set-up and cheaper, but it did not fit with Ofgem’s objectives. The gas alternative would have cost around £100 million, less than a tenth of the cost of Viking Wind Farm and the inter-connector.
2. How well does Ofgem balance environmental objectives against its responsibilities in relation to affordability for consumers?
What does the Committee mean by Ofgem’s “environmental objectives”? These days, environmentalism seems to have nothing to do with being custodians of Britain’s wild places, and everything to do with “net zero”. In the context of this Inquiry, I strongly suspect that the Committee isn’t remotely interested in whether Ofgem is offering sufficient protection for Shetland’s whimbrel, merlin and red throated diver population, or its peat, and is concerned only with how well it’s achieving the “net zero” obligation. The words “net zero” or “zero” appear four times in the list of questions, while only one question relates to “affordability for consumers” and only one to “security of supply” (see below).
3. How well does Ofgem fulfil its obligations to consumers? Does Ofgem take consumer views into account sufficiently, particularly those of vulnerable consumers?
The latest statics show 31 per cent of Shetland households are in fuel poverty with 22 per cent living in extreme fuel poverty. Approving very costly “green” energy schemes, requiring extensive grid upgrades, can only add to consumers’ bills.
4. What implications will the transition to net zero have for the security of the UK’s energy supply? How does Ofgem currently manage issues relating to security of supply?
Cable reliability has not been adequately researched by Ofgem. An inquiry into repeated failure of the Western Link has been ongoing for the last 18 months with nothing published to date.**
On 29th September 2020, a new 6MW engine was delivered to Lerwick Power Station. Within the transmission link consultation no mention was made as to how security of supply to Shetland was to be achieved. An upgrade of the existing Lerwick Power Station has recently been confirmed. At least this demonstrates a concern to ensure that lights stay on in Shetland, but how does this fit in with “net zero” and Viking Wind Farm? Nationally, last year’s outages, much discussed at CliScep and elsewhere, should cause eyebrows to be raised.
5. Is Ofgem’s current system of price controls appropriate? Does it provide sufficient incentives to invest in the context of the transition to net zero?
This is almost certainly too big an issue for this article, leading as it does in to, inter alia, the question of constraints payments. Viking Energy will almost certainly receive substantial sums from constraints payments in due course. Perhaps I’ll talk about this issue in a subsequent article.
6. Is the current system of governance for the UK energy market appropriate to secure the transition to zero? What improvements could be made and what role should Ofgem play?
I would submit that Ofgem’s role as regulator should be first and foremost to ensure security of supply and (a very close second) to look after the interests of consumers, particularly with regard to cost. It is self-evident (see below) that these vital tasks conflict fundamentally with the race to “net zero”.
7. Are Ofgem’s duties and powers appropriate and sufficiently clearly defined? Do Ofgem’s objectives conflict and, if so, how should any conflicts be managed?
Do Ofgem’s objectives conflict? Most certainly they do – “delivering a net zero energy system while ensuring secure supplies at lowest cost for consumers” is a triangle that can’t be squared!
8. Is Ofgem’s relationship to Government and Parliament appropriate? Are there issues related to the split of responsibilities, transparency or accountability?
So far as concerns transparency and responsibility, in March 2019 Ofgem issued a “minded to approve” statement about a transmission link to Shetland subject to Viking Energy making a winning bid in the upcoming Contracts for Difference (CfD) auction. However, as Viking Energy was unsuccessful in the auction, local residents expected plans for the Viking Windfarm to be put on hold. And yet, from summer 2019 it was apparent that SSE were progressing with their plans for the Viking Windfarm, which would be built only if a subsea cable to Shetland was available.
On 23rd April 2020, a statement from Ofgem gave conditional approval for the cable, subject to Ofgem being convinced that Viking Windfarm would proceed to construction. A consultation was announced about the cable approval but within the documents released, important cost benefit analysis figures were heavily redacted. Several Freedom of Information requests were submitted by local residents in connection with the redacted figures but these were not revealed until after the cable approval had been finalised, creating the suspicion in some minds that delaying tactics had been employed.
On 18th June 2020 the Consultation was closed. On 16th July 2020 Ofgem gave approval for the transmission link to/from Shetland, subject to confirmation of an investment decision by SSE regarding the Viking Windfarm. On 17th July 2020 the award of the contract to supply and install the transmission cable was announced. This led some local residents to conclude that this had been put in place well before the cable approval announcement by Ofgem.
On 30th July 2020, responses to the consultation were finally published and showed that a majority of responses had opposed the approval of the transmission link. Ofgem’s reasons for approval emphasised that Shetland should be provided with the facility to export power. On 3rd August 2020 further announcements about contracts for various parts of the Viking Wind Farm and cable works were made. Would these complex contract negotiations have been undertaken if there were serious doubts about the cable approval being forthcoming from Ofgem?
The timetable of events concerns local residents with regard to the issue of transparency, to the extent that Ofgem’s handling of this matter was the subject of formal complaints.
9. How does Ofgem compare to similar bodies internationally? What lessons can be drawn from the experience of other countries or jurisdictions?
Suggestion – don’t copy New York or California if you want to guarantee security of supply…
10. Are there any other aspects of Ofgem’s work that the Committee should consider?
The National HVDC Centre might be a good idea, given the road that politicians are sending us down, but Ofgem’s role in it does lead, yet again, to questions regarding conflicts of interest and the suitability of Ofgem being required to have a variety of conflicting roles:
“An Ofgem funded state-of-the-art simulation and training facility established to support all HVDC schemes connecting to the GB grid.
The Centre works with Transmission Operators, System Operators, Offshore Transmission Operators, Interconnector projects and Manufacturers to de-risk projects and ensure the integrity and security of the grid network.”
Was the funder of such a project ever likely to reject the application for an inter-connector between Shetland and the Scottish mainland?
Other worryingly cosy relationships exist, not just between Ofgem and developers, but between developers and the UK government. For instance:
“SSE NAMED AS MAJOR PARTNER FOR COP26”***
“SSE has today been confirmed as a major partner for COP26 as it gears up for a year of climate action ahead of the flagship summit in Glasgow, where world leaders will be seeking a more ambitious climate change agreement.
The business is among the first Principal Partners to the UK Government and will work with government and other stakeholders to support the delivery of a successful and impactful COP next November.
The news comes as SSE continues to deliver its £7.5bn investment programme, leading the way in developing the low-carbon assets and infrastructure required for the UK to reach its target of net zero emissions by 2050.
Today SSE has also confirmed ambitious plans, alongside fellow sponsors National Grid and Scottish Power, to develop a multi-billion pound underwater super-highway that will see the North Sea become the hidden power house of Europe, supporting the UK supply chain and delivering hundreds of green jobs throughout construction and operation.”
When power companies/developers are Government partners, and when Ofgem funds a centre for developing the projects desired by power companies and on which Ofgem sits in judgment, what confidence can consumers and locals have that the Government is interested in putting in place an objective and transparent system of oversight, and what confidence can local objectors to “renewables” schemes have that Ofgem will consider them impartially?
*The Climate Change Act 2008 (2050 Target Amendment) Order 2019
***https://www.sse.com/news-and-views/2020/11/sse-named-as-major-partner-for-cop26/
Climate Scepticism 
Mark, congratulations. According to reports this is Cliscep’s 1000th article.
My own view about the three aims of our energy system – that it must be cheap, reliable, and green – is that you can have two out the three, but you can’t have all three. I would ditch the “green”, air quotes because I have no doubt at all that nuclear power is in reality greener than e.g. wind farms. Nuclear, of course, was opposed by the very forces that first killed coal, and are now insistent on killing gas.
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Jit
Many thanks for the heads-up. I feel bad about it. I assumed it was going to be 999, but Tony pipped me at the post. Had I been a bit quicker, Tony could have had the glorious 1,000th article. Sorry Tony!
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Nice article. It can be demonstrated that the deployment of Renewables (solar and wind turbines) across many nations conforms to cultural attitudes, and is not a function of the climate or climate exposure of nations, climate science, technical issues, or indeed anything physical or rational. https://judithcurry.com/2020/11/19/cultural-motivations-for-wind-and-solar-renewables-deployment/
Subsidies, compensations, unaddressed conflicts of interest, elite interests, blindness to downsides, etc are all part of how cultural belief rides rough-shod over reality at scale in society. And all critical to document, expose. But while the cultural ‘spell’ holds, there’ll be precious little impartiality.
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Perhaps this is as good a place as anywhere to post this piece of information, since I criticise the planning process in the article:
https://petitions.parliament.scot/petitions/PE1864
“Under consideration
PE1864: Increase the ability of communities to influence planning decisions for onshore windfarms
Calling on the Scottish Parliament to urge the Scottish Government to increase the ability of communities to influence planning decisions for onshore windfarms by—
adopting English planning legislation for the determination of onshore wind farm developments;
empowering local authorities to ensure local communities are given sufficient professional help to engage in the planning process; and
appointing an independent advocate to ensure that local participants are not bullied and intimidated during public inquiries.”
Perhaps asking the SNP Government to adopt English planning legislation wasn’t the best choice of words (red rag to a bull?), but it’s an important development, and IMO it’s worth looking at the whole petition to understand much more about the background in Scotland, and why (perhaps – it’s my perception, anyway) windfarm applications seem to make easy headway in Scotland. I found this section particularly illuminating:
“Larger wind farms exceeding 50MW are determined at the outset by Scottish Ministers under the Electricity Act 1989, section 36 (s.36) rather than by the LPA. However, the LPA remains a statutory consultee for each s.36 planning application submitted to the Scottish Government’s Energy Consents & Deployment Unit. Should an LPA formally object to a s.36 application, a Public Inquiry is automatically triggered. This results in significant expense to the LPA, in order for them to defend their objections. In the majority of cases, the objections of these LPAs and the Community Councils are overruled by the Scottish Ministers, acting on Reporters’ recommendations.
In contrast, wind energy schemes in England are determined by the LPA, irrespective of size. LPAs are directed to only grant planning permission if:
the development site is in an area identified as suitable for wind energy development in a local or neighbourhood plan; and
following consultation, it can be demonstrated that the planning impacts identified by affected local communities have been satisfactorily addressed and therefore the proposal has community backing.
Whether a proposal has the backing of the affected local community is “a planning judgement for the local planning authority.”
If an LPA rejects a planning application, then a developer has a right to appeal to the Secretary of State via the Planning Inspectorate.
This difference in legislation makes it significantly more difficult to obtain planning permission in England, and has led to an influx of developers seeking sites in Scotland, because they believe that the Scottish Government will overrule local decision making and grant consent for planning applications for onshore windfarms.”
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On the call for evidence to the House of Lords Industry and Regulators Committee, the members of the committee are:
The Lord Hollick (Labour) (Chair)
The Lord Allen of Kensington CBE (Labour)
The Lord Blackwell (Conservative)
The Baroness Bowles of Berkhamsted (Liberal Democrat)
The Lord Burns GCB (Crossbench)
The Lord Curry of Kirkharle CBE (Crossbench)
The Baroness Donaghy CBE FRSA (Labour)
The Lord Eatwell (Labour)
The Lord Grade of Yarmouth CBE (Conservative)
The Baroness Noakes DBE (Conservative)
The Lord Reay (Conservative)
The Lord Sharkey (Liberal Democrat)
Anyone know anything about them?
The Lord Reay is the only hereditary member. His personal profile on the committee web site states that he has no experience outside parliament, no focus areas, and that he has spoken four times in the House.
His registered interests include one directorship (a financial advisory consultancy) four paid employments and four companies in which he has significant control, including Highland estates and investment in Africa; plus shareholdings, including in Rio Tinto and other mining companies. So he stands to win big from the plastering of the Highlands with windmills and the plundering of Africa for rare metals for batteries and solar panels. And with four paid jobs outside parliament, he won’t have much time to listen to our arguments.
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Here’s an interesting development:
“National Grid to lose Great Britain electricity role to independent operator
New controller will be part of overhaul to make the energy system ‘fit for the future’”
https://www.theguardian.com/business/2021/jul/20/national-grid-to-lose-great-britain-electricity-role-to-independent-operator
“The government plans to strip National Grid of its role keeping Great Britain’s lights on as part of a proposed “revolution’” in the electricity network driven by smart digital technologies.
The FTSE 100 company has played a role in managing the energy system of England, Scotland and Wales for more than 30 years (Northern Ireland has its own network). It is the electricity system operator, balancing supply and demand to ensure the electricity supply. But it will lose its place at the heart of the industry after government officials put forward plans to replace it with an independent “future system operator”.
The new system controller would help steer the country towards its climate targets, at the lowest cost to energy bill payers, by providing impartial data and advice after an overhaul of the rules governing the energy system to make it “fit for the future”.
The plans are part of a string of new proposals to help connect millions of electric cars, smart appliances and other green technologies to the energy system, which government officials believe could help to save £10bn a year by 2050, and create up to up to 10,000 jobs for electricians, data scientists and engineers.
The new regulations aim to make it easier for electric cars to export electricity from their batteries back on to the power grid or to homes when needed. They could also help large-scale and long-duration batteries play a role in storing renewable energy, so that it is available when solar and wind power generation levels are low.
Anne-Marie Trevelyan, the energy and climate change minister, said the rules would allow households to “take control of their energy use and save money” while helping to make sure there is clean electricity available “when and where it’s needed”.
She added: “We need to ensure our energy system can cope with the demands of the future. Smart technologies will help us to tackle climate change while making sure that the lights stay on and bills stay low.”
The energy regulator, Ofgem, raised concerns earlier this year that National Grid would face a “conflict of interest” in providing advice on the future electricity system because it also owns energy networks that stand to benefit financially from future investment plans. It called for a new independent operator to take its place.
Jonathan Brearley, Ofgem’s chief executive, said the UK requires a “revolution” in how and when it uses electricity to help meet its climate targets and added that the government’s plans for a new digital energy system were “essential” to meeting this goal “while keeping energy bills affordable for everyone”.”
A bit of an irony in Ofgem accusing the National Grid of a conflict of interest!
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Special pleading? Maybe, but it doesn’t reflect well on Ofgem and the regulatory framework around the energy system in the UK:
“Britain’s energy supply is in crisis, and I can tell you why
Years of regulatory tinkering left my company vulnerable. When gas shortages hit, its end was inevitable
Andy Harris is a former chief information officer at Utility Point”
https://www.theguardian.com/commentisfree/2021/oct/20/blame-ofgem-energy-company-collapse-utility-point-gas
“I take no pleasure in saying to Ofgem, “I told you so.” Thanks to a perfect storm in the energy sector, many suppliers have been failing. But with all storms, you can see the clouds building first. Utility Point, the business I helped set up and build to one with more than 220,000 customers, was a victim of the regulators’ inaction.
What began in late spring 2021 as a search for strategic partnerships and investment to help us grow, quickly became, as the market deteriorated, a quest for funds to see us through a difficult winter. It wasn’t long before it became apparent that we were fighting for Utility Point’s survival….
…I do not hesitate in pointing the finger of blame at Ofgem for what happened. For years now, the government and Ofgem have tinkered with regulation – from the poorly designed and calculated price cap, to passing more obligations on to suppliers, and new initiatives for supporting vulnerable customers without provisions to recover costs. All this made it harder for suppliers to operate, and created an environment in which it felt inevitable that small operators would fail. When gas prices surged this autumn, lightning struck, and many of these smaller providers found themselves exposed.
Customers are no better off. The price cap was put in place to prevent suppliers from penalising their customers who remained on standard variable tariffs after their fixed-rate term had ended, and to ensure everyone paid a fair price. This mechanism was not designed to protect customers from the price rises we are now seeing. Based on current average wholesale prices, I would not be surprised to see the price cap increase in April 2022 by more than 20%. This is not protecting people from higher prices, it is merely facilitating a delay in costs being passed on.
When suppliers fail, their costs – such as customers’ credit balances – will be passed on to the remaining suppliers and also included in the price cap. Every supplier failure will increase the cap, further pushing up customer costs….”.
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“Ofgem must show it is awake as energy sector faces winter nightmare”
https://www.theguardian.com/business/nils-pratley-on-finance/2021/oct/21/ofgem-must-show-awake-energy-sector-faces-nightmare-winter
“”We are in danger of just sleepwalking into an absolute massacre,” Keith Anderson, the chief executive of Scottish Power, said dramatically this week, referring to the number of energy suppliers that could go bust before next spring.
His prediction is credible because a critical ingredient in an energy price crisis, from the point of the view of retail suppliers, is how long it lasts. Customers’ fixed-price deals come to an end as time passes and new arrangements have to be made, backed by purchase agreements and hedging contracts.
Since regulator Ofgem’s default tariff – an average £1,277 for a dual-fuel household – is now the cheapest deal on the market, suppliers are locking in losses because they cannot buy energy that cheaply. Wholesale gas prices remain high throughout the winter.
Losses could be as much as £1,000 per customer, reckons Anderson, a level of financial pain that not all will withstand, even if Scottish Power will obviously be a survivor. Ofgem is next due to raise the cap next April, which is a long way off. Thus the danger clearly exists that the industry could shrink rapidly to the ugly oligopoly of old.
Anderson’s suggested remedies sound a non-starter for ministers. He would like the price cap adjusted once a quarter, rather than every six months; or he’d scrap it and introduce a wide-reaching social tariff to tackle fuel poverty. Neither fits with the current mantra from Kwasi Kwarteng, the business secretary, and Ofgem, that the cap must stay through the winter to “protect customers”.
But what’s the plan to deal with the radical alteration in the retail market that a cull of suppliers would imply? Let it happen? That’s possible. Ofgem can force suppliers to take on stranded customers, and nationalisation is the ultimate option for a failure of a big company. Meanwhile, the price cap, which is really a price-smoothing mechanism for customers, allows suppliers to recoup losses in later periods, even if that would mean higher energy bills until 2023.
Yet Ofgem keeps hinting it is working on something else. “We will need to regulate the energy market differently,” its chief executive, Jonathan Brearley, said in a speech this month that lacked detail and bite. He presumably means insisting that all suppliers are properly capitalised – Ofgem’s standards have been shockingly low, as we can now see. But there must be more to the thinking than that.
Therein lies the source of Anderson’s other grumble about fruitless meetings with government and Ofgem. “I’ve seen nothing about what new regulation might look like,” he says. “I’ve seen nothing about protecting vulnerable customers and the fuel poor.” The complaint is fair. This crisis has now been running for six weeks and the arithmetic of high gas prices, stretching into the middle distance, is relentless. Ofgem needs to show it is awake.”
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“UK energy regulator to take ‘bold action’ over price cap as crisis deepens
Ofgem will open consultation on how cap is calculated to ensure suppliers can recover their costs”
https://www.theguardian.com/business/2021/oct/29/uk-energy-regulator-to-take-bold-action-over-price-cap-as-crisis-deepens-ofgem
“The energy industry regulator is poised to take “bold action” to overhaul the price cap protecting millions of households from rocketing bills as suppliers face a deepening energy crisis this winter.
In an open letter to the industry, Ofgem promised to open a consultation on how the energy price cap is calculated as soon as next month to make sure that it allows suppliers to recover their costs.
The regulator did not suggest any specific changes in the letter but the industry is expected to take the opportunity to call for the price cap, which changes only twice a year, to be more responsive to swings in the market by changing as often as once every quarter.
“These are challenging times, requiring bold action,” Jonathan Brearley, the chief executive of Ofgem, wrote.
This would be the first major change made to the price cap, which was introduced in early 2019 to protect households from unfair energy bills through a maximum cap based on the costs of buying and supplying gas and electricity.”
The answer, of course, is to ditch “green” subsidies and allow the UK to generate electricity from relatively cheap and reliable sources, but that’s not in Ofgem’s remit, so won’t happen. They can’t square the circle, given the parameters the government has foisted on them. The system is broken.
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“Four more UK energy suppliers go bust amid high gas prices
Ofgem says latest collapses will leave about 24,000 households in need of a new supplier”
https://www.theguardian.com/business/2021/nov/02/four-more-uk-energy-suppliers-go-bust-amid-high-gas-prices
“A total of 17 energy companies have collapsed since the start of September….
Another four energy suppliers have gone bust in a single day as historic gas market highs continue to rip through the UK’s energy market amid fresh fears that Russia may curb gas supplies to Europe.
The energy regulator, Ofgem, said the collapse of four small energy suppliers on Tuesday would leave about 24,000 households in need of a new supplier, and bring the total number of bust energy companies to 17 since the start of September, affecting more than 2 million households.
The flurry of failures follows rocketing global energy market prices due to a sudden surge in demand for gas as economies began to shrug off restrictions related to the Covid-19 pandemic. Gas markets have reached record highs in recent weeks, leading to one of the sharpest increases in home energy bills and fears of a cost-of-living crisis this winter.
Out of the four UK casualties Zebra Power had the largest customer base, and supplied 14,800 households with energy. Omni Energy supplied about 6,000 domestic pre-payment customers, while AmpowerUK had about 600 UK customers and supplied a further 2,000 overseas households. MA Energy had about 300 overseas customers.
Scores more energy suppliers are expected to collapse in the months ahead as gas markets remain at near-record highs, and suppliers are forced to shoulder the higher costs without raising their tariffs above the regulator’s energy price cap.
Consumer charity Citizens Advice said struggling households would ultimately pay the price “with uncertainty, inconvenience and ultimately higher bills” as suppliers continue “to fall like dominoes”.
Gillian Cooper, the head of energy at Citizens Advice, said: “Last week, Ofgem set out how it intends to ‘raise the bar’ for supplier standards and improve their resilience in the short term. This is a positive step, but it’s clear that existing rules and their enforcement, has not been enough.”
Cooper added: “Longer-term, Ofgem will need to do more to make sure companies are financially sound and provide good customer service. This should include protecting people from the loyalty penalty, which prior to the cap allowed companies to profit from those who didn’t or couldn’t switch.”…”.
That’s working well, then.
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“Proposed energy price cap tweak may mean household bills rise faster
Ofgem outlines way to keep pace with fast-moving market prices, which may mean more than 15m homes face higher bills more often”
https://www.theguardian.com/business/2021/nov/19/energy-price-cap-tweak-may-lead-to-faster-rises-in-household-bills
“Energy regulator Ofgem has set out plans to tweak the energy price cap more often to keep pace with fast-moving market prices, in a move that could mean over 15m households face higher bills more often.
In response to lobbying by energy companies, and after the collapse of 21 smaller suppliers since wholesale prices spiked in September, Ofgem has proposed a change to the rules for the first time since price capping was introduced in early 2019.
Under current rules, the cap can only be changed every six months. The plans outlined would allow Ofgem to recalculate the level more frequently, but only during “exceptional or unprecedented market changes such as the high global gas prices we have been experiencing recently”.
Ofgem is seeking the view of energy suppliers as part of its plan to take “robust action” to overhaul the energy market, which could lose scores of companies in the coming weeks due to a record in energy market prices.
The regulator will consider all proposals to tweak how it calculates the cap, which was designed to protect millions of homes using standard energy tariffs from unfair prices, so that it “reflects the costs, risks and uncertainties facing energy suppliers”….
Ofgem has asked for views to be submitted before 17 December, and plans to make a decision on a wide range of potential changes by February next year.
Energy suppliers, including Scottish Power, are expected to take the opportunity to call for the price cap, which currently changes only twice a year, to be more responsive to swings in the market by changing as often as once every quarter.
Households are expected to face some of the highest energy bills on record this winter after Ofgem hiked the price cap by about 12% to reflect the energy market highs ignited by a global gas supply crunch….
Peter Smith, a director at fuel poverty charity National Energy Action, warned that moving the price cap more often as market prices rocket “could create a desperate situation for consumers, if every quarter for example, they were hit with unmanageable price increases at a time when so many are already stretched to the limit”.
“Ofgem needs to remember millions of energy consumers will have faced a very bleak winter and the prospect of further, more regular rises will be unthinkable. They won’t know what changes to a cap methodology could mean to their own negative budgets but they will feel the consequences of allowing suppliers to pass on more costs, more frequently,” he added….”.
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The system is broken:
“Energy firm Bulb set to go into administration”
https://www.bbc.co.uk/news/business-59373198
“Bulb Energy, which has 1.7 million customers, has announced that the firm will be put into administration.
It is the largest UK energy company to face difficulties following a sharp rise in wholesale gas prices this year.
Bulb will become the first energy company to be placed into “special administration”, where it is run by the government through the regulator Ofgem.
“Customers of Bulb do not need to worry – Bulb will continue to operate as normal,” Ofgem said.
“Customers will see no disruption to their supply and their account and tariff will continue as normal. Bulb staff will still be available to answer calls and queries.”
The special administration measure is only used if Ofgem is unable to find another company to take over an energy firm’s customers. The regulator said it was planning to apply to a court to appoint an administrator who will run the company.
Bulb said energy supplies were “secure and all credit balances are protected”.
Bulb is the UK’s seventh biggest energy company and has 1,000 staff. It has been trying to shore up its finances for several weeks.
Ofgem set up the Special Administrator Regime (SAR) for when an energy company goes bust but is too big to have its customers transferred to another firm.
The aim of the regime is to stop financial failure spreading across the industry.
Under the SAR scheme, the government can make grants and loans to the company while its future is sorted out.
It could come in the shape of a takeover by another company, selling parts of its business or customers being transferred to another firm.
Provision for special administration, owing to the collapse of a major player in the UK energy sector, has been part of the law for 10 years.
It had never been needed until now….”.
At one level, of course, it can be argued that the system DOES work, because customers’ continuity of supply is guaranteed, and they won’t lose anything. On the other hand, a ridiculous number of energy supply companies are going bust, and if the state effectively takes on the supply of 1.7 million customers, we might as well have a nationalised energy supplier in place. In addition, many of the problems encountered by the energy sector are down to the mad drive to net zero. It’s no coincidence (gas price hike or no) that many companies in this sector traditionally go to the wall when it’s the time of year to hand over “green” subsidy money.
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The Guardian, on 11th September 2018:
“Green energy firm on course to challenge big six despite price hike
Bulb aims to overtake First Utility and Ovo after tenfold customer increase in year”
“https://www.theguardian.com/business/2018/sep/10/green-energy-firm-on-course-to-challenge-big-six-despite-price-hike”
“A green energy firm has claimed it is on track to become the largest challenger to the sector’s big six before Christmas, despite raising prices for a third time this year.
Bulb, which has focused on affordable renewable electricity and customer service, has attracted more than 750,000 customers, up from 70,000 a year ago.
Hayden Wood, a former management consultant who co-founded the company with former Barclays energy trader Amit Gudka, said the firm was on a trajectory to overtake First Utility and Ovo within the next three months.
First Utility has 825,000 customers and launched in 2008, while Ovo has 890,000 and started in 2009. Bulb was founded in 2015….
…At the smaller end of the sector, Wood said he was puzzled that new challenger firms were still launching with electricity tariffs that included fossil fuels.
“It still really surprises me they have one green tariff and one brown tariff. Why wouldn’t you just have something that your company stands for?”
It has not all been plain sailing for Bulb. The company was reprimanded by the energy regulator for being slow to offer prepayment meters and is now big enough that its price hikes this year made headlines.
While focused on offering one green tariff to consumers, it is branching into new areas. Two key ones are business energy customers and exploring how to leverage the combination of solar power, Tesla-style household batteries and electric cars….”
The Guardian, on 22nd November 2021:
“‘Too good to be true’: the rapid rise and costly fall of Bulb Energy
Challenger company that hoped to win 100 million customers burned through cash as the complaints piled up”
https://www.theguardian.com/business/2021/nov/22/greenwashing-bulb-energy-critics-collapse-coming
“…Its collapse marks a catastrophic fall from grace for a company that in the space of six years won the approval of government ministers and catapulted its chief executive, Hayden Wood, to leading positions in a string of business initiatives including the government’s Council for Sustainable Business….
…Within six years the company claimed 6% of the energy market, and helped to pioneer a number of tech startup campaigns including the government’s kickstart scheme for unemployed young people, and the Tech Zero climate taskforce in June this year.
Wood, 38, gravitated towards the limelight, appearing at events alongside ministers such as the business secretary, Kwasi Kwarteng, and hosting Boris Johnson at his London headquarters in July. As one of a handful of executives on the Council for Sustainable Business, he advised the Department for Environment, Food and Rural Affairs (Defra) on making companies greener….
…The company’s collapse came as little surprise to anyone in the energy industry.
“Sadly, today’s news has been a long time coming,” said Keith Anderson, chief executive of ScottishPower.
“If we are to learn anything from this crisis, it is that we need a sustainable and responsible supplier market in which companies are able to withstand market shocks. The government now has a vested interest in working the industry and the regulator to ensure this happens.”
Bulb’s major strength was its marketing: it excelled at attracting new customers through lucrative referral payments and green energy claims, and managed to secure willing investors by talking up its credentials as a tech startup.
But Bulb’s rivals have long claimed that the company’s business model, green credentials and fundraising were all unsustainable because it relied on greenwashing, and “too good to be true” energy prices to help fuel its rapid growth.
Government officials and ministers were also taken in by Bulb’s seemingly unstoppable success, and as one senior industry source said, and “loved them” because “they came in to challenge the incumbent suppliers and grew at scale”….
…“It was always a struggle to see how this company would be viable over the long term,” the source added.”
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Everyone needs to worry. Maybe I am falling into an alarmist mindtrap, but I think society should fear high energy costs more than climate change.
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“Bulb’s collapse signals the urgent need for energy market reforms
Nils Pratley
Ofgem was grossly naive in allowing so many undercapitalised startups to take a punt on wholesale prices”
https://www.theguardian.com/business/2021/nov/22/bulb-collapse-signal-urgent-need-energy-market-reform-risk-return-oligopoly
“About three hours after Bulb announced to the world, including its 1.7 million household customers, that it had gone bust, Ofgem confirmed the fact. Slow reactions, sadly, have typified the regulator’s struggle to keep pace with events in the energy crisis. Even now, after the biggest company failure, one can discern only an outline of a plan for reforming the retail market to ensure it can withstand future storms.
Still, “special administration”, or nationalisation, was the only practical short-term solution for Bulb. It would have been impossible to oblige another supplier to swallow so many customers in one gulp. The financial pain of loss-making supply contracts would merely have been shifted along the line.
The special administration regime is untested in the energy market, but similar arrangements have worked for more complex businesses in the past – Railtrack in 2001, for example. The critical necessary ingredient is capital to underwrite energy-purchase and hedging contracts. That comes courtesy of the Treasury, which will be on the hook for Bulb’s losses until a permanent solution is found.
So, in effect, the financial hit is being taken via the public purse rather than spread among everybody’s energy bills via the industry-wide levy system. Given how far bills will rise anyway next April when Ofgem next adjusts the price cap – £500, possibly, if the methodology is applied strictly – burying Bulb among general government expenditure probably represents good short-term politics.
The longer-term, though, is the bit to worry about. The business department and Ofgem have stuck to their mantra that “protecting customers” is their priority and companies should bear the consequences of inadequate hedging policies. Those broad principles are correct, but we’re now at a point where the retail market is in danger of shrinking to an oligopoly of old, which is also a grim prospect for consumers.
A reformed regulatory set-up will inevitably involving changing the price cap more frequently than every six months, and ensuring companies have the financial muscle to survive shocks. On the latter score, Ofgem was grossly naive in allowing so many undercapitalised startups to try their luck by taking a punt on wholesale prices. Life will be different in future, the regulator now says; last week it launched a consultation on the cap. Really, though, it’s time for some action.
As it is, the clean-up costs of the pre-Bulb failures will probably be felt in bills into 2023. A sustainable market is essential before then. The survivors, remember, are the companies the government is relying on to install heat pumps and the rest of the retail-facing green agenda. The firms need to know the new rules of the retail energy game; and consumers need to be confident there will still be competition. Get on with the reforms.”
Hindsight is a wonderful thing, but I’m not relying on hindsight in being critical about the set-up here. For years in this household we’ve been trying to avoid having a smart meter foisted on us (unsuccessfully in the end – it will turn up on Thursday). For years I’ve been analysing the accounts of small energy companies with a view to switching to one of them, and getting away from the “big 6”. Every time our contract has come up for renewal we have reluctantly stayed where we were for the simple reason that any small company we thought about moving to was self-evidently under-capitalised and/or expensive and/or provides terrible customer service. With a heavy heart, each time we tried to change supplier, we ended up not doing so. If my wife and I could work out what a mess this all is, what’s OFGEM been doing? Why didn’t they see it?
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Speaking of smart meters…
“E.ON and Octopus are less than smart over my meter mix-up
I switched to Octopus, but E.ON is still charging me for gas”
https://www.theguardian.com/money/2021/nov/23/eon-octopus-less-smart-meter-mix-up-switch-gas
“…The company blamed your “incredibly rare” problem on the fact that you had new smart meters installed when you arrived at the property.
It seems that the gas meter that was removed was linked to a slightly different address on the national database. This meant that E.ON kept billing this (now removed) meter, rather than the new one….”.
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“UK government sets aside £1.7bn to support Bulb customers”
https://www.bbc.co.uk/news/business-5940959
“The UK government has set aside nearly £1.7bn to allow energy firm Bulb to continue supplying energy to customers.
The firm was put into special administration on Wednesday, which will let it keep trading for the moment.
Bulb will be run by administrator Teneo until a buyer can be found or until its customers have moved.
The government loan will mean the administration is managed in a way that the lights stay on for Bulb’s 1.7 million customers.
Teneo estimates it will cost around £2.1bn to keep Bulb trading until the end of April next year.
Business Secretary Kwasi Kwarteng can provide more money for the company if needed.
Without the cash, Bulb would not have been able to keep going past the middle of December, court documents show….
…For Labour, shadow business secretary Ed Miliband said: “With so many companies going bust in just two months, something not happening anywhere else in the world, it points to a systemic failure of regulation.
“Firms took risky bets and were allowed to do so and the government and Ofgem significantly deregulated the conditions of operation in 2016.
Mr Miliband called for “a proper external review of the regulation of the market”.
As a result of a cap limiting what companies can charge their customers, some businesses have been forced to sell energy for less than they bought it for.
Bigger companies tend to buy their gas further in advance, helping them avoid large hits from the price spike. However smaller firms that are less able to do that have come under pressure.
Since the beginning of September, 22 energy suppliers have failed following a spike in gas prices.
Labour MP Alex Sobel said: “We’re moving back to an oligopoly of energy companies who are increasing their profits whilst the supplier of last resort is socialising losses….”.
Labour is right on this issue,, IMO but, the analysis is shallow – it doesn’t seem to understand that the biggest part of the problem is relying on expensive and unreliable renewables.
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The Guardian editor seems to have a short memory – it’s not so long since the Guardian published articles (of which the one I quoted a few comments ago is an example) broadly supportive of Bulb, especially in view of its “green” credentials. Now the Guardian is saying this:
“The Guardian view on the energy crisis: a Bulb goes out”
https://www.theguardian.com/commentisfree/2021/nov/24/the-guardian-view-on-the-energy-crisis-a-bulb-goes-out
“…Like the other corporate failures before it, Bulb has been quick to blame the government-imposed cap on fuel bills, which limited how far it could pass on the soaring costs it faced in the wholesale market. But Bulb’s directors and investors have their own case to face. Founded in 2015, the startup posed as less of an energy company and more of a tech firm – the Deliveroo or Uber of the fuel market that would challenge the old logic of the sector.
Like any Silicon Valley wannabe, it was more bothered about market share than profit – which was handy, as it never made one. Instead, it took on households and business customers at below cost and sported groovy advertising. A triumph of marketing, it brought no real innovation to the industry.
For government ministers, this was the hungry young competitor from central casting. Its east London offices were visited this July by Boris Johnson who, with his customary restraint and financial acumen, declared it a “wonderful company”. Its chief executive, 38-year-old Hayden Wood, was placed on the government’s Sustainable Business Council. Sadly, his own business has proved wholly unsustainable….”.
I do broadly agree that this is a sector that is just too important to be left to the vagaries of markets, especially rigged and expensive “green” markets. I would be happy to see the energy sector re-nationalised. But if it’s to work properly, the net zero agenda must be ditched.
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There’s more. Has someone at the Guardian woken up?
“Was Bulb as green as it claimed to be?
Analysis: less than 5% of the green power the supplier provided to homes was sourced directly from renewable energy projects last year”
https://www.theguardian.com/environment/2021/nov/24/was-bulb-as-green-as-it-claimed-to-be
“The collapse of Bulb Energy this week follows a steady decline in its promises to customers.
Britain’s fastest-growing energy supplier set itself apart as a challenger to legacy energy giants by claiming to offer better service and energy that was cheaper and greener. But was Bulb as green as it claimed to be?
It promised to supply 100% renewable electricity to its customers and offset the carbon emissions of its gas. However, less than 5% of the green power it supplied to homes was sourced directly from renewable energy projects last year and it did not own any generating assets, such as wind or solar farms.
The rest was bought from the UK’s wholesale electricity market alongside “renewable energy certificates”, which have come under fire in recent years for allowing companies to “greenwash” their energy tariffs.
These certificates are issued to renewable energy projects for every megawatt-hour of clean power they generate, but a loophole means they can be sold separately from the green electricity itself. This means suppliers can use the cheap certificates to market their tariffs as 100% renewable without ever supporting clean energy.
The energy regulator has set out plans to clamp down on so-called “pale green” energy tariffs. And a government review, launched three months ago, plans to take aim at companies that claim to sell renewable energy without buying directly from renewable energy projects or investing in green schemes….”.
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Mark, have you read John Constable’s evidence to the Lords?
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Jit, yes I have, and so should every single Parliamentarian charged with legislating about net zero and our energy supply system. Meanwhile:
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“Collapse of UK energy firms could cost each household extra £120
Rise would plunge hundreds of thousands of consumers in England, Scotland and Wales into fuel poverty”
https://www.theguardian.com/money/2021/nov/29/collapse-of-uk-energy-firms-could-cost-each-household-extra-120
“The energy crisis could cost each home in Great Britain an extra £120 to cover the expense of dozens of energy supplier collapses this winter, which would plunge hundreds of thousands of households into fuel poverty for the first time.
Consumers in England, Scotland and Wales could be on the hook for a total of £3.2bn to cover the costs left behind by bust gas and electricity providers, on top of paying for record gas and electricity market prices, according to analysts at Investec.
The bank warned of a “substantial” burden on households to provide a safety net for the customers of bust suppliers, including the largest to go under so far, Bulb Energy, which plunged into a special administration process last week.
“The meltdown in the supply market is likely to see substantial additional costs land on every GB household, hardly welcome when fuel poverty is an issue, inflation is an issue, and commodity costs look set to push energy bills up,” the wealth management group Investec said.
Energy bills had already climbed from an average of £1,138 a year to £1,277 a year from last month under the energy regulator’s price cap, which is used to limit price rises for 11 million homes that pay for a standard dual-fuel tariff by direct debit.
The increase, which has raised concerns among fuel poverty campaigners that hundreds of thousands of additional households will be unable to pay their bills, is expected to be followed by an even steeper price in April….”.
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“Zog Energy becomes latest firm to collapse in gas price crisis”
https://www.bbc.co.uk/news/business-59488818
“Another energy supplier has collapsed amid an ongoing surge in gas prices, UK regulator Ofgem has said.
Zog Energy, which has about 11,700 domestic energy customers, ceased trading on Wednesday.
It marks the latest company to go bust under higher wholesale gas prices, which have made it difficult for companies to keep price promises.
Ofgem will appoint a new supplier for the firm’s customers….
…They join nearly four million other households, which have seen their supplier fail since the start of the pandemic….”.
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like how they say –
“It marks the latest company to go bust under higher wholesale gas prices, which have made it difficult for companies to keep price promises.”
“impossible” is the word I’d use !!!
from the BBC link they say – “More than 20 energy suppliers have now failed following a spike in wholesale gas prices.”
from the graph provided I count 23 suppliers with Ampoweruk at the bottom only having 600 customers ?
with added link comment –
“Bigger companies tend to buy gas further in advance, which protects them from the impact of a price spike. But smaller firms are less able to do and have come under more pressure.”
so the old “shop around for a better deal” comes home to bite us all.
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“Ofgem blamed for errors that led to energy firms collapsing
Citizens Advice says regulator failed to act over rule-breaking suppliers, leaving households facing steep bills”
https://www.theguardian.com/business/2021/dec/09/ofgem-blamed-for-errors-that-led-to-energy-firms-collapsing
“The energy regulator is responsible for a series of mistakes and missed opportunities that allowed the collapse of dozens of energy suppliers and led to spiralling household bills, according to a report by a leading consumer rights charity.
Citizens Advice has blamed the industry regulator, Ofgem, for failing to take action against rule-breaking suppliers for almost 10 years despite mounting concerns over the energy market.
In a damning report, the consumer watchdog warned that there was evidence of financial weakness in the energy market “long before this year’s crisis”, but said Ofgem had failed to heed warnings, meaning households would bear the brunt of its “catalogue of errors”.
The market has lost 26 suppliers amid record high gas prices, which could mean household bills rising by an extra £94 to cover the cost to companies of taking on the extra customers.
Clare Moriarty, chief executive of Citizens Advice, said households would face a multi-billion-pound bill “in large part because Ofgem missed multiple opportunities to regulate the market and tackle rule-breaking by suppliers”.
The report found that Ofgem failed to act following repeated warnings from Citizens Advice over the precarious finances of a raft of small suppliers that entered the energy market between 2010 to 2019.
It had also been slow to take action in recent years even as the industry’s customer service levels declined and financial instability increased, according to the report.
“Recent wholesale price rises would have been hard to handle in any circumstances, but they need not have led to the collapse of a third of companies in the market,” Moriarty said.”
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“Is Ofgem up to the job of sorting out the energy crisis?”
https://www.theguardian.com/business/nils-pratley-on-finance/2021/dec/15/is-ofgem-up-to-the-job-of-sorting-out-the-energy-crisis
“Ofgem wants to close the stable door after the horse has bolted. The regulator now feels it would be an excellent idea if the retail energy market was not littered with failed companies – 26 at the last count, in the space of three brutal months. It wants to ensure such a thing can not happen again.
The ingredients of reform are not hard to identify: outsiders have been telling Ofgem about them for months, or years. And, to be fair to the regulator, a loose version of most can be found in the draft proposals it published on Wednesday.
Suppliers will be subjected to “stress testing” to ensure they are “adequately hedged or hold sufficient capital to manage a wide range of scenarios”. There will be “enhanced monitoring” of companies. Key individuals at companies will have to pass fit and proper tests. Consumers’ credit balances will be better protected to stop them being used for general financing purposes. And the price cap will probably be reformed; one option is to switch to quarterly adjustments rather than six-monthly.
All worthwhile ideas, but the big worry is Ofgem’s ability to make the reforms stick and to enforce them. Confidence is not improved by its chief executive, Jonathan Brearley’s, tiresome habit of talking endlessly about the “unprecedented” rise in global energy prices while glossing over Ofgem’s failure to model for extreme events (which have always happened in commodity markets). Come on, the crisis was a gross failure of regulation. Ofgem, undoubtedly under pressure to increase competition, counted success by the number of new entrants. It missed the wider picture….
…If one studies Brearley’s words carefully, one can find a couple of gentle references to how Ofgem will adapt its “organisational approach” in response to the crisis. None of it, though, screams radicalism or urgency. A question of credibility hangs over these reforms.”
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Tim Lord, senior fellow at the Tony Blair Institute, talking at an event at the Centre for Policy Studies (founded by Margaret Thatcher) yesterday:
Summary: it’s going to be very bumpy next year, in four distinct phases. Labour as well as Tories should listen up.
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Click to access Open%20letter%20on%20trends%20in%20balancing%20costs%20in%202021.pdf
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“6m UK homes may be unable to pay energy bills after price hike, charity warns
Campaigners fear fuel poverty could hit highest level since records began unless government acts”
https://www.theguardian.com/society/2022/jan/01/6m-homes-uk-pay-energy-bills-price-hike-fuel-poverty
“The number of UK households living in fuel poverty could climb to the highest level on record by this spring unless the government moves to soften the blow of a looming record high energy bill hike, according to a fuel poverty charity.
Around 4 million homes in the UK were already classed as fuel poor before a surge in global energy market prices triggered one of the steepest ever energy bill hikes in October, but campaigners are braced for a record increase in the numbers unable to pay their energy bills following another hike this spring.
The charity National Energy Action warned that the double blow to household bills could cause at least 2 million more homes to slip into fuel poverty compared with the start of 2021, taking the total to 6 million households. This would be the highest level of fuel poverty across the UK since records began in 1996.”
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This is a story which, quite rightly, isn’t going to go away:
“Gas prices: MPs and peers urge PM to act on energy bills”
https://www.bbc.co.uk/news/uk-59849731
“The government says it is meeting suppliers and the regulator regularly to work out how to help consumers.”
Sounds like a desperate scrabbling round for answers that don’t exist, to me. Well, they do exist, but they are unacceptable to the “net zero” fanatics.
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Mark Hodgson says:
This is a story which, quite rightly, isn’t going to go away:
“Gas prices: MPs and peers urge PM to act on energy bills”
That is exactly the way that parliamentary government has worked since, at least, the “Glorious Revolution”. Some minor toffs think up great get-rich-quick schemes that they exploit until they get themselves known in the right place. Then when their scams go tits-up they get their mates in government to bail them out. That’s how the British obtained the biggest empire in history without, compared with say the Roman Legions, having to fight very much.
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“Government and Ofgem have sleepwalked into this energy crisis”
https://www.theguardian.com/business/2022/feb/03/government-ofgem-sleepwalked-energy-crisis-prices
“For the last umpteen years Ofgem has offered parental-sounding advice when adjusting the energy price cap. “Switch to save money,” the regulator trumpeted last February as the maximum rate was raised by £96. Even last autumn, when £139 was added, Ofgem was still saying customers “can avoid the increase by shopping around”.
There’s no escape now. As the thumping £693 increase from April landed on Thursday, the regulator merely offered a limp line about how it knows it’s all “extremely worrying for many people”. It, like everybody else, knows there aren’t better deals to switch to. Competition has disappeared. The price cap has become the floor rate, not the ceiling. Roughly 80% of households are on it – the main exceptions being those who had the luck or foresight to secure a fixed rate before wholesale gas prices quadrupled.
To put it mildly, the energy supply market looks nothing like the one Ofgem has spent a couple of decades trying to encourage. Some 29 suppliers – half the tally last June – have gone bust and the high corporate casualty rate cannot be pinned solely on the “unprecedented” (the regulator’s favourite word) rise in gas prices.
At least part of the blame falls on a rotten regulatory system that allowed undercapitalised companies to try their luck by operating with skimpy hedging policies on energy-purchase contracts. Ofgem had a go at tightening licence rules a couple of years ago, but merely tweaked. The admission by the chief executive, Jonathan Brearley, in December that a proper version of “financial resilience” is required arrived extremely late in the day….”.
And there’s more – worth a read, IMO. I agree with much, though blaming it primarily on the gas price hike, as the article does (“Yes, the surge in gas prices is the prime driver of this crisis, no question.”) rather ignores the role played by net zero, which gets not a mention.
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“Ofgem admits it should have acted sooner to protect UK households
Regulator says it missed chances to make energy market more resilient, after wave of collapsed providers”
https://www.theguardian.com/business/2022/feb/08/ofgem-regulator-uk-energy-market-collapsed-providers
“The energy industry regulator has admitted that British households would have been better off weathering the winter gas crisis if it had acted sooner to crack down on financially unstable energy suppliers.
The Ofgem chief executive, Jonathan Brearley, told MPs that households could face a bill of about £200m to cover the costs left by a string of energy provider collapses since gas market prices rocketed to record highs last September.
“We need a retail sector that’s more resilient and more able to deal with the kind of shock that we’ve seen,” Brearley told the Commons business select committee. “And to be clear, chair, we accept that had we done that earlier this would have been better for customers.”
The Ofgem boss, who stepped into the role in February 2020, identified multiple missed opportunities to strengthen the rules for energy suppliers that could have helped to avoid the number of supplier collapses, and the related costs for bill payers and the Treasury.
Instead, regulatory decisions had been “dominated” by the desire to create more competition by increasing the diversity of suppliers within the market but that new regulation to protect customers against poorly-run companies was not put forward “with the pace and scale that I think with hindsight that we needed”.
“When you look back at the history of Ofgem’s decision-making … without doubt there was a perspective at the time that we needed to diversify the market, and challenge the dominance of the big incumbent companies. That’s what dominated thinking at the time. It’s my view that we should have combined that with greater financial resilience,” he said.
The UK has had the largest number of energy company casualties across Europe, after a steady influx of energy startups to the market over recent years, many of which used their customers’ credit balances to provide working capital while offering heavily discounted energy deals.
The cost of paying these credit balances back to customers after their supplier has gone bust, combined with the cost of sourcing gas and electricity from the market at current rates, is covered by imposing higher energy bills across the market.
Although the regulator brought in plans to toughen financial checks on small suppliers at the beginning of 2020, it has taken action against only one, despite evidence that many in the market relied on their customers’ credit balances to stay afloat.”
Pretty damning.
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Mark – “The UK has had the largest number of energy company casualties across Europe … & despite evidence that many in the market relied on their customers’ credit balances to stay afloat”
everybody in the UK watched ads on TV to switch for a better deal & they implied only old or stupid people would not do this.
kind of knew it was to good to be true (but who can resist a bargain)
ps – no deal for me in IOM (Gas bill due any day – gulp!!!)
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“Consultation on Scottish Hydro Electricity Transmission’s (SHET’s)
MSIP Re-opener (Gremista Grid Supply Point Project) ”
Click to access Consultation%20on%20SHET%E2%80%99s%20MSIP%20Re-opener%20%28Gremista%20Grid%20Supply%20Point%20Project%29.pdf
42 pages of it. By the way, I see that Ofgem is now behaving like a commercial organisation with a snazzy mission statement – “Making a positive difference for energy consumers”. I wonder how many consumers would agree with them?
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Behind a paywall, unfortunately:
“Neil Mackay: Time to stop Ofgem running a cartel for the energy companies”
https://www.heraldscotland.com/politics/20175599.neil-mackay-time-stop-ofgem-running-cartel-energy-companies/
Anyway, the conclusion seems to be “time to pull the plug” on OFGEM.
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“UK’s energy crisis response could include winter power cuts
Cold weather and gas shortages could force rationing of electricity to some firms or even households”
https://www.theguardian.com/business/2022/aug/09/uks-energy-crisis-response-could-include-winter-power-cuts
“Businesses and even consumers could face blackouts this winter under government crisis plans as concerns grow over power supplies, it has emerged.
Under the government’s latest “reasonable worst case scenario”, officials believe the UK could experience blackouts for several days in January if cold weather combines with gas shortages to leave the country short of power.
Concerns are mounting over the toll on households this winter as new forecasts showed annual energy bills are forecast to top £4,200 from January, triggering a warning that Britons face “serious hardship on a massive scale” without government intervention.
The deepening energy crisis has piled further pressure on the Tory leadership candidates, Liz Truss and Rishi Sunak, who are split on how to support households struggling with the rising cost of living.
Under the forecasts, which government sources insist are highly unlikely to materialise, the power shortfall could total about a sixth of peak demand even if emergency plans to fire up retiring coal power plants are enacted, Bloomberg reported.”
It’s going well, isn’t it?
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“Collapse of supplier Bulb could add more than £150 to energy bills
Cost of bailing out UK company threatens to top £4bn by next spring because of soaring gas prices”
https://www.theguardian.com/money/2022/aug/22/collapse-of-supplier-bulb-could-add-more-than-150-pounds-to-energy-bills
“Households could end up paying more than £150 extra on their energy bills because of the collapse of Bulb, as the price of bailing out the failed supplier threatens to top £4bn by next spring.
The cost of bailing out the UK company, which has about 1.4 million customers, has escalated because of rising wholesale gas prices since Russia’s invasion of Ukraine.
The Office for Budget Responsibility said in March that the bailout would cost £2.2bn over two years. The consultancy Auxilione forecasts that Bulb could lose a further £420m for the six months to October, when households use less energy, and £1.6bn during the colder winter months.
Bulb is in a special administration overseen by the UK government and run by the restructuring firm Teneo. The government has refused to allow it to hedge – where companies buy energy at a fixed price for a certain period – exposing it to rising gas prices.
Bulb was one of 29 suppliers to have collapsed during the energy crisis, with many caught out by sharp rises in prices combined with a lack of hedging.”
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Who on earth thought it was a good idea to design a system that gives priority to unreliable and unpredictable renewables while building in penalties for gas?
“‘Significant risk’ of winter gas shortages in Great Britain, warns Ofgem
Electricity-producing firms ask regulator to change rules that could penalise them if gas supplies run out”
https://www.theguardian.com/business/2022/oct/03/significant-risk-of-winter-gas-shortage-threatens-uk-power-supply-says-ofgem
Wind companies suffer no penalties for failing to supply energy, and are even paid to switch off when they supply too much.
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madness – but the blob have control of the knob.
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“‘Too slow to act’: Ofgem’s ‘failures’ cost energy consumers billions, say MPs
Damning report questions regulator’s fitness to police the industry after so many suppliers folded”
https://www.theguardian.com/business/2022/nov/13/too-slow-to-act-ofgem-failures-cost-energy-consumers-billions-say-mps
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