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.
It reassures me a bit that general taxation (rather than energy bills) will be used to cover the costs, but there is a fundamental problem with pretending that the market is adequate to control these infrastructure companies. The game of monopoly was created to show how in a market generally the winner takes all. The Graun webpage header is right: are we at risk of returning to an oligopoly?
A
2.0 kW/4.62 MWh pa in Ripples, 4.5 kWp W-facing pv, 9.5 kWh batt
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Most travel by bike, walking or bus/train. Veg, fruit - and Bees!
A nationalised service would never have given us Octopus and their great products/innovations.
I agree the model is broken. But part of the reason it is broken is government mandated price cap that forces companies to supply energy for less than cost price. That will force any company under. The bigger will naturally last longer than the smaller. I don;t think you can blame "Delboy and Rodney" how long would your business last if you were forced to sell products below cost price?
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3x 380W JA Solar panels (1.14kWp)
5x 2.4kWh Pylontech batteries (12kWh)
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(Artist formally known as ******, well it should be obvious enough to those for whom such things are important.)
Of course, they won't last long, their model was just buy something add a margin and sell on, with no control of buying or selling price, no added value nothing created, pay out a dividend. That's a joke.
There's no reason a nationalised company can't innovate, in fact history shows they can Intercity 125 for one.
+1 for BR innovating. I would also offer the first Solid State Interlocking (i.e. a virtual physical signalbox, but actually a computer in a cabinet somewhere.) Also the first tilting train which was abandoned, sold abroad - then bought back!
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.
£1.7 Billion? That's one hell of a mis-reading of the market on the company's part! How many of the big 6 are vulnerable in these circumstances?
I always think that comments like
The government loan will mean the administration is managed in a way that the lights stay on for Bulb's 1.7 million customers.
are a joke. Of course they won't be cut off. Can anyone imagine any organisation (let alone this government) suddenly finding a corps of enough tradesmen to run round all the customers either pulling out and confiscating their mains fuses, or closing their gas valves and clamping a seal on them?
A
2.0 kW/4.62 MWh pa in Ripples, 4.5 kWp W-facing pv, 9.5 kWh batt
30 solar thermal tubes, 2MWh pa in Stockport, plus Congleton and Kinlochbervie Hydros,
Most travel by bike, walking or bus/train. Veg, fruit - and Bees!
AE-NMidlands wrote: ↑Wed Nov 24, 2021 10:39 pm
I always think that comments like
The government loan will mean the administration is managed in a way that the lights stay on for Bulb's 1.7 million customers.
are a joke. Of course they won't be cut off. Can anyone imagine any organisation (let alone this government) suddenly finding a corps of enough tradesmen to run round all the customers either pulling out and confiscating their mains fuses, or closing their gas valves and clamping a seal on them?
A
On the other hand (on second thoughts) didn't somebody say recently that smart electricity meters have a relay in them? In these circumstances I wouldn't like to be on a smart pre-payment meter having to top up some sort of a card or account to keep the juice on.
I can imagine some poor or vulnerable people losing their supply in these circumstances.
A
2.0 kW/4.62 MWh pa in Ripples, 4.5 kWp W-facing pv, 9.5 kWh batt
30 solar thermal tubes, 2MWh pa in Stockport, plus Congleton and Kinlochbervie Hydros,
Most travel by bike, walking or bus/train. Veg, fruit - and Bees!
AE-NMidlands wrote: ↑Wed Nov 24, 2021 10:39 pm
I always think that comments like
The government loan will mean the administration is managed in a way that the lights stay on for Bulb's 1.7 million customers.
are a joke. Of course they won't be cut off. Can anyone imagine any organisation (let alone this government) suddenly finding a corps of enough tradesmen to run round all the customers either pulling out and confiscating their mains fuses, or closing their gas valves and clamping a seal on them?
A
On the other hand (on second thoughts) didn't somebody say recently that smart electricity meters have a relay in them? In these circumstances I wouldn't like to be on a smart pre-payment meter having to top up some sort of a card or account to keep the juice on.
I can imagine some poor or vulnerable people losing their supply in these circumstances.
A
I cannot imagine the lights would ever go off. I cannot see a government surviving that. I can see Bulb being turned into "Northern Rock" where it continues under government ownership until all the customers have found new providers.
12x 340W JA Solar panels (4.08kWp)
3x 380W JA Solar panels (1.14kWp)
5x 2.4kWh Pylontech batteries (12kWh)
LuxPower inverter/charger
(Artist formally known as ******, well it should be obvious enough to those for whom such things are important.)
Yep, at great cost to the taxpayer, jobs to the sort of mates that encouraged this degree of practise in the first place.
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Mr Gus wrote: ↑Thu Nov 25, 2021 12:28 pm
Yep, at great cost to the taxpayer, jobs to the sort of mates that encouraged this degree of practise in the first place.
Carrion crow with road kill & spatula's (ala Gary Larson)
The Guardian view on the energy crisis: a Bulb goes out
Bulb has become the biggest energy supplier to go under since August. Its collapse brings the crisis to a new climax
‘A triumph of marketing, it brought no real innovation to the industry.’
The crisis in the UK’s energy market has been growing in scale and seriousness for months. This week it claimed its latest corporate victim – and reached a tipping point. Bulb is the 23rd energy supplier to fail since August, but, unlike minnows such as Igloo and Neon Reef, it cannot easily be taken over by a rival. With turnover of £1.5bn, it is simply too big.
Bulb will instead enter “special administration” and be run on behalf of the government until it can be broken up or sold off. Meanwhile, its 1.7 million customers will remain with the company and get the same corporate branding on their bills, even while taxpayers stump up for any immediate costs. Any final losses will be passed on to households through their fuel bills.
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.
There is about this whole sorry affair a strong whiff of Northern Rock. In the 2000s, that was a challenger bank offering cheap mortgages, indulged by a dopey regulator and all the while relying on a precarious business model. Just like the old Newcastle bank, Bulb’s collapse raises some serious questions about the true purpose of competition in what is a utility sector. If a taxi app collapses, it ultimately does not matter as much as the failure of a supplier of finance or fuel.
In the short term, one obvious solution is for the watchdog Ofgem to pay far more attention to the financial viability of businesses in its sector. That will frankly make it harder for smaller players without ready access to a cash fountain. So over the long run there is a big question about how the sector can deliver lower prices and energy security while helping the UK move towards a lower carbon future.
The answer to that will probably not lie wholly through a market solution. It may involve a much larger role for the state, either through further regulation and funding, or even a public sector entity. Someone should tell Sid.
"Any final losses will be passed on to households through their fuel bills" sounds to me like all households (not users, note) will pick up the costs rather than ex-Bulb customers - or all tax-payers.
2.0 kW/4.62 MWh pa in Ripples, 4.5 kWp W-facing pv, 9.5 kWh batt
30 solar thermal tubes, 2MWh pa in Stockport, plus Congleton and Kinlochbervie Hydros,
Most travel by bike, walking or bus/train. Veg, fruit - and Bees!
