Energy Suppliers

[chrcoluk]

This isn’t a blip, the government has forced them to sell their product to 1.7 million people at a significant loss for a sustained period of time.

Where’s the evidence they were actually mismanaged?

Lack of money for a rainy day.
Over aggressively selling cheaper consumer products.
Lack of diversity meaning too much of their business is reliant on reselling energy.
(Possibly) they didnt book enough energy on longer term deals like the bigger energy companies did.

If you going broke within a few months of things getting rough you not well managed. It is as simple as that. My dad's business sometimes had slumps that lasted over a year, he didnt fold the business, he rode it out.

Why are british gas, eon, npower etc. still going.

 

[b0rn2sk8]

Why are british gas, eon, npower etc. still going.

For the two obvious reasons:
They’ve had decades of overcharging their customers and therefore retained earnings to fall back on.
Many of those companies have had decades to develop other revenue streams, form parts of huge multinational groups, have the advantage of being a previously privatised state utility or in the case of EDF, owned by a foreign government.

Just because a company has failed, doesn’t mean it has been badly managed. It’s also not even realistic for a company which was founded in what 8 years ago and only broke out of the tiny irrelevant supplier bracket 3 or 4 years ago to have all of the things an incumbent player has had for decades while continuing to grow and reinvesting in growing the company.

Companies that have been around for 8 years don’t have rainy day funds which includes government imposed loss making, particularly rapidly growing ones where their customer base from a few years ago bares no resemblance to what it is now so it’s previous retained profits are not going to be able support it’s current customer base during the period of government imposed loss making.

This isn’t a rainy day either, it’s a force 6 hurricane ripping through your business model caused by geopolitical issues well outside the scope of their remit with a bit of U.K. government incompetence thrown in as well for good measure.

I wouldn’t even describe bulbs approach as overly aggressive. I’ve been very engaged with the energy market for years and bulb was the cheapest once for a period of around 3 months.

Sure they were always cheaper than the big providers but that is literally the only point you can compete on in the market. It’s not like you can differentiate the product at all. At the end of the day, electric is electric when it arrives at my consumer unit and it’s the same no matter who provides it.

There is no way anyone can break into the market without being cheaper, it’s just not possible.

 

[Zenduri]

As i keep saying in this thread, the "big 5" have to buy electricity and gas 14 months in advance (due to regulation), which requires an enourmous amount of capital which they have, to ride out the storm like this. The smaller companies and some medium sized ones didnt have the capital and are having to buy on day and month ahead prices which at the moment are astronomical and mean they are often selling gas and electric to fixed tarrif and ofgem capped customers at a huge loss.

Not able to pass on the costs = going under regardless of how well they are managed. If its even remotely cold this winter we're going to see many more go under

 

[chrcoluk]

Well its a difference of opinion, mine is its common for UK business mindset to run with little capital in the bank and a unwillingness for directors to cover losses out of their pocket which is why we have so many bankrupt companies out of the ones that dont get sold off. Have seen it time and time again.

Remember at one point the gov was considering bailing these out, I expect after due diligence they found issues with the sustainability of these business and hence allowing them to go broke.

Ok if after a year or so of losses maybe the argument is there, some of these companies literally went bust within a fortnight of these problems starting.

Regarding having to go cheaper, if the business plan is to grow via bottoming out the market rather than offering something unique, you better be sure you got lots of capital to ride out the bad days.

 

[b0rn2sk8]

The issue is that

Regarding having to go cheaper, if the business plan is to grow via bottoming out the market rather than offering something unique, you better be sure you got lots of capital to ride out the bad days.

How does one make electricity different?

The electrons that arrive at your house are the exact same regardless if you buy them British Gas or Bulb. The only thing to compete on is price. Before you say customer service, that's well down the priority list compared to price.

 

[silversurfer]

Scottish gas produce the stuff, they import it from cheaper parts of the world and can arbitrage the price differences. Im not sure if they gain from the higher price or not but if all the smaller companies had hedged all their obligations in the market below the current fix they'd been ok; I dont know that was feasible but the larger companies might have been able to as they own production.
Price volatility and inflation in general is super destructive to economies, we havent seen the last of this

 

[explicit4u]

My 'offer' from Ovo for a fixed rate for 12 months capped out at £120! I've slowly watched it go up from around £55 which in hindsight I should have taken (usually around £30-45 usage), they're now not even offering a 1 year option, 2 years at £85 or 3 years at £75!

 

[BigBoy]

Scottish gas produce the stuff, they import it from cheaper parts of the world and can arbitrage the price differences. Im not sure if they gain from the higher price or not but if all the smaller companies had hedged all their obligations in the market below the current fix they'd been ok; I dont know that was feasible but the larger companies might have been able to as they own production.
Price volatility and inflation in general is super destructive to economies, we havent seen the last of this

The gas we (the UK) produce (99% from the north sea) has been and will continue to be the most expensive to produce natural gas in the world. There is no hedging UK gas prices that have not changed in quite literally years.

The issue we have stems from Russia throwing it's toys out of the pram and shutting down the larges gas pipeline in the world taking global wholesale prices from 1.2p per cubic meter to nearly 80x that (at its peak). We import over half of all our natural gas, mostly from the Netherlands, Belgium and Norway.

There is Whole political thing going on that under lies the gas price hike to do with Embargoes and sales restrictions placed on Russia for aggressive behaviour towards the Ukrainian and other areas.

The last of it you say? This is just the tip of the iceberg nudging and the outer skin of the UK economy as a whole.

In the UK we have had the lowest energy prices across Europe for many many years because of deals we made via the EU. Good old Brexit made a mess of far more than the government are willing to let on when it comes to the wider energy market.

Just for reference, I work for EDF as an engineer in a major supply roll, I deal daily with large format installations (industrial use and production of both Gas and Electricity).

 

[ChrisD.]

This is my BG tariff:

Supplier British Gas
Tariff name Price Promise Apr 2022
Tariff type Variable
Payment method Monthly Direct Debit
Standard unit rate 20.592p per kWh
Standing charge 25.093p per day

After April I guess it'll switch to their SVR, providing nothing changes that would be the best to go on.

 

[Simon]

This is my BG tariff:

Supplier British Gas
Tariff name Price Promise Apr 2022
Tariff type Variable
Payment method Monthly Direct Debit
Standard unit rate 20.592p per kWh
Standing charge 25.093p per day

After April I guess it'll switch to their SVR, providing nothing changes that would be the best to go on.

That is the energy cap price there.

 

[Simon]

Octopus emailed me.

You're on Flexible Avro, our always great-value variable tariff.

Your prices (including VAT) are:

• A standing charge of 24.11p per day and 20.49p/kWh for your electricity.
• A standing charge of 26.11p per day and 4.13p/kWh for your gas.

 

[Semple]

As i keep saying in this thread, the "big 5" have to buy electricity and gas 14 months in advance (due to regulation), which requires an enourmous amount of capital which they have, to ride out the storm like this.

Are they buying in the current climate at the astronomical prices? Or are they effectively paused until the prices drop to a more manageable level? Presumably buying 14 months in advance gives them some decent window where they could just not buy any gas for 6 months and hope by then that prices have dropped.

 

[Zenduri]

Are they buying in the current climate at the astronomical prices? Or are they effectively paused until the prices drop to a more manageable level? Presumably buying 14 months in advance gives them some decent window where they could just not buy any gas for 6 months and hope by then that prices have dropped.

Honestly dont know at the moment, i can find out though. i Suspect they are still buying in advance hence why 2-3 year fixed prices are basically all thats on offer now, to spread the cost out over multiple years

 

[chrcoluk]

The issue is that


How does one make electricity different?

The electrons that arrive at your house are the exact same regardless if you buy them British Gas or Bulb. The only thing to compete on is price. Before you say customer service, that's well down the priority list compared to price.

Price is all you can think off?

Example's would be paypal support, monthly bills, annual bills, dedicated phone app, dedicated windows app, energy advisor service, energy saving products, energy monitoring products, and more, these are the first things that popped up in my head as was typing this reply. There is more but the list would just go on and on.

 

[Journey]

It’s not like you can differentiate the product at all.

Yet Octopus do just that, they have made the market a different place for a lot of folks, through the use of smart metering that is being rolled out. I'm sure once you order your Model 3 you'll be looking at them as a supplier.

 

[b0rn2sk8]

Price is all you can think off?

Example's would be paypal support, monthly bills, annual bills, dedicated phone app, dedicated windows app, energy advisor service, energy saving products, energy monitoring products, and more, these are the first things that popped up in my head as was typing this reply. There is more but the list would just go on and on.

I can see where you are coming from but the issue with those payment ideas is that In reality the vast majority of the market want a fixed monthly payment that they don’t want to think about.

It’s the reason people flocked to direct debit in the first place, that and to avoid the extra charges of not doing so.

Many suppliers support actual useage billing but they charge you more for the privilege because it costs them more to administer. To support PayPal, they’d have to charge even more due to the fees. Why would you pay extra to pay my PayPal over direct debit?

Pretty much everyone has an App. Having or not having an app doesn’t really add value. Most people switch via a price comparison siites and are the main route of descoverability for energy suppliers. Most meters read themselves and websites are optimised for mobile either way.

All the big suppliers offer energy saving products, advice and monitoring and have done for years so that isn’t anything new either. Likewise they would have a cost which most people just don’t want to bear the burden of that.

Like I said, outside of price, it’s very difficult to differentiate yourself in the energy market.

Let’s be honest, you just aren’t going to move from a behemoth like British Gas to a little fledgling company unless it was cheaper.

Yet Octopus do just that, they have made the market a different place for a lot of folks, through the use of smart metering that is being rolled out. I'm sure once you order your Model 3 you'll be looking at them as a supplier.

Octopus are an interesting supplier, there not one of the big boys but they aren’t exactly small. Outside of agile, the Ocotpus offering isn’t particularly unique anymore.

Go wasn’t exactly revolutionary, it’s just a variation on economy 7. I’d argue that thing that made attractive was ultimately the price though. You wouldn’t have signed up to it if it was more expensive.

It’s exactly what was initially attractive about agile in a falling market with low demand, it was very cheap. As soon as that changed everyone ditched it so it falls back to a price motivation again.

P.S. I’ve ordered one . I may end up with Octopus, I may not. It depends who can deliver the electric the cheapest and lots of places offer similar options but the market is a bit of a mess at the moment.

 

[Semple]

All the big suppliers offer energy saving products, advice and monitoring and have done for years so that isn’t anything new either.

I didn't see much from the big suppliers on energy monitoring. They all offer locked down smart meters where you're not able to retrieve your own data. AFAIK Octopus have a public API that allows you to do this.

 

[200sols]

Apparently the administrator has £1.7billion of public funds available to keep Bulb going through winter. Perhaps just highlights the colossal amount of money these companies are losing right now.

 

[b0rn2sk8]

Yup I saw that, £1.7b on top of all of the money coming in from customer bills will not even get them to April next year. Apparently that £1.7b is more than their entire turnover for the previous year.

It says it’s a loan but I can’t ever see that being repaid. No one’s going to take in the company saddled with that debt.

 

[Semple]

Yup I saw that, £1.7b on top of all of the money coming in from customer bills will not even get them to April next year. Apparently that £1.7b is more than their entire turnover for the previous year.

It says it’s a loan but I can’t ever see that being repaid. No one’s going to take in the company saddled with that debt.

I guess it's phrased as a loan to not upset the taxpayer, but as you say, no investor in their right mind is going to buy a company that already has a 1.7bn debt - especially as Bulb don't have any other assets / business interests that are worth money.