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Energy firms on the brink of collapse, reveals report

May 27, 2018

By Paul Homewood

 

 

From the Telegraph:

 

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Half of Britain’s energy suppliers face an existential risk after the “Beast from the East” tore through the balance sheets of the industry’s small players.

Thousands of energy customers could be left in limbo due to a high risk that around 10 of the most fragile suppliers are on the brink of going under.

Many hundreds of thousands more bill payers face the risk of sudden ­energy tariff hikes because almost 40 suppliers may be forced to squeeze their customers to survive.

The startling strain endured by the industry in the wake of the volatile winter energy market is laid bare in leaked proprietary data compiled by one of the City’s top analytics firms, Dun and Bradstreet.

The report, seen by The Sunday Telegraph, ranks 37 of Britain’s 81 energy suppliers as being at risk. Eight are identified as being on the brink of failing based on forensic analysis of company financial accounts and trade payments.

The dire health warning underlines the struggle of energy suppliers, which have endured a winter of price spikes not seen in six years, and face the threat of the Government’s looming energy price cap later in the year.

The list includes many of the suppliers that rely on offering some of the market’s cheapest deals to see off the steady rise in competition. One of the worst hit suppliers, Iresa Energy, has already quietly accepted a major bailout from a larger peer within the last month. The supplier grasped another stay of execution after slumping into credit default twice last week…..

 

Energy supply bosses fear the regulator may force their companies to pick up swathes of disgruntled energy customers if a smaller market rival goes bust. Their fragile profit margins have been tested by the sudden freeze that swept Britain in late March, and decimated cash flows for poorly-funded new market entrants after energy markets spiked to six-year highs.

A perfect storm of weaker European gas production, shrinking storage ­capacity and rising oil prices has held energy market prices well above those paid last year.

https://www.telegraph.co.uk/business/2018/05/26/energy-firms-brink-collapse-reveals-report/

 

This was an accident waiting to happen. Indeed. my small supplier went under last year for similar reasons.

Many small suppliers have set up in recent years, offering what appear to be attractive prices, but in reality surviving on thin margins. When energy prices spike, as they did this winter, they are rapidly into big problems.

Government has delighted in using these lower prices as a stick with which to beat the Big Six energy giants, who of course have to stand the full cost of the government’s own eco-nonsense, such as smart meters. This has enabled them to deflect attention away from their own ruinously expensive climate policies.

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15 Comments
  1. Charles Wardrop, permalink
    May 27, 2018 10:27 am

    All the more reason the UK to frack, carefully regulated, and also to beware of “smart meters” in domestic use.

  2. Bill permalink
    May 27, 2018 10:28 am

    Dig deep comrades you know you want to.
    https://www.patreon.com/climatehomenews/overview

  3. May 27, 2018 10:57 am

    It’s a portent of worse things to come.

  4. May 27, 2018 11:13 am

    Not surprising really as these energy companies have been converted into stealth tax collectors and those that collect the least tax will go to the wall. The market rules and expensive energy is coming our way.

  5. Joe Public permalink
    May 27, 2018 11:23 am

    The smaller energy suppliers offered cheaper prices because they didn’t have the costly ‘environmental obligations’ of the larger suppliers.

    Energy suppliers have legal obligations under the Energy Company Obligation (ECO) scheme if they:

    have more than 250,000 domestic customers
    provide more than 400 gigawatt hours of electricity or more than 2,000 gigawatt hours of gas.

    https://www.ofgem.gov.uk/environmental-programmes/eco/energy-suppliers

  6. HotScot permalink
    May 27, 2018 11:29 am

    Imagine that, a cold winter in Britain.

    Not that it was particularly long or harsh or long, a couple of weeks of snow and ice in the South East, at worst. I appreciate it was worse elsewhere, but come on, a few weeks of cold weather in the winter, I mean, it’s winter, what do these companies expect.

    If the climate alarmists are right, we can expect much worse weather, much more often. How many energy companies will we have left then? They can’t have it both ways, telling us the weather will be worse, but to stop it getting worse, we must all convert to renewables, when our current fossil fuelled energy industry can’t cope when the weather is better than it will be in our dystopia future.

    How on earth do they expect renewables to cope?!

    And if anyone’s remotely interested, here’s Matt Ridley’s calculations on the staggering amount of land area required by renewables, just to cope with the annual 2% rise in global demand for energy, never mind replacing the existing capacity. It’s simply not physically, practically, or financially possible.

    “At a density of, very roughly, 50 acres per megawatt, typical for wind farms, that many turbines would require a land area [half the size of] the British Isles, including Ireland. Every year. If we kept this up for 50 years, we would have covered every square mile of a land area [half] the size of Russia with wind farms. Remember, this would be just to fulfil the new demand for energy, not to displace the vast existing supply of energy from fossil fuels, which currently supply 80 per cent of global energy needs. [para corrected from original.]”

    http://www.rationaloptimist.com/blog/wind-still-making-zero-energy/

    This is difficult for even the most rabid greens to deny or distort, this is just simple arithmetic.

    Talking of which, this self confessed green agrees. The late Dr. David McKay does a short but illuminating TED talk on the subject. Very well worth watching.

    • Chilli permalink
      May 28, 2018 12:33 am

      After seeing the renewable options set out in that TED talk, the only sane conclusion is ‘let’s just keep using fossil fuels’. Also it’s a bit disingenuous to point at the decline in UK coal and North Sea Oil extraction and say ‘this is because the resources are finite’. No – there’s plenty more coal and oil down there – the reason for the decline was a) unions demanding ever higher salaries for miners making the mines uneconomic compared to overseas mines and b) tax rates up to 80% on North Sea Oil revenues – making it cheaper for the rigs to move elsewhere.

      • Ben Vorlich permalink
        May 28, 2018 7:59 am

        Deep mined coal is never going to be able to compete with open cast mining, highly paid miners or not. Open cast mining in the UK was never going to be acceptable to the Great British public. Germany has a lot of open cast mines supplying its power stations. destroying most of the Hambach Forest in the process.

      • Rowland P permalink
        May 28, 2018 10:32 am

        Coal mining was stitched up by our own government demanding a carbon tax of around $30 per ton. The German ones had to pay the same but were then paid a subsidy of $100 per ton – assuming my sources were correct. So our industry went to the wall.

  7. Green Sand permalink
    May 27, 2018 11:30 am

    Going bust? They could stop wasting resource on this crap:-

    ‘New smart meter? It could be second-hand – and you still can’t switch energy supplier ‘

    “Faulty second-hand smart meters are being installed in homes despite the next generation of meter being months away from a large-scale roll out.

    New figures from Electralink, the industry data analysts, and seen exclusively by Telegraph Money, reveal that 12,000 first generation smart meters – known as Smets I – are being replaced with other first generation meters every month.

    Smart meters allow consumers to track their energy usage in real time and send readings to their supplier automatically. However, most Smets I models will lose their smart functionality if the user switches provider……

    ……But Telegraph Money has learnt that some of the roughly 440,000 meters being installed in Britain each month have previously been removed from other homes because they had ceased to be fully operational……

    …….It is unclear why so many smart meters are being replaced each month, but some suppliers, including Ovo Energy, said they offered a new meter to customers who had lost smart functionality when they switched. Others will simply be broken…..

    ……Suppliers are obliged to do their best to install a smart meter in every home by 2020 and more than 10 million are currently in place as part of the £11bn roll-out. The programme is being funded by energy companies and passed on to consumers in energy bills.

    Experts estimate a smart meter installation costs around £250, meaning the current rate of replacement has the potential to ramp up the overall bill. The Government claims the roll-out will take £300m off energy bills by 2020, even after costs, but the need to scrap meters could push costs higher…….

    https://www.telegraph.co.uk/bills-and-utilities/gas-electric/new-smart-meter-could-second-hand-still-cant-switch-energy/

  8. TinyCO2 permalink
    May 27, 2018 11:44 am

    One of the tricks by big building companies now is to break into smaller and smaller concerns. They take advantage of the anonymity of a new name and government rules for small companies. The hub acts as a contractor to the mini companies and profits are funneled towards the real company for ‘consultancy’. When things get tough, the small offshoots go bust leaving customers and real suppliers high and dry. If you dig deep enough you find names working for the big companies listed as directors. I have wondered if some of these small energy suppliers are part of a similar con.

  9. songhees permalink
    May 27, 2018 12:13 pm

    ‘The Deliberate Corruption of Climate Science’.

    My website is
    “Human Caused Global Warming”, ‘The Biggest Deception in History’.


    http://www.drtimball.com

  10. It doesn't add up... permalink
    May 27, 2018 12:53 pm

    A link to keep an eye on:

    https://www.bmreports.com/bmrs/?q=balancing/creditdefaultnotice

  11. It doesn't add up... permalink
    May 27, 2018 7:33 pm

    I suspect many of these small suppliers do well when prices are falling, because they know that the big boys will have invested in hedges that locked in high prices. Unhedged themselves, they lose out in rising markets. Why are they unhedged? Hedging is insurance that has a cost, and by not taking it out they lower their costs. Also, it requires the provision of large amounts of collateral that small firms will not have, since hedges are typically either CFDs (where they would be required to pay out in falling markets, but get paid in rising ones), or caps that come with an upfront premium.

  12. Gerry, England permalink
    May 29, 2018 1:00 pm

    I was with GB Energy when they went bust and everything smoothly moved over to Coop energy and surprisingly even the rate stayed the same for the rest of the contract. As they were then more expensive I moved elsewhere.

    I have just left Iresa as they were taking no notice of my usage which has dropped due to a pond system no longer running. They then increased my monthly direct debit and so I left. I have finally got a closing bill with them still owing me nearly £200 which I am taking steps to recover. So if you are with a small supplier and they pull the unnecessary increase stunt, cancel your direct debit when you have a month or so credit.

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