Challenges faced by energy suppliers are greater than the CMA claimed
Updated: Nov 13, 2021
“All they are actually doing – and I shall get into trouble for this – is metering and billing. They are not making the stuff,”. Words from the head of the CMA's two year investigation in the UK Energy Market according to the Guardian in 2016.
In the last few weeks, we've seen more than 5% domestic market share placed into SoLR, and nearly 7% of market share since January this year. Current market conditions make it highly likely that more will follow.
Our recent analysis (link in the comments) suggests that the real impacts of supplier failure will be more than £1 billion pounds.
There are a number of other suppliers who are really struggling in the market, ranging from the well hedged - to the unhedged. And by that I mean there are suppliers out there who are leaving all of their energy to the imbalance markets, and going 100% unhedged.
We look to be in for a challenging few months in the whole sale markets. The forward curve is in backwardation, and prices look to be coming down for Summer 22. This means we have hard yards for a number of months.
Speaking to a number of energy CEO's this week, they've all shared with me that they've been placed under immense pressure to "not collect debt". Suppliers will need to take a hard look at their current approaches to payment adequacy and debt collection, and look to come to appropriate arrangements with customers on the repayment of arrears, and given the likely reforms on credit balances have a very clear set of processes in place to manage customer credits.
It's clear that energy suppliers are doing more than just metering and billing. The complexities of the market are vast, and the current rules which need to be adhered to are making it very difficult to achieve a fair rate of return.