Energy Companies going under

Will yours?

Yes but just so. 
 

The current system isn’t working. Why should customers of insolvent suppliers have their credit balances protected by the customers of larger more stable suppliers? If you want to go round saving every last penny by switching to unknown “disruptive” companies then that should be at your risk. 
 

Im not actually against being back regional utility boards. 

Scottish Power, fixed rate until March 22. 

Went online to check the price of a new fix to Dec 22  - the rate was 60% higher than the current fix.

Who on earth would be idiotic enough to sign up to that?

Their variable rate, even with 2 hefty increases in the cap coming up, will only be about 25% higher.

In April the price ceiling will be revised upwards to reflect wholesale price movements in the 6 months prior. 

If you think prices are staying up, fix. 

Jelly, the is no way the cap will be allowed to increase by more than 15% in April. 

It’s politically impossible. If HMG has to step in and subsidise the big 6, it will do so.

All current fixes are waaaaay more than the likely 25-30% increase over the next 12 months on the standard rate, and are themselves only fixed for 15 months at most.

“Hedging is essentially buying in advance. And what do you need to buy in advance?  Capital. 

And what do smaller suppliers not have”

er

hedging is agreeing the price in advance

you don’t settle in advance 

You just agree with the hedge provider (usually a bank) that on the day you need to settle for the gas you intend to buy, you will pay them a certain amount and they will pay you the actual cost to you of buying the gas.

You don’t need any more upfront capital than is needed to buy gas unhedged, save to the extent of the hedge provider’s fee anyway, and you probably settle that at the date of settlement on the gas.

Laz, a proper hedge in the gas market means actually getting your hands on stuff, or in other words fill your massive storage facility when prices are low, and paid on delivery (upfront). That's what they did on the Continent, although not quite to the extent they would have liked to because Russia kept the taps half closed during spring/summer.

There are no large storage facilities left in the UK. They cost too much to maintain/operate and so everyone got their gas from the spot market. As a result, any price increase has immediate repercussions.

right but that’s my point, if they know the storage facilities aren’t sufficient to enable them to actually buy in advance, such that they’ll have to buy spot; why aren’t they hedging the price? Forward purchasing and price hedging are different not least because the counterparty is different. Yohr counter party to a forward purchase is the gas seller. Your counterparty to a pure price hedge is a bank.

Forward price hedging is a non-starter if there's only a few major players who can set prices more or less as they seem fit. LNG was dupposed to be the game changer, but unfortunately Qatar can sell its LNG to Asia at an even higher price, so we're stuffed.

It's almost as if the climate wankers should have been told to shut up and we should have invested in domestic coal gasification.

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