It is time to give up the pretence that there is a viable neoliberal market in the supply of domestic energy in the UK.
As the Telegraph reports this morning:
Ovo Energy is preparing to slash tens of millions of pounds in costs under a radical plan to secure its survival.
In a bid to convince the regulator of its financial viability, Britain's fourth-largest gas and electricity supplier is plotting deep spending cuts to areas including advertising and brand building activities.
The cuts come as Stephen Fitzpatrick, Ovo's founder, scrambles to meet tougher financial rules imposed by Ofgem.
Under the energy regulator's new regime, introduced after dozens of suppliers collapsed during the energy crisis in 2022, Britain's biggest suppliers are required to hold a certain level of cash based on how many customers they have.
Another multi-billion-pound bailout no doubt looms, with the government still refusing to get the message that the UK's private utility supply model is fundamentally bust by design.
When will the lesson be learned, not least when the public is quite sure they would rather this service be nationalised?
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
As someone who worked for a time as an energy sector analyst, I was always amazed at the lengths government regulators needed to go to to try and construct anything resembling a competitive market for domestic energy supply. It is clearly an industry which just does not lend itself to competition, and the fact so many governments have persisted with these absurd efforts to try and fit a square peg into a round hole show how much we are captured by neoliberal economic thinking no matter how inefficient it is.
Any reasonable appraisal of the sector would conclude that a single state-owned supplier is the most cost effective solution. I firmly believe that our energy costs and emissions would be lower, while our energy security, competitiveness and efficiency would all be much higher under a nationalised energy supplier.
We’d have the benefit of not subsidising the ownership of those companies as well.
Much to agree with
The break-up of the market meant supposed competition. But they all had a profit motive and customer deals are separate to the supply side to the grid. It introduced marketing costs, and lost economies of scale on operations along with a profit motive, cost of holding a cash balance, and cost of servicing debts.
The only benefits went to shareholders.
Nationalise.
The entire energy supply “market” is a layercake of scams some of which are clear to the public (the myth of free choice, the huge numbers of people employed by “suppliers” who provide neither infrastructure nor power production), and others are hidden from the general public such as the “Energy Pricing Mechanism” and the central role of hedge funds in it. I think if you’re asking why the government never admits the case for renationalisation, the answer is the hedge funds and their owners. These are the same people who effectively own our mainstream political parties, politicians and mainstream media.
“Another multi-billion-pound bailout no doubt looms”
Socialism for the private sector, but rewarding failure.
The effluvia of competition in public services – branding, uniforms, accounting, websites, vehicles and other duplication in utilities and railways is one of the most wasteful things I have ever seen. We have seen this even in housing in for example with the creation of arms length management organisations (ALMOs).
It’s complete bollocks. If done properly, with end user service satisfaction at its heart – the best form of competition – then that might be another matter. But the way the privatisations have been layered is a compete (sic) joke. A lot of this is to because of how the privatisations were done, with too much emphasis on setting up corporate structures and identities aimed at extracting vale rather than delivering services to users.