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?
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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.
In my experience with the sector, the primary competition was related to how best to influence the government and regulators. I witnessed the revolving door of Ofgem management into the private sector, and often back again! Regulatory capture has resulted in some pretty terrible oversight, almost always at a cost to the public.
While a nationalised structure does not completely guarantee best practices at all levels, it does at least stop this very destructive practice of poacher and gamekeeper musical chairs.
You are probably right Simon, but the other thing you see is in senior management pay – how ALMO and housing association senior management tell their newly created boards that they should have pay rises similar to other orgs in the market based on their turnover etc. I’ve seen that trotted out time after time again in social housing and no wonder the pay differentials between seniors and front line staff rocketed up. Becoming an executive officer of privatised public service became a ‘get rich scheme’ and still is.
“market in the supply of domestic energy in the UK”.
There is no “market”. There is a malfunctioning “market” on the wholesale side (using marginal pricing). How can there be a “market” on the retail side, given, marginal pricing sets the price for ALL generators – & given pricing implies a willing seller (& ALL the willing sellers get the same price) and willing buyers: who by definition pay the same price (the marginal price). Sure there is some rinky-tink stuff in terms of futures (bought by buyers) & the banks do their best to game the system (turnover in the elec “market” is +/- 4x delivered elec). The whole edifice is a Thatcherite construct designed from the get-go to leach money from UK serfs.
1. Split the wholesale market: nukes, hydro, renewables – fixed price, fossil marginal price, arrive at a combo wholesale price (based on pro-rata depending on volumes from each segment)
2. The UK gov is the retailer defining the price. Spilt the Distribution Network Operators into: System Operations (gov owned), metering (& reading) gov owned, maintenance (could be gov or private).
Oh look, we are back to 1989 & a functioning elec system & transparent pricing.
It will never happen – politicos too dumb to see that privatisation was predicated on a utopia that could never be achieved.
Thank you, Mike.
@ Richard: Could you, please, please, please, introduce Mike to Zack Polanski. Clive Parry, too.
A former colleague works for a public affairs consultancy and is facilitating the business engagement with Reform.
Bailey, who jumped on the brexiteer bandwagon about 2012, propelling him to the governorship, met Farage recently and plans more meetings. About 2012 or so, I went to the Swiss embassy to hear Bailey come out in favour of brexit and Britzerland, an association he continues to support and would like extended to Singapore and the gulf monarchies.
I fear the left will not be prepared for the demise of the duopoly in 2029. Farage is getting ready, with help from the Heritage Foundation, despite leftists and centrists laughing at Reform in local government.
I am against privatisation of our core utilities, but as an Octopus customer I really like the quality of their customer service and how they do things. It would be nice if any new nationalised company could take what is good from Octopus.
The Labour party seems determined to avoid nationalising any of our utilities and I object to the cost of bailouts being added to the ever rising standing charges. We have to have a better system and the STP is not offering a solution.
FYI
Tomato Energy a small provider went bust 4 days ago (5/11/2025) leaving the industry watchdog to step in to ensure supplies for the provider’s 15,300 household and 8,400 business customers.
https://www.bbc.com/news/articles/cvgk127edzro
https://www.ofgem.gov.uk/press-release/ofgem-protects-customers-tomato-energy
Thanks
This fiasco should be over
Another Maggi pigeon coming home to roost, she’d have privatised air if she could have.
I have just finished watching Adam Curtis’ latest documentary Shifty (https://www.bbc.co.uk/iplayer/episodes/m002d2jv/shifty)
It highlights all the dodgy dealings behind the privatisation scam that was foisted on the UK by Thatcher and her acolytes. Absolutely shocking how we are constantly exploited to line the pockets of the few.
And talking of British energy companies with fingers in pies …
British energy company Energean, which operates natural gas reservoirs of Karish, Tanin, and Katlan in the occupied Palestinian territories in favor of Israel, is preparing to build a $400 million pipeline to transport natural gas from an offshore rig in disputed Palestinian waters to Cyprus.
According to media reports, the project requires only governmental approval, with Cypriot energy company Cyfield having already endorsed the initiative. If finalized, Cyprus would become the first European nation to import gas from Israeli-occupied maritime territory, raising questions about the project’s legality and its breach of the Boycott, Divestment, and Sanctions (BDS) campaign and international law.
Full article : https://english.almayadeen.net/news/politics/how-cyprus-became-the-eu-s-first-partner-in–israel-s–gas-t
When a privatized utility goes bust then it should be wound up and it’s remaining assets go back into public ownership.
The UK has the highest domestic energy prices in Europe except for the Republic of Ireland and it’s all down to poor regulation, political dogma, and the fact that we haven’t got nationalised energy companies.
Energy prices are going up. And I do not think that they should be.
The energy price cap for the first three months in 2025 is going to be £1,738. Now that is the guide indicator issued by the energy regulator as to the amount that the average household with average energy consumption should be paying in the UK for its electricity and gas over the next three months, so it is not. what your energy bill will be.
That cap has gone up. It doesn’t need to. It’s now roughly £600 more – even after prices have fallen dramatically since a year or so ago – than it was in 2021. In fact, from 2019 until early 2022, the energy price cap hovered at around £1,100 or £1,200 a year. Now, after the latest change, it’s over £1,700 a year.
This is a massive cost for many British households. We know that there are many households that are in energy poverty. They’re spending a significant part of their total disposable income on energy costs. And that’s particularly true of pensioners, who obviously have a very low amount of money available to them for the purposes of living in any case. And we also know that Labour made that worse by taking away the winter fuel allowance.
I’m just explaining why energy should not be costing £1,738 a year in the UK. And why, in fact, it is that we have the highest energy prices in Europe, quite unnecessarily. And that’s all because of the way in which energy prices are set in this country.
We have a quite absurd energy system in the UK. We have a system that was, of course, privatised under Margaret Thatcher and her successors in the Tory party. And they pretended, and we still do pretend, that there is a market in energy in this country.
We also presume that people are totally efficient. In other words, if you don’t like your energy price from whoever might be supplying you today – call it Ovo – then you know that British Gas will offer you a better deal, and you can afford to move.