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A few months ago one imaginative energy chief executive likened the energy supplier retail model to a scene from Ocean’s Eleven, where George Clooney’s character explains how a casino needs to be able to cover every bet on the table. As the CEO rightly pointed out, in this respect energy suppliers don’t compare favourably with them.
Ofgem’s supplier of last resort (SoLR) process had just been drafted in to rescue Iresa Energy’s customers because, unlike the great gambling houses of Las Vegas, the industry levy is the only game in town for underwriting failed supplier debt.
It was an analogy that stuck in the mind – and one that came rushing back this week when news of another supplier going bust hit the headlines.
Ironically, the company chosen to ride to the rescue of Usio Energy’s 7,000 customers was the very same one that had warned of the potential pitfalls of a market where energy retailers do not have to honour their commitments should they make the wrong call. The argument was strengthened just days later when small supplier Snowdrop transferred its customers to Nabuh Energy, citing wholesale market prices as putting pressure on its business.
Just how much longer customers will be exposed to the energy roulette wheel of fortune remains to be seen. Industry has made its representations to Ofgem’s current review of market arrangements and must await the consultation document due soon.
But will it have the answers? The regulator is certainly making the right noises about updating its rules for new entrants to a marketplace originally home to just the big six.
One Utility Week source, however, suggested Ofgem’s review should go far further in light of recent unprecedented news that 34 suppliers could be late in meeting their payments for Renewables Obligation Certificates (Rocs). If, as some fear, any potential multi-million pound shortfall will have to be bankrolled by the industry, then surely this part of the system is not fit for purpose either – especially if suppliers who default are offering cheap renewable energy deals. One wonders, should Roc payments become a monthly rather than annual obligation?
Whatever the decision, financial prudence must sit at the heart of any new arrangements. Being able to play fast and loose with an essential service was never the game plan.
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