One in four UK households exposed to vulnerable ‘unhedged’ suppliers
As many as one-in-four UK households receive energy from providers that could face collapse as a consequence of soaring gas prices, industry sources have warned.
A 250% increase in prices has exposed providers whose wholesale supplies are not “hedged” or insured against market fluctuations, meaning they can now only fulfil supply deals with customers at a significant loss.
The increase has already triggered the collapse of two providers and left others vulnerable including Bulb, one of the larger new entrants to the market which has 1.5 million customers.
The scale of the crisis emerged after a third day of emergency talks between energy providers, regulators and business secretary Kwasi Kwarteng aimed at protecting customers of failing firms.
Customers of failed providers are automatically passed to another supplier, but the gap between real-world prices and the Ofgem price cap, estimated at at least £300 a year, means they will be doing so at a loss.
Industry insiders estimate that providing unhedged energy for every one million new customers at current market rates would cost £1bn, a total bill of up to £6bn if every unhedged firm was to fail.
The huge potential exposure has prompted Mr Kwarteng to consider granting government-backed loans to established providers to ensure they are able to take on new customers.
In talks Mr Kwarteng has stressed that the government will not bail out failing firms and that no company is “too big to fail”, but the loan proposal is an acknowledgement that the current market is dysfunctional.
Providers would still have to borrow the funds on commercial markets, but the loans would be secured against government guarantee and be paid back over a long period, with the cost shared across all energy bills.
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Greg Jackson, the CEO of Octopus Energy, updates Ian King on the market struggles that are forcing bills up.
British Gas today confirmed it is taking on 350,000 customers from the collapsed People’s Energy under the existing “Supplier of Last Resort” arrangements.
Under the scheme it said any costs it could not recover, including those incurred from buying energy, would be recovered from an industry levy.
Many hedged providers argue that the crisis is not about prices, but prudent management and believe that smaller companies who profited from not hedging when prices were falling are now reaping the consequences.
“The market is a dog’s dinner,” said Dale Vince, founder of renewable provider Ecotricity, which hedges all but 10% of its supply.
“We have seen companies selling power for less than they can buy it for and running constant losses to grow a customer base very quickly.
“Then at the same time we’ve got a regulator that says even though there are 70 competitors in the market there’s no competition so let’s have a price cap.
“There is too much interference there, but not enough with the business models and the need for hedging.
“Shouldn’t it be a requirement that energy companies buy what they’re going to sell?”
Newer entrants, however, argue they meet a demand for more straightforward bills and cheaper supply to challenge the dominance of the bigger established players.
Simon McGirr, chief executive of Green Energy, which has 250,000 customers but is unhedged, does not expect the company to survive the winter.
“With the current market conditions we are facing huge financial distress and it will be very difficult to continue trading,” he said.
“Hedging is a fine art and we have not been able to forecast the changing conditions across lockdowns and different rules in different regions.
“We have given people what they wanted, simple cheap tariffs and 95% of customers fully online, but now we are being swept under the carpet by the government.”
Business
Ex-Post Office head of IT says Paula Vennells ‘hoped to avoid’ inquiry – and reveals she blocked her number
A former Post Office executive has said she was forced to block ex-boss Paula Vennells’ phone number after the ex-CEO called multiple times asking for help to avoid an independent inquiry into the Horizon IT scandal.
Lesley Sewell, previously the company’s head of IT, told the Post Office inquiry on Thursday that former CEO Ms Vennells had reached out to her four times between 2020 and 2021.
Ms Sewell said that she blocked Ms Vennells’ number due to discomfort with the contact.
In her witness statement to the probe, Ms Sewell said that one of Ms Vennells’ emails referenced the need to fill in memory gaps regarding Horizon and “Project Sparrow”, a committee addressing issues with forensic accountants who identified flaws in the accounting system.
“Paula contacted me on four occasions in total. I recall blocking her number after the last call as I did not feel comfortable with her contacting me,” Ms Sewell said.
“I had not spoken to Paula since I had left POL [Post Office Limited] in 2015.”
Lesley Sewell giving evidence to the Post Office inquiry. Pic: PA
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According to Ms Sewell’s testimony, former chief executive Ms Vennells said that she had “been asked at short notice” to appear before a parliamentary select committee on “all things Horizon/Sparrow and need to plug some memory gaps”.
Ms Sewell says Ms Vennells added: “My hope is this might help avoid an independent inquiry but to do so, I need to be well prepared.”
Ms Sewell, who struggled to contain her emotions and broke down in tears while giving her oath at the start of her inquiry evidence, was offered support and breaks as needed by chairman Sir Wyn Williams.
Sir Wyn told the former executive: “Ms Sewell, I appreciate this may be upsetting for you, Ms Price will ask you a number of questions in a proper and sensible manner, but if at any time you feel you need a break, just let me know, all right?”
Lesley Sewell taking the oath at the Post Office inquiry. Pic: PA
The Post Office has faced significant scrutiny following the ITV drama Mr Bates Vs The Post Office which highlighted the Horizon IT scandal.
The faulty system led to the prosecution of more than 700 sub-postmasters between 1999 and 2015, with many still awaiting full compensation despite government announcements regarding payouts for those with quashed convictions.
London City Airport will on Thursday name its first permanent female chief executive as it targets approval of an expansion plan that would create nearly 1,500 jobs.
Sky News understands that the Docklands airport has told staff that Alison FitzGerald, who has been co-CEO since January alongside finance chief Wilma Allan, has landed the role.
A woman wearing a face mask walks by London City Airport, which suspended its operations during the pandemic
She replaces Robert Sinclair, who left in January after six years to become boss of the High Speed 1 rail link.
The airport is owned by a consortium of Canadian pension funds and Kuwait’s sovereign wealth fund, which have backed a plan to increase its annual passenger traffic from about 6.5m to 9m.
It is appealing against Newham Council’s rejection of a planning application that would see it extend operating hours at the site, which is popular with City commuters.
The airport’s proposals include no increase in the annual number of flights and, in what it claims is a first for a UK airport, a commitment that only cleaner, quieter, new generation aircraft will be allowed to fly in any extended periods.
The runway at London City Airport
The appeal is being reviewed by the Independent Planning Inspector.
Its change of leadership makes London City the second of the capital’s airports to name a new CEO in quick succession, following the arrival at Heathrow of Thomas Woldbye last year.
“London City delivers one of the best passenger experiences in the UK and I’m committed to building on this success even further,” Ms FitzGerald said.
Representatives of Thames Water’s multinational syndicate of shareholders are poised to quit as directors of its corporate entities after refusing to inject the billions of pounds of funding required to bail it out.
Sky News has learnt that a number of board members at companies connected to Kemble Water Finance, Thames’s parent, are expected to resign in the coming days.
City sources described the move as “the logical next step” after the owners of Britain’s biggest water utility said they would not commit more than £3bn to help upgrade its ageing infrastructure and shore up its debt-laden balance sheet.
A default on part of Thames Water‘s holding company debts last month has raised the prospect that the company is heading towards special administration, a form of insolvency that would effectively leave the government liable for managing a utility firm which serves nearly a quarter of Britain’s population.
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Rainy day for iconic British brand as profits suffer
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Thames Water under threat
Thames Water is owned by a group of sovereign wealth funds and pension funds from countries including Abu Dhabi, Australia, Britain, Canada and China.
A number of the investors are represented on boards which sit at various points in the group’s labyrinthine capital structure.
It was unclear on Wednesday whether Michael McNicholas, a representative of the giant Canadian pension fund Omers and who sits on the board of Thames Water Utilities Limited, was among those in the process of stepping down.
Read more:
Directors hold crunch talks over utility’s future
Even bigger surge in bills proposed under new plans
Along with the rest of the privately owned water industry, Thames Water faces a crucial moment next month when Ofwat, the industry regulator, publishes its draft determination on companies’ five-year business plans.
The draft rulings will be subject to negotiation before final versions are published in December.
Thames Water and a spokesman for Kemble declined to comment.
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