In the News
Energy Economics - Bulb goes into special administration
23rd November 2021
Is this a watershed moment in the energy sector, with a relatively large supplier, Bulb, going into special administration?
The company has 1.7m customers and unlike smaller firms it will go into special administration, and be run by the government via OFGEM.
If companies of this size can go bankrupt, what next? The government are already exploring options such as altering the price cap, but the current situation looks unsustainable.
In other news, it seems as though OFGEM is on the brink of admitting that the existing energy price cap is not fit for purpose.
The argument is going to be that "exceptional or unprecedented market changes" mean that under certain circumstances, the cap should be altered more frequently than every 6 months, and I can see that there's some merit in this.
The problem comes in determining the parameters of those "exceptional circumstances" - the energy companies are clearly going to be lobbying hard for broader definition so as to limit the risks to them - when, of course, they need to face both upside and downside risk. And if that means periods of low profit, and lower dividends for their shareholders, so be it. For most of the period since privatisation, there's been little risk associated with running a utility business.
The Guardian looks here at how special administration is going to work for customers of Bulb, although the reality is that they shouldn't notice any difference. The interesting thing here is that this process has never been run before, and it will have a substantial cost of somewhere around £2 billion for the taxpayer.
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