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Aah - thanks for the explanation. The cap was a piece of information that I was missing.
However, I'm still surprised that the regulator didn't force them to hold the capital to cope with this. For example, the price rises are significant, but it's not unprecendented (for example, post Fukushima in Japan, gas prices rose 80% or something insane as the nuclear plants were all turned off).
Why wouldn't they hold the risk?
I'd just assumed that regulators wouldn't allow them to given that their role is to supply an essential service, or would insist on them holding sufficient capital. Maybe they do and this is one of those 99.99th percentile events that they can't cope with. Maybe the holding of capital isn't even a thing the energy regulator can insist on - it's not something I know a lot about.
christianSpaceman-
This is one of those once in a decade events, don’t think there’s been a price rise this steep in a very long time from data I’ve seen going back to 2008 ish.
@cozey that’s why many energy companies have very large trading teams to look at exactly that. As @Dammit said earlier there’s very much twin parts, the physical to someone’s home and the engineers needed for that to happen, plus the market trading to make sure they remain viable and can buy energy at a good price to allow them to offer competitive tariffs to consumers
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I'd just assumed that regulators wouldn't allow them to given that their role is to supply an essential service
Nothing happens to consumers' supplies if the "suppliers" go bust, because the whole thing is fictional, so none of it matters. LOL or whatever.
I've submitted a refund request with Bulb for the credit I had, which they've apparently accepted, though I have a sinking feeling the money will be lost in the ether if they collapse before it gets to my bank account.
Here's the page they send you to when you email them, which I don't think is linked anywhere:
https://account.bulb.co.uk/dashboard/payments-and-statements/refund
C4r1s
grams
Ofgem sets a price cap for a standard variable tariff (SVT) that is the maximum price an energy company can charge the consumer for a standard tariff. Fixed rate tariffs are treated different, so are excluded from this cap.
Energy is a pretty competitive market, with little to really differentiate the providers as the goods delivered are pretty intangible. thus consumers are very price sensitive, and will go for the cheapest option. This used to be a fixed rate (2 year fixed often), that guaranteed the suppliers regular income so they took a loss on energy in test 1, to make margin on year 2 due to hedged energy purchases. However, the current climate means that the cheapest tariff is the variable tariff as the cost of energy has risen to such an extent suppliers are increasing their fixed rate tariffs to maintain margin. As they can’t raise the svt above the price cap, this is now the cheapest tariff in market, and is a loss making one for suppliers.
So it’s partly the regulator not allowing higher costs to be passed on to the consumer and partly the govt protecting the consumer from excessive bills. Normally the price cap works, and is based on the cost of energy + x% to allow suppliers to make money from it but with the 70% increase in wholesale prices since the cap was announced in July it’s no longer valid.
If the price cap was calculated know it would be nearer £1700 vs the £1300 it will be from Oct simply due to August price increases.