Demand might go up, the wind might not blow and the sun might not shine. Putin has other ideas about Ukraine, and it might just turn out to be cold, grey and windless in both northern Europe and parts of the UK.
But both the gas price and the weather may turn out otherwise and luck can run out, and complacency plus “holding his nerve” hints at a complacency that will haunt BEIS for as long as it takes for the Secretary of State and the Department to recognise that something more fundamental needs to change. He may be lucky with both the gas prices and the weather (as he continually consults the Met Office to check) and this maybe allows the market to settle down a bit, later in 2022. If it were only a small number of these immediate problems, the situation would be bad, but at least partly retrievable as and when gas prices fall in the spring, as the Secretary of State seems to expect they will (and which may well happen). Estimates suggest anything from around £85 to £120 per customer. Only the second has merit, and even here, we as customers rather than as taxpayers will pick up the bill for the customers who have been transferred to new suppliers and for Bulb’s strategies. The Secretary of State told the Select Committee that a few suppliers exit the market every autumn, and that he was not going to bail out failed companies (for all the claims about customers being protected). The immediate problem is the collapsing supply companies – 25 so far – and one (Bulb) so big that it has in effect had to be temporarily nationalised. The result is one hell of a mess, and most of it avoidable. No wonder there are inquiries into almost everything now in train. OFGEM has not properly regulated the supply companies, allowing licensed businesses to trade without due regard to the possibility that wholesale prices might rise, and therefore failing to do proper scrutiny of the companies’ business plans.Įlsewhere the disconnection of some customers for more than a week as the result of a storm raises big questions about the behaviour of the distribution companies, and the price spikes in the balancing market have been pretty remarkable. They did not see it coming, and they should have.
The ramp-up of gas prices, the knock-on rise in wholesale electricity prices, and the consequences for those supply companies that failed to hedge forward to cover the six-month rolling price cap have all taken the Secretary of State and officials at the Department for Business, Energy and Industrial Strategy (BEIS) by surprise.