GB Energy collapse

[77ss]

This may (should - but don't bank on it) reduce the political pressures on the big energy suppliers.

The company had about 160,000 customers. According to a Credit Suisse report (cited by Digitallook) Ofgem will be appointing a new supplier, with Centrica, SSE and EON as front runners.

I hold SSE and Centrica, hence my interest.

http://www.digitallook.com/news/news-an ... 24446.html

[gadgetmind]

They didn't attempt to do any demand prediction or to buy any energy in advance. This left them entirely exposed to system pricing, which charges those without contracts in place for the most expensive tranche during each half hour. If someone has to run diesel gennies, you end up paying £1k+ per MWh rather than £45.

If you predict and have contracts in place but demand is lower, then you can get hit with "mark to market" as you will have to pay for the energy even if your consumers didn't use it, and the suppliers won't take the credit risk.

[dspp]

I agree that it is likely to reduce pricing and political pressure on the big 'uns.

However you look at it selling energy without having generation is a disaster waiting to happen, the only question is when it happens. If the challenger utilities price in spike then they are never competitive enough to get market traction. If they don't price in spikes then sooner or later they come a cropper. That's why even the smallest challenger utilities should have their own generation to an extent.

(holding SSE and Pennon, plus NG)

regards, dspp

[gadgetmind]

However you look at it selling energy without having generation is a disaster waiting to happen, the only question is when it happens.

I disagree but as I'm currently in the midst of starting a small energy supplier, that's to be expected.

You put contracts in place for the energy you require. This does involve being able to predict customer base and what they'll consume, but you buy what you know you'll need a long way out and then add additional energy via additional buying once you have the data (customer base, weather, TV schedules and much more) so base bought (say) six months in advance, some more one month in advance, and the final tranche just days in advance. Any shortfall exposes you to system pricing, which can be crippling, but over buying can be just as bad.

From what I hear, GB Energy made no effort and ignored everyone who told them they were doing it wrong.

[dspp]

However you look at it selling energy without having generation is a disaster waiting to happen, the only question is when it happens.

I disagree but as I'm currently in the midst of starting a small energy supplier, that's to be expected. You put contracts in place for the energy you require. ....Any shortfall exposes you to system pricing, which can be crippling, but over buying can be just as bad. From what I hear, GB Energy made no effort and ignored everyone who told them they were doing it wrong.

If you are in the midst of starting then good luck. As you rightly say if you get your forecasting models wrong then the shortfall can be crippling, terminally so. GB Energy was not the first to fail, and I am sure it won't be the last, and I've had a fairly close view of one of the previous failures. Good luck !
regards, dspp