You may have heard of the Deficit Tariff Scheme being touted by UK’s energy suppliers as the “solution” to all our cost of living problems. The plan is endorsed by all energy suppliers in the UK and is based on them receiving £100 billion of taxpayers money over the next two years. This cash will enable Ofgem to “freeze” the price of energy at current levels (29p per KWh for electric and 7p per Kwh for gas). Essentially, the UK taxpayer will bailout the energy suppliers for the next two years and, if the price of wholesale gas hasn’t fallen (it won’t have), then presumably, the taxpayer gets to gift even more cash to the suppliers. The fact is, energy suppliers in the UK are very, very worried that consumers will not be able to pay their bills and they face a real prospect of bankruptcy. Bulb was the largest supplier to go bust last year with debts of £2.2 billion and this is exactly what the remaining suppliers fear, hence the call for a Government (taxpayer) bailout.
But, surely, a much better plan would be to let these companies go bust and then step in to nationalise. The UK Government already has Bulb on its books, supplying 1.7 million customers, or 6% of the total UK domestic energy market. When unit energy prices increase in October and again in January ’23, energy supply companies will start to fail and the UK Government can then step in, picking up more and more customers as the failures increase. The debts of these companies will average £2 billion each, and obviously, the taxpayer will be on the hook for any further losses, but, when compared with a £100 billion bailout which the energy consumers will be expected to pay back at a rate of £30 per month for ten years, this is a very good deal. There are 29 million households in the UK and millions of businesses. Any supplier with that size of customer base would be able to demand large discounts in the wholesale market and that has to be good for UK consumers.
NOTE: For folk who think there is no discount to be had in the wholesale energy market,, the fact that energy generators are making huge profits (Centrica 1,100%) suggests otherwise. Centrica sells to British Gas, a company it owns. Do you think British Gas demand huge discounts? Is it competitive when EDF, generating electricity for pennies in France sells to EDF (UK) which retails at 29p per KWh. It’s time the UK Government got to grips with this madness once and for all, and now is the time to do it.