Sorting out Bulb Energy’s accounts

So apparently the energy companies should all be nationalised because:

Second, whatever risk appraisal was undertaken with regard to future cash flows of this company it now looks unlikely that they were sufficient. The assumption implicit in the directors’ comments that there would always be an adequate time lag between moves in wholesale price and the ability to increase tariffs was clearly not true.

It did turn out to be an incorrect assumption, yes. But then there is always that political risk, isn’t there? That government is going to do something as damn stupid as imposing a price cap? Only on the retail market, now wholesale?

I am not suggesting that anyone should have foreseen the increase in wholesale fuel prices that have taken place since March 2020. I would, however, suggest that if the directors were aware of the significant risk to the company then they had a very obvious duty to model the possible consequences of substantial change in that price to determine whether this would have put the company at risk. What now appears certain is that their belief that the use of a variable price tariff would cover any risk without the apparent use of hedging appears to have been misplaced.

Ah, yes, hedging. That’s the thing that to Ritchie is the speculative froth in the markets that we should tax out of existence, isn’t it?

6 thoughts on “Sorting out Bulb Energy’s accounts”

  1. You see?
    The problem was that it was greedy capitalists running the business. Good, holy public running of the insert industry under discussion here would mean this wouldn’t happen as they would see the difficulties coming and plan accordingly, because they wouldn’t be distracted by all this dirty “making profit” business.

    That government is going to do something as damn stupid as imposing a price cap? Only on the retail market, now wholesale?

    Or do something as stupid as shutting down the economy for a year and a half for a flu? Thus causing a massive drop and subsequent spike in demand, unsurprisingly causing massive price fluctuations…

  2. “I am not suggesting that anyone should have foreseen the increase in wholesale fuel prices that have taken place since March 2020. I”
    Why not?
    He’s not much of an economist if he couldn’t see that coming.

    With Princess Nut Nuts in charge, and energy policy being set by religious ecofreaks chanting Kumbayar, it was not only predictable, it was inevitable. And they’ll go a lot higher still, especially if we keep p*ssing of Mr Putin by sailing our toy navy in his garden pond.

  3. Be fair, TTC, only half the navy is pissing down Putin’s pant leg, the other half is in the South China Sea.

  4. Since I think all paranoid xenophobes are far, far, far too trusting, I’d say the error was not to frack. Had it done so, the UK could have long since have been independent of foreign fuel, except perhaps for imported uranium.

  5. “…except perhaps for imported uranium”
    Which come from Canada, or Roxby Downs, SA
    All part of the Empire.

  6. I found the Left MSM laughable for blaming failures on not hedging (enough. As you say, they’ve been attacking hedging, futures, options etc for decades as despicable “casino gambling” putting the economy at risk.

    iirc British Gas almost went bust when they signed long term purchase agreements and then gas price crashed.

    Volatility can go both ways and Gov’t & Left must stop virtue signalling interference which always makes matters worse

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