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?