Home World Massacre of utilities in Great Britain: 2 million families without electricity

Massacre of utilities in Great Britain: 2 million families without electricity

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On the evening of November 5th, it will be a “Bonfire Night” in a minor tone for the British. Every year His Majesty’s subjects flock to the streets to shoot fireworks: it’s their New Year’s Eve. They remember the failed attack on Parliament: back in 1605 the revolutionary Guy Fawkes tried, in vain, to blow up Westminster. Since then, the narrow escape has been celebrated, but not this year. There are no “barrels” in the country: the fault of the problems in the global supply chain in the post-Covid world. Bonfire Night, however, is the least of the problems around the UK. One morning in mid-September in Scotland, some 350,000 families woke up without electricity. Their supplier People Energy, an innovative utility born with an internet fundraiser, closed its doors overnight. That of the Scottish electricity company is just one of many cases: in the United Kingdom, small utilities are failing in a chain: to date, almost 2 million households have been without electricity and gas suppliers. A few days ago, three other companies raised the white flag: Igloo Energy, which supplied 179,000 households; Symblo Energy which had 48 thousand and the small Enstroga, with 4 thousand customers. They won’t be the last. Within a few weeks, in September, as many as 9 gas and electricity companies closed their doors. These are companies that have proliferated like mushrooms in the wake of the liberalization of the market, which began in the 1980s with Margaret Tatcher.

The utility bubble

Chain defaults are the consequence of massive increases in wholesale energy prices: prices have skyrocketed across Europe. At the Rotterdam hub, the natural gas contract reached 73 euros per megawatt per hour: a 250% increase from the beginning of the year. But in the UK the record was reached: on 9 September the price of 1 kilowatt hour reached 1 pound, the Guinness Book of Records. The average increase in wholesale prices is 70%. Squeezed between skyrocketing prices and tariff caps, many utilities have seen their already narrow margins drop by as much as 20%. Many simply could not resist the impact, which was too fast and violent: the English free market is played on small waste and just an earthquake is enough to blow up the system. Or maybe it would be better to say to blow the bubble. The consequence is that small operators are failing in flurry. The most striking case was that of Avro which had 580 thousand customers. For families, who suddenly found themselves without electricity, the public life buoy went off. The public body Ofgem, the guarantor of energy, has re-protected all the customers who have remained “orphans”: they have been reassigned to other operators. Although the re-routing also covers any credits in the bill with the failed companies, the mechanism hides a trap: families are reassigned without being able to choose operator and new tariffs. In many cases, the bills go up. The fragility of the domestic energy market came to light all of a sudden in the United Kingdom: in a few weeks in September, as many as 9 operators were blown up. They are mostly small to medium sized operators. The rise in wholesale prices will lead to other inevitable failures and closures: “After ten years of free market – said Bill Bullen, the founder of a small company called Utilita Energy – we are returning to an oligopoly”. Example: the customers of the disappeared Green Supplier have been reallocated to Shell Energy, the retail division of the Anglo-Dutch oil giant Royal Dutch Shell. The crisis strengthens the giants.

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The upstream increase is then passed on to consumers downstream. Throughout Europe, a sting on bills is coming: in Italy the surge is 40% (then sterilized at 30% by the intervention of the Draghi government, which, however, in fact subsidizes fossil fuels and gives a blow to green energy) . In the United Kingdom, for Anglo-Saxon families, the blow of electricity will be 139 pounds a year per family, which is added to the 700 pounds of increase in health coverage, announced by Prime Minister Boris Johnson to finance the NHS, tormented by Covid. Further insult: from 1 October, the Price Cap mechanism, the ceiling that a customer can pay bills, has increased by 12%: the cost has risen to 1,277 pounds a year. Having come out of the pandemic full of savings in the bank, as a result of the lack of consumption from quarantine, British citizens are the victims of a bloodletting of almost 1,000 pounds per family, between rises and inflation.

Prophetic Italy

In March 2019, the Embassy of Italy in London organized a reception to celebrate his “green” conversion: the sumptuous rooms of the elegant building in Grosvenor Square, which houses dozens of masterpieces of Italian art, would be illuminated by the clean electricity. It was supplied by the Italian, transplanted to London, Green Network Energy. The liberalization of the market and the boom of Italians in the United Kingdom, which reached 700 thousand in the pre-Brexit and pre-Covid years, had also attracted Italian operators: the company of Sabrina Corbo and her husband Giovanni Barberis, an old acquaintance of Piazza Affari (a passed in D’Amico Shipping, in Acea and even earlier in the troubled Arena-Roncadin), had become the fourth company in the electricity and gas market in Italy, and the only Italian in the United Kingdom, where it entered in 2016. Among private individuals local citizens and businesses had reached over 450,000 customers spread across England, Scotland and Wales. The bulk, of course, were the Italian expats across the Channel. Then suddenly, the blackout: in January 2021 the Italian company closed its doors, for no apparent reason, and customers, including the Italian Embassy, ​​found themselves without electricity. The safety net has also been triggered for them: they have been assigned to the French giant Edf. Partly for vision, the official explanation of the farewell was the fears of the imminent Brexit; a little for less noble reasons, because the company has come under investigation in Italy, with the accusation of embezzlement for 166 million euros, the case of Green Network Energy was prophetic. He anticipated what would happen months later: the British utility massacre. The millions of families caught in the grip of chain closures and monstrous price increases sparked political controversy and the battle in Parliament: Labor went to attack the government and called for the re-nationalization of energy. The fault of the high bill and the chain failures is the frantic and unregulated liberalization of the market.

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Venezuela syndrome?

At the Shell petrol station near Wandsworth Bridge, one of London’s busiest hubs, there was no more petrol last weekend. Motorists were unable to fill up. Those who live in the hinterland were more fortunate: in Workingham, a town that gravitates around the capital, they were able to get petrol, but at the cost of a very long line. The government had to send the army to restore order. Autumn Britain is headed for a Venezuela syndrome. All to blame Brexit for the energy crisis. But the real reason for the inconvenience is the bottleneck of the global supply chain, which is throttling the post-pandemic world. The government reassures that the newly appointed industry minister Kwasi Karteng tried to reassure him and took it out on the panic effect unleashed by the media. But in the meantime everyone is afraid of a World War II scenario, with rationing of supplies. Dry petrol stations make headlines around the world, but that’s not the problem: only 1% of the petrol station network is actually closed. And, moreover, it is a weekend effect: after Covid, the British, who previously got on a plane at every opportunity to escape to the heat and the sun of the Mediterranean, now remain more in the country and all move by car, like tail of the contagion phobia. Fuel demand spikes for the weekend and declining supplies of raw materials, and that’s it. Brexit or Covid, the risk of the UK running out of electricity or heating for the upcoming winter is remote, but there will certainly be some austerity that will benefit large groups. In 2010, the six largest energy companies covered 99.5% of the retail market, household energy use. By early 2021, the share had dropped to 69%: liberalizations broke a monopoly. Now the pendulum is in danger of swinging backwards again. But above all, the “Delta variant” of the energy virus, from Great Britain is likely to reach Europe as well.

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