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More than three decades ago, when part of a team was trying to get the mandate to manage the international sales of the privatized UK electricity companies, we suggested that local distribution companies should buy power in the market and sell it to consumers . No intermediaries. The government made it clear that our Americans were there to beat the stock, and not give advice. We did not get the mandate.
Patrick Jenkins, in his analysis of the current problems in the energy sector (“British energy companies hit by a crisis are like macho banks of 2007”, September 28) makes an appropriate case for financial negligence and inappropriate regulation. But
I suggest that he also consider whether retail energy suppliers have a useful purpose other than to serve as a hedge for their owners of generators / producers, and may not be viable outside the function.
Suppliers all buy the same energy in the same markets, making it very unlikely that any of them can buy consistently at a better price. So much for real competition. Then they have to add marketing, administration and hedging costs and margin, some of which would not have been necessary if retail customers had bought from the distributor. I suspect that the supply function contributed to consumer costs, but it did give the appearance of competition. And what counts more?
In short, the recent debacle must require a rethinking of the sector’s structure, not just a handful of inadequate regulation and risk management. Advice from an American, however.
Sleepy Hollow, NY, United States