2 MIN READ - Last week the Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff reported that the twelfth British retail gas/power supplier since September had failed under the weight of rising wholesale energy prices.
What makes Britain more crisis-prone is that its power regulator Ofgem (Office of Gas and Electricity Markets) allows wholesale prices to rise or fall without limit but caps retail rates, restricting private power suppliers from passing higher natural gas/power generating costs on to customers. Hence in the midst of the energy crisis suppliers are paying a lot more to produce electricity but aren't allowed to charge more to deliver it.
The Correspondent also compared Britain’s problem to California’s 2000 electricity crisis when the state government also allowed wholesale energy prices to rise with the market and also strictly capped retail rates, spawning widespread blackouts, forcing power giant PG&E into bankruptcy and nearly bringing down Southern California Edison save a last minute rescue package from Sacramento.
You can read more details of California’s failed electricity experiment at:
At the time the Correspondent predicted British left-wingers would call their price-capped power crisis “deregulation” and “free market capitalism” just as Californians have mislabeled their own disaster for over 20 years.
Well the verdict is still out on the left-wingers, but not for the press (then again, the latter has become just a genus of the former's larger family). Reuters is now reporting twenty more British suppliers are teetering on bankruptcy while referring to the bizarre price-capping arrangement as “deregulation.”
("Britain faces 'massacre' of 20 more bust energy suppliers, Scottish Power says": Reuters)
Two passages from the story:
“Britain's energy market faces an absolute massacre that could force at least 20 suppliers into bankruptcy in the next month alone unless the government reviews the energy price cap, Scottish Power Chief Executive Keith Anderson said on Thursday…”
"...We are now going to start seeing some relatively well-run, good, commercially sound businesses going bankrupt because they just can't pass the cost of the product through to customers."
And written in the middle of literally eight mentions of the price cap and price regulator:
“The soaring natural gas prices have strained Britain's retail energy markets to breaking point, putting into question 30 years of energy deregulation which began in 1989 under then-Prime Minister Margaret Thatcher.”
Which leads the Correspondent to ask a reasonable question: “What do the Reuters editor’s desk and journalism schools think the definition of ‘deregulation’ is?” Because evidently their dictionary defines it as “anything that goes wrong in a government-controlled marketplace.”
Call me old-fashioned, but I always thought “deregulation” meant “no government interference in the economy” which definitely includes "no price controls."
At minimum Reuters could describe Britain's power market as "retail-regulated" or "partially regulated," but then my generation probably isn’t woke enough to understand.
In case you can’t get past the Reuters paywall Yahoo! has rerun the story at: