So we'll be bailing out the big energy companies if they crash: how likely is it anyway?

Keeping the flame alive.

As part of a team building exercise in my previous workplace, I once tried tight rope walking. Just to make the experience more exciting, I decided to do the dead-fall – something I had mastered at theatre workshops while in university – knowing there was a safety net below to catch me.

Had it not been for that safety net, I would have never tight rope walked in the first place – leave alone try the crowd pleasing antic. But my risky decision didn’t harm me or anyone around me.

Under a revised plan drawn up by the Government to avoid “market chaos”, UK consumers may be on the hook for a £4bn safety net if any of the six leading energy suppliers see a downfall.

Energy secretary Ed Davey is looking at a quick intervention with “adequate protection” if any of the ‘Big Six’ go out of business. Fair enough, but is it?

In a capitalist society such as the one we live in today, is it morally correct to ensure a safety net for corporates – such as big energy companies – to take risky decisions that could negatively affect millions in the UK market?

If the government is worried about any of these companies going out of business, the one thing it should not do is make it clear that it would be bailed out in case it does crash – providing the company with almost an incentive not to work towards keeping itself afloat.

The Big Six in the UK energy sector refer to German-owned E.On, Npower with its German parent company (RWE), France’s EDF, British Gas, Scottish and Southern Energy (SSE) and Scottish Power.

Competition is imperative to a company performing well. A safety net only reduces the need or will to compete.

A big energy company crashing would be unlike the crash of the banking sector where the crisis risked consumers losing their lives’ savings and government bail outs were imperative.

If a big energy company does go bust, the way it would affect a regular householder would be to find a new energy supplier. Would it be any more complicated than that? Why not let the private sector undertake the rescue?

Half of the Big Six are foreign owned companies, and it could perhaps make sense to draw up plans for the government to separate UK subsidiaries from foreign parents.

However, what are the chances of a big energy company on the whole going under in the first place? Highly unlikely – as Ed Davey himself accepts. Could this be anything more than a threat of nationalisation?

In January this year, a new survey by uSwitch found significant differences between satisfaction in the UK with smaller energy suppliers and the ‘Big Six’. EDF and Npower ranked at the bottom of the survey while Good Energy, the UK’s only 100 per cent renewable energy company, owned top spot.

Of the "Big Six", only two – E.ON and SSE – came in the top ten, sharing ninth place, whereas British Gas and ScottishPower came joint 11th.

Is it really justified, then, that consumers collectively face higher costs and pay up to almost £4bn to save any of the "Big Six" crashing when the satisfaction levels may not be up to mark?

Some may argue it will be better if the costs of the bail out came out of the profits of the energy firms instead of heightening the prices for householders. But ultimately it would amount to the same thing.

Albert Camus said all that he knew about morality and obligations he owed to football. Taking his cue, one thing we do know about the rules of any game is winning –not losing – should be rewarded. By that respect, the Big Six should fight to keep their heads up in stormy times instead of looking for that parachute they know the government is already making for them. And an expensive one at that.  

Photograph: Getty Images

Meghna Mukerjee is a reporter at Retail Banker International

Photo: Getty
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The Republican nightmare shows no sign of ending

The Republican establishment is no closer to identifying the candidate who can stop Trump or Cruz, while Hilary Clinton finds herself in a similar position to Barack Obama eight years ago.

After being cruelly denied by the people of Iowa, we were finally treated to a Donald Trump victory speech in New Hampshire last night. While Trump’s win will come as a “yuge” shock to anyone waking up from a yearlong nap, it was very much in line with more recent expectations. More surprising is John Kasich’s second place finish ahead of the tightly packed trio of Ted Cruz, Jeb Bush and Marco Rubio.

Rubio’s underperforming his polling average by about four points at time of writing (with 89 per cent of precincts reporting) – perhaps partly the natural erosion of his post-Iowa bump, perhaps also due to his mauling at the hands of Chris Christie in Saturday night’s debate. Meanwhile Ted Cruz’s 12 per cent compares favourably with past Iowa winners’ New Hampshire performances: Mike Huckabee got 11 per cent in 2008 and Rick Santorum 9 per cent in 2012, but neither came close to winning the nomination.

The result offers little help to those “establishment” Republicans who’d been planning to coalesce around whichever of Jeb Bush, Chris Christie, John Kasich and Marco Rubio emerged from New Hampshire in the best position.

Christie and Carly Fiorina are probably done. Both got less than 2 per cent in Iowa; both finished in single digits in New Hampshire after focusing heavily on the state; both are stuck at the bottom of the national polls, and neither has raised all that much money (relatively speaking). Christie is heading back to New Jersey to “take a deep breath”, “get a change of clothes” and “make a decision” tomorrow.

But who will party elites rally around to stop Trump and Cruz? Kasich, who came second in New Hampshire but is on just 3 per cent nationally? Rubio, who beat expectations in Iowa and is best of the bunch in national polls but disappointed badly tonight after a terrible debate performance? Or Bush, who’s had more than $75 million spent on him by the “Right to Rise” super PAC with just three per cent in Iowa and 11 per cent in New Hampshire to show for it? Nobody has won either party’s nomination in the modern primary era without a top-two finish in New Hampshire – does either Rubio or Bush really seem like the candidate to break that trend?

Jeb does have plenty of money and organisation, and is guaranteed some extra support from one prominent establishment Republican in South Carolina: his brother. George W has recorded an ad for the Jeb-supporting “Right to Rise” PAC, calling his brother “a leader who will keep our country safe”, which is already running on South Carolina TV (and which ran in New Hampshire during the Super Bowl). He will also join his brother on the campaign trail in the run up to the primary. Bush 43 left office very unpopular and remains the most disliked former President, but he is very popular with Republicans. A Bloomberg/Selzer poll in November found that 77 per cent of them have a favourable opinion of him, making him far more popular than any of this year’s candidates. (Jeb calls his brother “the most popular Republican alive”, which is a bit of a stretch. Nancy Reagan? Clint Eastwood?)

Trump leads convincingly from Cruz in the most recent polls in both South Carolina and Nevada, but there haven’t been any polls from either state since the Iowa caucus. Neither state is as friendly territory for “establishment” candidates as New Hampshire: South Carolina’s electorate is much more evangelical, and Nevada’s much more conservative. Newt Gingrich won South Carolina handily in 2012 and Huckabee came a close second in 2008. Cruz and Trump are doing best with evangelicals and very conservative voters this time around. Thanks to the state’s winner-take-all rules, whoever prevails in South Carolina will get the small ego boost of going into Super Tuesday with the most delegates.

On the Democratic side, Bernie Sanders secured a big win over Hillary Clinton (60 per cent to 38 per cent with 90 per cent of precincts reporting). What seemed incredibly unlikely a year ago has been almost certain for the past week or so. As he heads south and west, though, Sanders faces a new challenge: winning over African American voters.

Just two per cent of those who voted in the two Democratic contests so far have been black; in the next ones that number will be a lot higher. (In 2008, it was 15 per cent in Nevada and 55 per cent in South Carolina). In national polls, Clinton holds a 58-point lead among African American voters compared to her six-point lead with white voters, and she’s 31 points ahead overall in FiveThirtyEight’s average of South Carolina polls (all taken pre-Iowa).

Ironically, Clinton now finds herself in a similar position to the one Barack Obama was in when battling her for the nomination in 2008: heading to South Carolina, having won Iowa but lost New Hampshire, hoping African American voters will help her win big and regain the momentum as we head towards Super Tuesday.