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11 February 2013updated 22 Oct 2020 3:55pm

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

Keeping the flame alive.

By Meghna Mukerjee

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?

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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.  

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