Ofgem energy regulator wants you to believe that its new measures to close customer deposits are “tough”. Surely they should be. Some £ 400 million of customer money has evaporated with the failure of 28 energy suppliers since last September – the coffers were only filled with a charge on every household.
Unfortunately, the presumption of hardness regulation seems premature. An appropriately sound plan to prevent deposits from being used as “an interest-free business credit card,” as Ofgem CEO Jonathan Brearley said, would be adopted immediately. Some providers would have to raise capital to replace the deposits they have been using as working capital, but a determined regulator would insist that they do.
This is not Ofgem’s plan, or at least not yet. Instead, it has entered a world of consultation and evidence gathering. On the one hand, the regulator says it is “in mind” to introduce full closure “as soon as possible,” which means end of year. On the other hand, he wants to “better understand the magnitude of any risk to vendors’ business models.”
In other words, it is willing to listen to the requests of some sectors that the total and immediate protection of deposits would bring down some suppliers. The document cited a figure of only 30% as a level of limitation that domestic suppliers “could accommodate” this winter.
A 30% result (ringfencing-lite, so to speak) would be a sign of regulatory weakness, not harshness. £ 94 has already been added to household bills to replace the missing green deposits and taxes on bankrupt businesses. It would be a shame if that number went up again this winter.
Yes, Ofgem must follow the proper statutory process to avoid soliciting legal action. Ultimately, however, it has to deal with cries of delay and long transition periods. Brearley, in reform mode after two decades of lax regulation in Ofgem, must deliver on its promises. No recoil.
Easyjet and others will not be able to growl
EasyJet shareholders, like some of the passengers with booked flights, are in the dark. The missing element in the airline’s announcement that it is “proactively consolidating” a few thousand flights over the summer was an estimate of what the “resilience” measures mean in financial terms.
“There will be an impact on costs,” the statement said, without offering guidance. Much depends on how many affected passengers accept the offer of an alternative flight. Past experience says that the percentage should be high, bettors still want to go on holiday, but the difference between 70% and 90% is still large in terms of the compensation bill that will end up being paid by easyJet. The most that can be said is that while the City Council previously thought that the company would finish washing this year, there is now a loss.
The bullish case says a terrible summer does not disrupt long-term recovery prospects; The strength of the demand to fly has been demonstrated, after all. An alternative view is that disruption can have long-term consequences for all airlines. Passenger rights are being violated in a natural way, said the consumer body Which ?, testifying before MPs last week. If the current unrest acts as an indication to rewrite the rules, or simply to enforce existing ones, the industry is not in a position to protest.
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Why it is reasonable to resist the full Internet conversion for Primark
The operating profits of Primark, a retailer that has resolutely refused to sell online, will be nearly £ 800 million this year, if city analysts ’forecasts are correct. At Asos, the online pioneer, the equivalent figure could be just £ 20 million, according to last week’s warning. So why would Primark even want to venture into online gaming by experimenting with a click and collect service?
Well, the answer seems simple. Clicking and picking up, customers still have to show up at the store, where they can decide to buy extra stuff. If the test with children’s clothing and accessories in 25 stores in the North West of England works, the chain should generate incremental sales.
What will never happen, almost certainly, is a conversion to a full online offer at Primark, delivery and all. The economy does not work at the cheap end of the market, the company has always insisted. Given Asos ’latest issues with high levels of uncomfortable performance, the conviction is suspected to be greater than ever. Just copy the working bits and stay away from the hassle. Sensible movement.