While we wait for Putin ... here's some meerkats

I’ve long been quite surprised that the market has sustained so many price comparison sites.   Presumably, the software is relatively simple, the overheads are low and their biggest cost is massive prime-time TV advertising campaigns.  It seems to be as competitive as an industry ever gets – ironic, when at the start of energy-price comparisons we notoriously only had the ‘Big 6′ of actual energy suppliers.  Right now, unsurprisingly in view of the UK energy pricing debacle, they’re in trouble. 

You’ll have read it here; but I don’t recall ever seeing in the MSM recognition of the baleful impact the auto-switchers or ‘flippers’ had on the health of the energy supply market itself.  It was once impossible for small new entrants to access this market – and quite right too: why should the barriers to entry in a sector like this be low?  But a number of factors conspired to turn this situation utterly on its head, so that any two-bit rogue could play – and play with other people’s money, too.  High on the list of new factors was the ‘flipper’:  all you had to do was register with the site, ensure your price was the lowest for a short while (or, with the less scrupulous ones, cross the flipper’s palm with silver for ‘special favours’), and be sent as many customers as you wanted.  Simples, eh, Sergei?

And play they did – for a while, until the tide inevitably went out and their lack of swimwear was revealed.  Meanwhile, many a rogue syphoned off a chunk of the free working capital that the energy ‘market’ gifts to end-game suppliers in the form of pre-payments, and green levies collected but not paid over.  As well as genuine profits in the early stages of this game when prices were falling and they could play the Northern Rock tactic of sell long, buy short – without needing much by way of credit-lines.  Yes, of course it was unsustainable.  

The outcome is costing us £ billions to unwind, even though Ofgem’s SOLR mechanisms mean no customer loses their supply in the process.  It has also brought the game into fundamental disrepute.  Ofgem is generally quite a good regulator but they screwed this one up royally.  Thanks, Sergei and that Welsh git.

ND