Energy Supplier
Energy Supplier: Buy forward, sell under a cap. An energy supplier buys wholesale and sells retail, and the margin between them is a few pence in the pound…
Buy forward, sell under a cap. Sell electricity at a price the regulator set, bought at one it did not.
An energy supplier buys wholesale and sells retail, and the margin between them is a few pence in the pound. The whole trade is hedging: buying next winter's energy months ahead for customers who can leave tomorrow and whose price is capped. Grow fast on a cheap tariff and you are short of hedge when the market moves. Customers pay by direct debit in advance, so a failing supplier looks flush right up to the week it is handed to somebody else.
- Setup costs
- £3,000,000 to £30,000,000
- Competition
- Very high
- Category
- Infrastructure & Utilities
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