Q. Good afternoon, Matt mentioned that some suppliers have historically used certain billing systems and/ platforms that are inappropriate – can you explain a little more and why those systems are not fit for purpose?
A. Most suppliers use 'off-the-shelf' systems.
A number of the inhouse or bespoke developed systems we have seen have not correctly interacted with the various complex industry databases or have not been designed to deliver a complete customer final billing process (mass meter readings and billing) without substantial reworking.
This can result in incorrect data being collated and inaccurate bills.
Q. Allan mentioned that hedging can play a significant role for suppliers. In your experience, are hedges typically built into the power purchase agreements (PPAs) itself (i.e. between the supplier and their generator company) or are those hedges separate contracts that sit outside of the PPAs?
A. Dependent on individual circumstances of each company but recent hedges we have seen have tended to be separate agreements with right of set off across any of the generators' liabilities.
Q. Ofgem and the SOLR as creditor appear to be key strategic questions facing the restructuring industry at both the beginning of this process and at the end stage for dividends. Does the panel have a view on this?
Yes although with ongoing court cases for directions against both the ROCs and credit balances, notably about the validity of their creditor status, it isn't appropriate to answer this at this time.
The outcome of these cases could materially change the outcome for the unsecured creditors.
Q. Apologies if i missed this, why are some inhouse/outsourced CRM/billing system not fit for purpose?
A. As above.
Q. Presumably for smaller energy providers, if the final billing is done prior to appointment, a liquidation can be used rather than an administration?
A. Yes, liquidation can be an alternative option.
However unless there is a sufficient gap between SOLR and appointment, with customers getting readings through or substantial smart meter penetration, with limited creditor pressure and limited ongoing trading risk for the directors, administration would typically be the better option to take control and retain staff for the billing.
B2B suppliers with lower customer numbers may see liquidation as a more appropriate option.
Q. How can a generator carry out due diligence on a Supplier to check their credit worthiness, given the speed at which a Supplier's financial position can change?
A. Similar to any business, it will depend on the underlying financial information available.
Currently the market is very volatile but sector specialists in normal times would be able to assess the forecast position from forward supply pricing and build in appropriate sensitivities.
Given the restricted finance offerings available to E&G retail suppliers, wholesales often have either collateral (cash or guarantee) or alternatively have taken security.