Potential £2billion impact on well run suppliers

The excess costs (ie losses) to hedge a typical switching sized customer at the price cap are approaching £1,000.

As part of 'business as usual', suppliers will have some open (unhedged) positions for customers they would normally expect to switch away, or re-fix their deal.

In a functioning market, the best suppliers in the industry will have <20% churn, which will be ~1.5%-2.0% per month.

The market has ceased to function normally, which means all existing churn models and energy demand forecasting models don’t work as they used to, as the customers have no where to churn to, and re-fixing is too expensive.

So each month ~1.5%-2% of the customer base is being moved onto a loss making product which is 10x-20x more loss making that the deeply discounted acquisition prices a number of suppliers have offered previously.

The forward curve currently shows that we’re in a period of extreme prices until Apr-22, and then energy will be expensive (but not extreme) until ~Apr-23.

Suppliers being forced to bear these excess costs is not sustainable.

So far, we've seen 1.7m customers going through SoLR, and the mutualised costs will be north of £1bn, which will add £35-£40 to everyone’s bill. If we see another 1m customers going through SoLR, this will be another ~£1b in mutualised costs.

We have a position where:

A) The price cap is not cost reflective, and is now hugely loss making

2) Each month more and more customers (~500k per month) are being moved onto the price cap

D) Customers can’t really go anywhere else and suppliers can’t really ask them to leave

For the suppliers who are able to weather the storm, they are facing into £1.7bn to £2.0bn of losses over the next six months for customers who are being advised not to switch and to stay on the price cap with their current supplier.

And yes, I really did just use the Buzz from Home Alone A, 2, and D quote :)