tag:blogger.com,1999:blog-5465015914589377788.post818093304665000822..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: Direct Energy Viewed as an Insurance CompanyMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-5465015914589377788.post-62985626231301823602009-04-09T18:14:00.000-04:002009-04-09T18:14:00.000-04:00Anonymous: Thanks for your input to this discussi...Anonymous: Thanks for your input to this discussion. I would like to think that your customers would take the time to check Direct energy's credit rating, but I doubt that very many customers even consider the financial health of the company that takes on risk for them.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-83876639132814573072009-04-09T17:45:00.000-04:002009-04-09T17:45:00.000-04:00I work for Direct Energy. We're part of the Centri...I work for Direct Energy. We're part of the Centrica group of companies (listed on the FTSE), and have investor-grade credit rating. Part of the value we bring to customers is that we have the financial werewithal to weather economic hardship and volatile markets, and to take on the risk of energy market volatility on their behalf.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-18817149528177383952009-03-27T13:09:00.000-04:002009-03-27T13:09:00.000-04:00Yep. The trade off is that the nat. gas company kn...Yep. The trade off is that the nat. gas company knows what they're going to get in the next 2 years, but in doing so takes on the risk that prices could go up. So pretty much exactly what you said.Nelsonhttps://www.blogger.com/profile/09200344016447500395noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-70006041017544768742009-03-26T17:50:00.000-04:002009-03-26T17:50:00.000-04:00Nelson: If I understand you correctly, Direct Ene...Nelson: If I understand you correctly, Direct Energy lays off the risk of rising costs onto the gas suppliers. So, if there is some major interruption in natural gas supplies, it is the gas supplier who has taken on the commitment to continue delivering gas for 2 years even if they have to do so at a loss.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-56316156437467008342009-03-26T17:32:00.000-04:002009-03-26T17:32:00.000-04:00Direct Energy just hedges the cost, the same way a...Direct Energy just hedges the cost, the same way airlines know what they'll pay for fuel or a gold company knowing how much revenue they'll get per ounce. <BR/><BR/>They just enter into a contract that states that a producer provides them with so much natural gas at a fixed cost over the two year term, then sell it to consumers at a premium. Happens all the time really.Nelsonhttps://www.blogger.com/profile/09200344016447500395noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-7985149481942314952009-03-26T08:59:00.000-04:002009-03-26T08:59:00.000-04:00Patrick: Thanks. Nice reference. If I was incli...Patrick: Thanks. Nice reference. If I was inclined to make a list of related posts, I'm not sure I would have remembered that one, but it's definitely relevant.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-35100362016244530782009-03-26T00:42:00.000-04:002009-03-26T00:42:00.000-04:00Wow, great post Michael. That's an aspect I hadn'...Wow, great post Michael. That's an aspect I hadn't considered -- I've avoided fixed-rate gas contracts merely because a <A HREF="http://michaeljamesmoney.blogspot.com/2008/05/safety-margin-beats-insurance.html" REL="nofollow">safety margin beats insurance</A>, but now I have an additional reason. :-)Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.com