In my experience, the reasons for someone resigning are rarely revealed by the ostensible account. Sometimes they've actually been fired. Sometimes they were at the end of their tether - maybe out of their depth - and looked for some convenient pretext, or picked a fight on a semi-spurious 'point of principle'. Sometimes they are just one of life's serial resigners with a track-record of flouncing off. And sometimes, I suppose, the whole thing should be taken at face value.
Anyhow, last week there was an interesting one: "Ofgem director Christine Farnish resigns over price cap change". Who she? Good question. Is the precise mechanism of the Ofgem price cap a resigning matter? Well, it's incredibly technical, as a glance at Ofgem's many publications on the topic indicates: a helluva balancing act in fraught circumstances, with lots of competing strategic desiderata in play. Only Theresa May ever wanted this cap thing, and the weight now resting upon it is wildly more than it was ever designed to bear.
The underlying complexity is a genuine one: what should be the hedging strategy of a utility supplier in ultra-volatile market conditions? An answer to this is required because the price cap logically needs to take it into account. What's being hedged is technically a short option - always ultra-problematic. There's no single "right" answer, not least because high volatility (and we are talking off-the-scale vol here) is naturally accompanied by thin liquidity in the hedging markets, and acute pressure on lines of credit, all for very logical technical reasons. In case anyone imagines there's an element of crying wolf here, just consider the number of suppliers who've gone bankrupt or otherwise exited the market in the past 12 months. Much of that was Ofgem's fault for licensing minnows in the first place, but Bulb (e.g.) isn't in that category and Bulb is languishing under state control at the expense of all of us. The government, for one, has no idea how Bulb should hedge, and so it ruled that it wasn't to be allowed to.
For those interested, there's another technically fascinating phenomenon at work in the hedging arena: backwardation in the gas market. This is where the forward curve is trading at lower prices than the spot market - generally not something seen in the gas market, except ultra-fleetingly**. But since last year when this whole thing kicked off (starting in the Far East - see this blog from Feb 21 - long before Putin played his hand about 12 months ago, but made much worse by his subsequent actions) there have been unprecedently sustained periods of deep backwardation. This, incidentally, is the only reason the big players like Centrica are still alive and kicking: they've been able to lock in at prices they are fairly sure will end up looking OK, relative to spot prices. They may still have had to take the risk of an open long position for quite a while, however. The small players might have wanted to go the same way - but didn't have the credit standing to take on the same position. The strain on even Centrica's lines of credit is enormous.
The last 8 weeks have seen astonishing movements along the forward curve - prices for calendar '23 and '24 have more than doubled. Even with this, there's still a degree of backwardation.
I don't know if the "£6,000 price cap" forecast is warranted - putting numbers on predicted commodity prices is a mug's game; and I've no idea who "Auxilione" are, except that they seem to be attention-seeking. (As an MP acquaintance of mine says, you can always get on the news if you are willing to take your trousers down in public.) Doesn't detract from the difficulties ahead, though.
But resigning over the technicalities of the price cap? She should have done that a long time ago: it's been a can of worms since the very start.
**There are all manner of pseudo-science theories about this - e.g. "backwardation can't ever be sustained in the gas market" - but, like econometrics in general, they are mostly bullshit