Need credit? State owned enterprises to the rescue

An interesting announcement yesterday. Bord Gais, the state owned gas monopoly, have announced that they are moving into the market to provide a wide range of consumer energy related services. Not only will they supply you with gas, but they will sell you all manner of insulation, heating and associated services.

All very good, thinking at the margin and employing their core comparative advantage (direct access to households) to their strategic corporate gain. Let's leave aside concern about market power that one might have (they might easily throw other suppliers out of the market due to their size, brought by their state enshrined monopoly in gas supply, or their very favourable access to capital markets as a state owned monopoly utility). No, what I am thinking about is the way they are going to allow customers to pay for such big-ticket capital expenditures.

It is the intention of the Bord Gais that customers will be able to "pay via their gas bill". That is just another way of saying that Bord Gais will extend credit to allow customers to undertake expenditure. No need to borrow from a bank (that has quite rightly tightened up its lending criteria). Bord Gais will, in the words of their CEO John Mullins at the Cork Chamber of Commerce yesterday, let customers have it "on the never-never".

There seems to be a general clamour for banks to open up the taps to all comers. The Irish government is happy to play along. I find this a curious development in such a context. With credit comes euphoria, if only for a short time until the never-never arrives for payment.