Tenth Energy Company “Our Power” folds in 2019 

Over the last year, the energy supply industry has seen nine energy suppliers forced to cease trading, as rising wholesale costs tip cut price providers over the edge. This week saw the tenth company go out of business, as “Our Power” folded.

Supplying around 31,000 domestic customers, “Our Power” was an Edinburgh based energy supplier who had been in business for around four years. Set up as a not for profit business, the small supplier let owing more than £9.5m to the Scottish government in loans paid over the years.

As usual, Ofgem stepped in with their safety net , advising customers to sit tight and assuring them that their credit balances would be protected. More recently they have appointed Utilita Energy Limited as the Supplier of Last Resort (SoLR), with customers’ accounts undergoing transfer over the next few weeks.

The seemingly endless string of failed suppliers has led to questions to be asked, over whether the very low pricing typical of challenger companies is really sustainable. Ofgem aims to tackle this issue in some respects with their new licensing tests for suppliers , which are due to come in by late spring of 2019.

As the saying goes, “one man’s misfortune is another man’s gain”, and this is certainly the case in the energy industry at the moment. As suppliers go out of business, the SoLR who takes on their customers is given a massive boost in growth, posing a serious threat to the domination of the big six.

Over the last year, displaced customers have totalled more than 800,000. These customers have often been moved on to other small and medium suppliers, rather than any of the big six, as they are perceived to have better value tariffs closer to those the customers would have been on before.

Of those who have benefited out of the collapse of other firms, Ovo Energy have led the way. They have taken on more than half a million customers from failed suppliers, taking their total customer base to 1.5million and giving them a market share of 4.9%. That’s pretty close to the smallest of the big six suppliers, npower, who currently have a 7.7% share of the market.

Ovo’s Chief Executive, Stephen Fitzpatrick, has indicated that Ovo would be happy to take on more customers in the event that other suppliers fold. He said “Taking on Economy Energy and Spark Energy customers has been significant for us – an increase of more than 500,000 customers – but we are prepared for more if the right opportunities arise.”

He points out that one of the reasons Ovo is doing well is because they’ve deliberately avoided offering loss leading tariffs, choosing instead to be disciplined with pricing to ensure a profitable business. Calling it a ‘race to the bottom’, he warns that the changing landscape and the new price cap means that many companies are struggling to adapt.

Not all boost from SoLR appointments are permanent, as we saw when Co-Operative Energy were appointed to take on 160,000 customers of GB Energy in 2016, almost doubling their customer base overnight. However, since then they’ve dropped around 40,000 customers, showing that not everyone switched to a SoLR will want to stick around.

Whether or not this culling of the energy industry will help small suppliers close the gap on the big six, one thing is clear: it’s not over yet. Ofgem are keeping a close eye on a number of small suppliers who have defaulted on Renewables Obligation payments, often a clear sign of financial crisis.

Further Reading

Ofgem lays out plans for energy suppliers to automatically refund surplus credit

How can smaller energy suppliers be competitive?

How to convince consumers to switch to a smaller energy supplier

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