Energy companies are businesses, some bigger than others and some more profitable. Some are able to weather the storm and the market environment will filter out ineffective players.
A supplier ceasing trading is an inconvenience to the customers it supplies, as well as costly to the industry as a whole. The underlying reason for failure, in our experience, is normally a mix of poor systems, insufficient funding, lack of profitability or poor managerial direction. Considering the complex nature of the variables involved, creating a successful supplier isn’t easily, or often, achieved.
Since the beginning of January 2018, 27 suppliers have either ceased trading, with their customers transferred under ‘Supplier of the last resort’, or have sold their customer base to other suppliers and exited the market. The vast majority of their customer bases have been domestic, however some do include B2B portfolios such as Bristol Energy and Robin Hood Energy.
Both are council owned suppliers. Their aim was to be a not-for-profit green energy provider tackling fuel poverty in their locality. At Ginger Energy, our team have worked with both suppliers, liaising with their knowledgeable and professional employees who conducted business and served their customers to the highest standards. Therefore, we would like to emphasise that the performance of these organisations should not be seen as a reflection on the teams who worked within them.
The outcome for both suppliers has been less than ideal for the residents of their council areas. Whilst neither have entered administration or had supply licences rescinded, they have both had to take drastic action recently due to the losses of public funds.
Bristol Energy has sold their B2B portfolio, around 4000 supplies, to YU Energy for £1.34m. It is understood that the residential business is being sold separately to Together Energy. To date, Bristol Energy has posted losses of £32.5m in council taxpayer funds. Our understanding is that staff within the business team of Bristol Energy will join YU.
Robin Hood Energy has sold their customer book, around 112000 domestic and a further 2600 business supplies, to British Gas. According to a BBC report, the council have estimated their total losses to be around £38m and 230 staff are to be made redundant. In addition to the Robin Hood brand, they also white labelled their services to 10 other council run energy providers, which will also have their supplies transferred to British Gas.
Instead of generating revenue for the councils, both organisations have lost considerable sums totalling in the region of £70m. In Bristol the average council tax bill is £1,758 per annum, in Nottingham it is £1,262 (source www.gov.uk). The losses equate to 18,500 homes in Bristol and 30,100 homes in Nottingham having their council tax payments gambled and lost. To look at it in an alternative way, it would be the equivalent of paying for solar panels to be installed on 15k domestic properties.
The difference is the solar panels (or investment in other energy efficiency) will provide guaranteed results that benefit the end user and help reduce energy poverty. You must assume that local authorities cannot afford to write off these sums without it impacting on their ability to deliver elsewhere. Given the high risk involved, with a low probability of a return, would councils not be better advised to seek alternative routes to help their residents, which will not risk their ability to provide services elsewhere?
The Ginger Energy team would like to take this opportunity to wish all staff at these affected suppliers the best for the future. We believe that councils play a vital part in the eradication of fuel poverty, but we’re not sure it is in the form of a supplier.