2021: A painful year for the energy retail market

January 2021 – There are more than 50 energy retailers operating in the UK market. Covid has not had the disastrous impact on suppliers as many a dire warning had predicted and the market has so far held up strongly though the pandemic.

Fast forward to December and the picture has changed dramatically. A grand total of 27 retailers have exited the market via the Supplier of Last Resort (SoLR) process – triple the previous record set in 2019. For the first time ever one supplier was deemed too big to be liquidated via SoLR, a tried and tested method, subsequently becoming the first ever retailer to enter the government’s special administration regime (SAR).

Indeed 2021 has been a year like no other.

It began with a double supplier failure in January. Milton Keynes-based Simplicity Energy served just 50,000 domestic customers, a minnow compared to the much larger Green Network Energy which left 360,000 for the SoLR. Yet despite its sizeable customer book, even Green Network was much smaller than other suppliers to exit further down the line.

All was quiet until the failure of small supplier Hub Energy in August, leaving behind 6,000 domestic and 9,000 non-domestic customers. But it was September when the impact of staggeringly high wholesale gas costs as the world opened up from lockdown that the crisis truly began to bite.

September

In total nine suppliers exited the market in September. For perspective, that’s as many as the whole of 2019 which in itself was a record year.

Most notable of the nine was Avro Energy. With almost 600,000 customers, Avro is the single biggest supplier to go through SoLR to date. It failed on the same day as Green, which supplied 255,000, as well as a small number of non-domestic customers.

Formed in 2014 by 20-year-old Jake Brown, Avro was recently revealed in an administrators report by Alvarez and Marsal as having “no external funding or security over its assets”, relying solely on working capital.

It further confirmed that Avro’s “lack of any hedging instrument in respect of its energy purchases” left it at the mercy of soaring wholesale prices.

Draft financial statements for the year to June 2020 showed a net profit of £30 million from a turnover of £421 million with net assets of £2.4 million on the balance sheet.

However a year later the company was recording net liabilities of £55 million. A cash flow forecast produced in September of this year predicted £71 million of funding would be required by the end of October, rising to £258 million by the end of March 2022.

Octopus Energy ultimately stepped up to take on Avro’s customers.

Another notable departure was Igloo Energy which had been consistently commended by Citizens Advice for its exceptional customer service. It frequently topped the consumer charity’s quarterly star ratings table.

While the total number of failures was set to be topped the following month, September was and remains the month where the biggest number of customers saw their supplier exit the market.

• PfP Energy – 80,000 domestic and 5,000 non-domestic
• MoneyPlus Energy – 9,000
• Utility Point – 220,000
• People’s Energy – 350,000 domestic customers and 1,000 non-domestic
• Avro – 580,000
• Green – 255,000 customers. small number of non-domestic
• Igloo – 179,000
• Symbio – 48,000
• Enstroga – 6,000

TOTAL: 1.7 million customers

October

While October’s total was nowhere near the previous month’s, more than a quarter of a million customers did see their retailer fail.

Perhaps the most surprising was the demise of BP-backed Pure Planet, which left with market after having acquired 235,000 customers since it was founded in 2017.

Pure Planet was far from a fly-by-night energy retailer. Its founders include telecommunications veteran Steven Day who was involved in setting up Virgin Mobile, which listed on the London Stock Exchange in 2004, doubled its share price, and was sold to NTL in 2006 for just under £1 billion when it became Virgin Media.

While BP had a 24% stake in the business, things rapidly unravelled when the oil giant withdrew its support because of the “increasing risks and large potential losses” faced.

In a statement, Day, along with co-founders Andrew Ralston and Chris Alliott, said they were “heartbroken” that their customers would go through SoLR.

Pure Planet’s customers, along with the customers of the month’s three other failures, would eventually be snapped up by Shell Energy.

• Pure Planet – October 2021 235,000 customers
• Colorado – October 2021 15,000 customers
• Daligas – October 2021 9,000 customers (gas only)
• GoTo Energy – October 2021 22,000 domestic customers

TOTAL: 281,000 customers

November

Despite the pain already caused by the 13 supplier failures of the previous two months, November proved to be an even more devastating month for market exits. Ten suppliers entered the SoLR process during this month.

Among these included CNG Energy which had had a presence in the market for 27 years. CNG’s wholesale business exited, compounding issues further for a number of suppliers. Zog Energy, which failed a month later, cited this as the reason behind its own demise.

Additional failures included Manchester-based Zebra Power which, like Igloo, has in recent years been commended for its customer service by Citizens Advice.

Another of November’s casualties, prepayment specialist Omni Energy, came under fire after attempting to offload its customers to other suppliers.

Scottish Power is understood to have prevented around 1,600 Omni customers being transferred to its own customer books, whilst Bulb is also understood to have blocked a number of potentially non-consensual switches.

A Scottish Power spokesperson confirmed the company was aware of the apparent switching of Omni’s customers to other suppliers, including itself. They added the supplier was taking “appropriate action” to minimise the impact on those affected.

Yet despite November being a record month for SoLRs, it will be chiefly remembered for the demise of Bulb, which became the first ever retailer to enter the special administration regime (SAR).

At 1.7 million customers Bulb was one of the market’s largest players and had been regarded as one of the success stories of privatisation. The London-based company however has been blighted by debt since being founded in 2015.

In its accounts for year ending March 2019 the retailer insisted the £129 million loss it posted was “part of the plan” to focus on growth, with an ultimate aim of having 100 million customers worldwide.

While losses reduced in 2020, it still posted a £63 million pre-tax loss for the financial year.

Despite rumours of potential takeovers, Bulb’s fate was sealed when it was announced late in the month that it was to enter SAR. Following this the government unveiled a £1.7 billion loan to help fund the administration and it is uncertain what will happen to the company’s sizeable customer book.

• Bluegreen Energy Services – 5,900 domestic
• Omni Energy –6,000 domestic pre-payment
• MA Energy – 300 non-domestic
• Zebra Power – 14,800
• Ampower – 600 domestic customers and 2000 non-domestic
• CNG Energy – 41,000 non-domestic
• Neon Energy Supply Limited –30,000 domestic
• Social Energy Supply – 5,500 domestic
• Orbit Energy – 65,000 domestic
• Entice Energy – 5,400 domestic

TOTAL: 176,500 SoLR/ 1.7 million SAR

December

At the time of writing Ipswich-based small supplier Zog Energy is the only retailer to have ceased trading so far in December.

Zog, which served around 11,700 customers, blamed its exit on the demise of gas shipper CNG. The disruptor brand said it was unable to secure the gas hedges it previously agreed with CNG.

Zog’s demise means that 27 energy suppliers have now left the market via the SoLR process in 2021. These suppliers accounted for more than 2.6 million customers, in addition to the 1.7 million of Bulb.

The bill for the failures is already is proving to be huge, with Ofgem confirming this week it will allow the SoLRs to claim back more than £1.8 billion in initial Last Resort Supply Payments (LRSP) which will feed through in April under an accelerated timetable.

While Utility Week understands Ofgem is seeking to mitigate the impact these payments will have, there are concerns of the effect on the incoming price cap as wholesale costs continue to rise to unprecedented levels.

The departure of 27 suppliers has seen the retail market change beyond recognition. Well-known brands thought to be paving the way for the future have collapsed, resulting in consolidation around the old legacy suppliers that remain – British Gas, Eon, Scottish Power and EDF – as well as the new players that were big enough to weather the storm – Octopus, Ovo and Shell.

Wholesale costs continue to rise, however, and there is a sense the market is not out of the woods yet.

All eyes will now be on whether Ofgem’s recently published ‘action plan’ will be enough to mitigate any further impact on both smaller, less well-capitalised retailers and their much larger counterparts which will undoubtedly be called upon to help pick up the pieces if anything more goes wrong.