Independent energy retailers: sink or swim?

Utility Week rounds up some of the newest additions to the energy retail market, and how they plan to stay afloat in a sea full of competitors.

There is a veritable shoal of new fish in the energy retail market pond, but as any Blue Planet fan worth their salt knows, not all fish survive. (GB Energy Supply got washed ashore in 2016, and Brighter World Energy went the same way just this month). The big six continue to dominate, but they are steadily losing market share to small independents, who are identifying and targeting niche markets, many to great effect.

To that end, a record 5.5 million households switched energy supplier last year, which is a 15 per cent increase on 2016 and the highest number that Energy UK has ever recorded. But as a result, competition in the energy market has intensified – most of the switches went to one of the big six (British Gas, Eon, EDF, Npower, ScottishPower or SSE), but 28 per cent of energy switches last year moved to small or mid-tier energy suppliers.

Hence all the new kids on the block. The problem with this though, is that the pond is increasingly crowded – more than 60 suppliers now operate in the energy market, and the smaller companies are more vulnerable to the scourge of half-hourly imbalance charges imposed by the central wholesale trading market, as they can’t cover their backs on the same scale as the big boys by hedging ahead.

Furthermore, the demise of Brighter World, which wasn’t such a small fish, has led some to suggest the wheels of a long-anticipated shake-up of the market may now have been set in motion. But for now this remains speculation, and new business models continue to join the fray – here we take a look at five of them, and how they’re planning to brave any rough seas that might be around the corner.

Ram Energy

• Founded: October 2017
• Parent company: Robin Hood Energy
• Chief executive: Larry Lee
• Headquarters: Derby

Last October Derby City Council became the latest local authority to launch its own energy company, Ram Energy. It was launched in partnership with Nottingham City Council’s Robin Hood Energy, and is available to those with a Midlands postcode. There was a special introductory offer in place for all new customers within the first three months, with discounts for credit accounts managed online. Ram is also available to pay-as-you-go customers, who the council says have been “traditionally poorly served by the energy market”.

Pay-as-you-go customers will have new smart meters installed, enabling them to top up online and by phone, as well as via the traditional key card route. And Ram’s launch was backed by some of Derby’s largest employers, including Rolls Royce, Bombardier and Toyota UK, who all agreed to promote it to their staff.

“Ram Energy is a local brand for the people of Derby, offering security and reassurance about value for money,” said council leader Ranjit Banwait at the time. “It is not about making big profits or paying shareholders, as is the case with the big energy supplier,” he added. “This will make a meaningful contribution to the quality of life in our city.”

Angelic Energy

• Founded: October 2017
• Parent company: Robin Hood Energy
• Headquarters: London

Based in London’s Angel Islington, Angelic Energy (see what they did there), is London’s first municipally-owned energy company for more than a century. Islington Council says the company, which opened its doors for business in October of last year, will focus on offering fair gas and electricity prices, with the aim of lifting some of the capital’s most vulnerable households out of poverty.

Cllr Claudia Webbe, Islington Council’s executive member for environment and transport, says: “For years, inflated energy prices have forced thousands of people across London into fuel poverty, with catastrophic consequences for their health and quality of life. Too many are forced to face the question ‘heat or eat?’ Children brought up in fuel poverty also do worse at school and college, so helping current and future generations to stay warm and well is an absolute priority for us.”

Liverpool Leccy

• Founded: April 2017
• Parent company: Robin Hood Energy
• Headquarters: Liverpool

A joint venture from Liverpool City Council and Robin Hood Energy, the Liverpool Energy Community Company (LECCY) was launched in April of last year with the aim of tackling fuel poverty in the city.

It offers competitively priced gas and electricity, as well as advice to households to help them move off costly prepayment meters and on to cheaper direct debit tariffs.

It says it also supports people in moving over to smart meters, so they can manage their energy use and provide help with managing their bills.

As well as a one year fixed rate deal that is cheaper than the tariffs currently offered by the big six energy companies, the council says more fixed rate deals are in the process of being agreed for Liverpool residents, and will be announced in the coming months.

People’s Energy

• Founded: May 2017
• Chief executive: David Pike
• Headquarters: East Lothian
• Number of customers: Around 4,000
• Number of employees: 13

After crowdfunding nearly £500,000 online, People’s Energy opened in May of last year with a manifesto that included offering customers greater fairness and transparency. The company sources its energy from the same wholesale market as established suppliers, but its founders (David Pike and Karin Sode) pledge customers will automatically get shares in the company, as well as a portion of its earnings – the couple promises to redistribute 75 per cent of the company’s profits as an annual rebate.

Customers will also be given representation on the board of directors, and key data such as salaries and wholesale energy costs will be published. The standard variable tariff (SVT) is forecast to be around £129 cheaper than the big six average, according to the company.

OneSelect

• Founded: April 2016
• Chief executive: Sathees Kumar Sampar
• Headquarters: Reading

Launched in April of 2016, Reading-based OneSelect says it’s all about simple, cheaper energy. It had a blueprint to work from, as it launched Energieflex on to the Dutch market in 2014. Energieflex was the first Dutch supplier to offer pre-paid billing, smart meters and the ability to switch in just 24 hours – it has been a great success and now supplies more than 100,000 households. Now OneSelect is aiming to apply the same principles to the UK market.

The company says it offers “the same mix of great pricing, excellent customer service and innovative products” as Energieflex, but in the UK. It’s about low-priced energy, which is fixed for 12 months, and simple tariffs with no exit fees.