Octopus Energy will take on 580,000 customers of Avro Energy, the biggest supplier yet to have gone bust in the crisis-hit British retail energy market.
Octopus has agreed to take on Avro’s customers via Ofgem’s “supplier of last resort process”, the regulator announced on Sunday.
The move will allow Octopus to recoup all costs incurred, including buying energy for customers of the failed supplier via an industry levy that ultimately falls on consumer bills.
Currently, there is a difference of more than £500 between how much Octopus would be allowed to charge under the UK’s annual price cap, which rises to £1,277 from October, and the near £1,800 cost of buying energy for new customers at present wholesale prices.
Any customers that had been on cheaper fixed price deals could see their bills rise by hundreds of pounds.
The potential cost to households of rescuing failed energy retailers is increasingly coming under the spotlight, with Keith Anderson, chief executive of ScottishPower, warning on Friday that “billions of pounds” could end up heaped on customer bills because of turmoil in the market triggered by record wholesale gas and electricity prices.
Octopus’s decision to take on more than half a million customers may lend support to the position of business secretary Kwasi Kwarteng, who last week backed away from arranging a rescue package for the sector.
Kwarteng has said the industry must try to resolve the problem of orphaned customers in the first instance. The Department of Business, Energy and Industrial Strategy has indicated it believes the existing protocols for transferring orphaned customers are robust.
Ofgem insisted on Sunday that Octopus has been appointed to rescue Avro’s domestic customers following a “competitive process . . . to get the best deal possible for customers”.
Others, however, have argued that the number of suppliers with balance sheets strong enough to take on large numbers of lossmaking customers via the supplier of last resort process is diminishing.
Bill Bullen, chief executive of Utilita, has said it is “impossible” for anyone but the very biggest companies to re-home customers given it requires risking a lot of capital upfront, even though costs can ultimately be recouped from customer bills.
London-based Octopus, part of the Octopus Group that was started in 2000 as a fund management company by three young graduates, entered the British retail market in 2016.
It has fast made a name for itself as a leading energy tech company that also licenses out its platform to other energy retailers, including Eon UK, as well as supplying its own customers. It has also made a string of deals internationally that have valued it at more than $2bn.
The move to take on the Avro customers will mean Octopus is supplying almost 3.1m homes and businesses, cementing its position as one of the five biggest suppliers in the UK.
The company said on Sunday that it had a “strong track record” in migrating large numbers of customers across from another supplier “and would like to reassure customers that there will be no interruption or impact to their energy supply”.
Octopus has also been connected to a possible bid for rival Bulb Energy, with Sky News reporting on Saturday that the company is among several that have requested access to a data room set up by the company’s financial advisers.
The FT reported last week that Bulb has asked its main bankers Lazard to help find new sources of funding to secure its future.
People familiar with the both companies have told FT that a deal with Octopus is unlikely, but multiple suppliers have requested access to the data room being run by Lazard.
Ofgem is yet to name a rescuer for Green, a Newcastle-based company with 255,000 households, that also went to the wall last week.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50LzQzMTAwZWNkLTZjZDAtNGJjMi1iY2ViLTRhNzBkMWFhYzdhY9IBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50LzQzMTAwZWNkLTZjZDAtNGJjMi1iY2ViLTRhNzBkMWFhYzdhYw?oc=5
2021-09-26 12:24:21Z
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