Utility Week

UTILITY WEEK | 18TH - 24TH JANUARY 2019 | 27 Customers at Economy Energy have no intention of closing our doors. "We will pay our outstanding ROCs [Renewables Obligation Certificates] obliga- tion in full, business will continue as usual for our customers. "We would like to thank customers for their loyalty and continued support." According to Companies House, Economy Energy extended its accounting reference period from the end of March to the end of September 2018. The company's next set of results was then due by 30 June 2019. An industry source previously told Utility Week that the sudden change could be a sign the company was facing financial difficulty. The Coventry-based supplier was also thought to be seeking emergency funds to avoid being the next company to fall. Accord- ing to Sky News, the energy supplier was reported to have brought in accountancy firm KPMG to dra a review of its "strategic options". These included a cash injection and even an outright sale of the business. Sky News claimed to have seen a document headed "Project Wattley", which stated KPMG was advising an unnamed utility with "a number of offerings including prepay tariffs, and direct debit tariffs". Economy Energy ceased trading just a day aer it was revealed to be in credit default and less than a week aer being banned from taking on new customers. A statement on Economy Energy's web- site published aer the company ceased trading says it is "delighted" that Ofgem selected Ovo to take over the energy supply of its customers. The supplier declined to comment directly. Regulation concerns Acknowledging the recent demise of sev- eral energy companies, Philippa Pickford, Ofgem's director for future retail markets, says: "We have seen a number of supplier failures over the last year and our safety net procedures are working as they should to protect customers." Ofgem will be outlining plans to tighten controls on how suppliers handle customers' balances this year and is exploring moves to extend regulation to energy intermediaries, according to the regulator's chair, professor Martin Cave. In a keynote speech at Ofgem's "Energy of the Future" conference in London on 10 January, Cave said the regulator is already consulting on introducing customer service and financial tests for new suppliers. Responding to the collapse of Economy Energy, Gillian Guy, chief executive of Citi- zens Advice, highlights that the failure of energy suppliers is "becoming an all too familiar story". She says: "Ofgem's moves to tighten up the licensing rules should address the prob- lem of unprepared companies coming into the market. "But the continued failure of suppliers shows there are firms operating that require the regulator's urgent attention." Meanwhile, professor David Elmes, leader of the Warwick Business School Global Energy Research Network, argues the fail- ure of suppliers is not just the concern of Ofgem but should also be taken seriously by the government. He says: "Asking the regulator Ofgem to look again on the checks they do on companies is not the only solu- tion needed. The government needs to think again about the policies it makes that Ofgem has to implement. "The recent government policy to set a price cap was just political games between the parties wanting to look tough on the energy companies. "The price cap is making it hard to run a viable retail energy business in the UK. News that Economy Energy has ceased trading, less than a week aer Ofgem prevented it taking on new customers, is more evidence that the way energy companies are expected to compete isn't working. "Last year we saw eight energy companies collapse and the merger between SSE and Npower fall apart. The collapse of Economy Energy shows 2019 is going to be no easier for the energy sector. "While it's right to ensure customers get a fair deal and good service, the government and Ofgem are struggling to support a sector that's essential to the UK economy." Economy Energy joins a long list of small suppliers that have ceased trading recently, including Spark Energy, Usio Energy, Iresa, Extra Energy, Future Energy, National Gas and Power, Gen4U, and One Select. Snowdrop Energy also transferred all its customers to fellow Sheffield-based energy supplier Nabuh Energy in October. During her keynote speech at Ofgem's conference last week, energy minister Claire Perry, said: "The nature of markets means that there will be winners and losers: this sector is no different. We have seen particu- larly challenging market conditions and a number of suppliers exiting and I feel there will be more to come." 2018 was the toughest year yet for energy retailers, but with the new year being only a few weeks old and already talk of several more suppliers likely to fail, the worst could still be yet to come. Domestic supplier market exits, 2018 to date Supplier Date of exit Method of market exit Publicly reported domestic customers Future Energy Jan 2018 Green Star Energy appointed as SoLR 10,000 Flow Energy May 2018 Acquired by Co-operative Energy 130,000 Gen4U Jul 2018 Octopus Energy appointed as SoLR 500 Iresa Jul 2018 Octopus Energy appointed as SoLR 95,000 Affect Energy Aug 2018 Acquired by Octopus Energy 20,000 Electraphase Aug 2018 Administration. All customers switched <100 away Usio Energy Oct 2018 First Utility appointed as SoLR 7,000 Snowdrop Energy Oct 2018 Transferring customers to Nabuh Energy 6,000 Extra Energy Nov 2018 Scottish Power appointed as SoLR 108,000 Spark Energy Nov 2018 Ovo Energy appointed as SoLR and 290,000 acquires operating group Spark Energy Ltd One Select Dec 2018 Together Energy appointed as SoLR 33,000 Economy Energy Jan 2019 Ovo Energy appointed as SoLR 235,000 Source: Cornwall Insight Investigations Ofgem previously opened three enforce- ment investigations into Economy Energy, two of which will now close – one into the company's compliance with the Renewables Obligation and one observing its sales and marketing obligations. The regulator has confirmed, however, that the investigation into whether Economy Energy, E and Dyball Associates infringed chapter I of the Competition Act 1998 will remain open. In May, Ofgem alleged that the two energy suppliers, along with consultancy firm Dyball Associates, breached competition law. The regulator issued a statement of objections to the three parties and stressed its findings were provisional.

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