Energy boss calls on suppliers to offer innovative solutions to survive
Energy suppliers have to offer creative options to customers if they are to survive the market crisis, rather than engage in unsustainable price wars, argued the boss of a leading challenger firm.
Andrew Lindsay, chief executive of Telecom Plus which owns Utility Warehouse, told City PM suppliers “should encourage the search for innovative approaches” rather than just see if they “can sell commoditised products cheaper.”
The energy boss cited his own firm as an example of an innovative solution to the market, offering a bundle of energy, broadband and mobile insurance as a way to drive down prices in a sustainable fashion.
He said: “What we’re doing is highly disruptive. It’s saying, ‘If you as a consumer bring your energy, broadband and mobile insurance together, we can create a more efficient business.’ “
This meant the costs the energy firm incurred are smaller, equating to a more sustainable reduction in bills for its customers over time.
Linsday was speaking to City PM following the company’s half-year results, where it confirmed £30m in savings through its multi-service model.
The company also posted a 51.5 per cent boost in revenues, which climbed to £562.4m, and unveiled adjust profit before tax of £32.1m, up 22.5 per cent year-on-year.
These headline results were reflected in the group’s customer growth, which had risen to 814,684 since March, reflecting an annualised growth rate of 24 per cent.
Shares in the company were slightly down on the FTSE 250 despite the strong headline results, trading 1.29 per cent below yesterday’s levels.
Utility Warehouse survives industry crisis
Utility Warehouse is one of the surviving suppliers from the energy industry crisis, which saw 30 suppliers collapse over the past 18 months amid soaring wholesale costs – exposed by insufficient hedging strategies and the constraints of the price cap.
This has contributed to record energy bills for households across the country, which are expected to climb to £3,000 per year next April.
The crisis has been capped with Bulb Energy’s year-long de-facto nationalisation prior to its expected offloading to Octopus Energy.
The latest data from the Office for Budget Responsibility forecasts an overall cost of £6.5bn, making it the biggest state bailout since RBS in 2008.
Ofgem has since sought to clean up the market with fit and proper person rules, financial stress tests and quarterly prices, while it has also initiated a consultation on ringfencing customer credits.
This has raised concerns the energy market could revert to a Big Six model, with challenger suppliers struggling with the increased costs of managing energy firms through market reforms.
If Octopus takes over Bulb, it mean nearly 90 per cent of the market will be held by just six suppliers – the very outcome the Government sought to avoid with its market reforms.
So Energy is the latest to scramble for funds, which is now finding itself in depressingly familiar jeopardy, appointing Interpath Advisory to secure £50m to help tide itself over the winter.
The watchdog also published its latest report on the handling of vulnerable customers across the energy sector, reporting that Utility Warehouse had “minor weaknesses” in its processes.