The recent spate of failures among UK small energy providers showed no sign of abating on Friday as not-for-profit supplier Our Power became the tenth to stop trading over the past year.
The Edinburgh-based group, which supplied electricity and gas to 38,000 customers, failed after less than three years in business. It is the second company to fold this month, continuing a trend that saw eight companies go bust in 2018 and a further four exit through deals with rivals.
“It is with great regret that Our Power Energy Supply Ltd has ceased to trade,” the group said on its website on Friday.
Almost a million customers have now been displaced by the 10 failures since January 2018. The increasing rate of exits — driven by factors including an over reliance on consumer credit or a failure to adequately hedge against wholesale price rises — has prompted criticism from incumbents, who have argued it is too easy for new suppliers to set up shop, with risky business models leading many to fail when market conditions deteriorate.
Our Power’s customers will be protected via a safety net procedure put in place by Ofgem, the UK energy regulator, which will see them transferred to another provider in the coming days.
“We have seen a number of supplier failures over the past year and our safety net procedures are working as they should to protect customers,” said Philippa Pickford, Ofgem’s director for future retail markets.
Our Power began trading in 2016 and was the first UK energy provider to operate on a non-profit basis. It was set up by a group of 35 Scottish housing associations and local authorities with £2.5m in funding from the Scottish government.
Its aim was to supply lower-cost energy to the tenants and communities of its members during a period of rising fuel poverty. It said at the time it expected to save its members up to 10 per cent on their household bills compared with standard tariffs.
Peter Earl, head of energy at price comparison site Compare the Market, said its failure showed “just how poorly smaller companies are coping with a rise in wholesale prices”.
He added: “The volume and regularity of recent energy company collapses is concerning but the majority of companies should have the financial stability to weather the storm.”
Ofgem plans to tighten requirements for new entrants in the coming months, requiring would-be suppliers to have enough funds to support themselves for at least a year.
Our Power’s exit from the market follows that of Economy Energy, which failed this month.