Industry must avoid return to ‘Wild West’ with ultra-cheap deals, warns energy boss
The retail energy sector has to avoid a “repeat of the Wild West of the last decade” and ensure suppliers are “pricing sustainably,” argued the boss of Telecom Plus – a leading challenger supplier.
He told City A.M. there was “no probability of a return to £400 discounts on energy” when suppliers would focus on rapid customer growth over hedging by offering ultra-cheap deals below market norms, after the government lowered the bar for entry into the market in a bid to provide more competition in a stagnant market.
“The period of 2015 to 2021 was not in any way the norm. It was extraordinary and ended up with an enormous implosion in the energy markets because suppliers across the board were losing a billion pounds a year – and that’s entirely unsustainable,” he said.
Instead he believed that in a market with tight profit margins of less than two per cent, suppliers should differentiate themselves with “disruptive” models for customers that provide them with better services and choices rather than prices.
Lindsay argued Telecom Plus – which trades as Utility Warehouse- achieves this through its one-stop-shop approach, with the company offering insurance, broadband, mobile and energy in bundle deals for customers.
“We’ve got one set of overheads and four revenue streams from each of our customers, and that makes us much more effective and efficient and we are able to give the savings back to consumers, which is what they want,” he said.
The domestic energy crisis saw the collapse of over 30 suppliers, when suppliers were exposed by their lack of hedging after prices rose in line with post-pandemic demand two years ago – eventually leading to the collapse of Bulb Energy, the UK’s seventh biggest supplier.
This contributed to record energy bills and the need for tens of billions of pounds in multiple support packages for households and businesses, after prices were further escalated by Russia’s invasion of Ukraine last February.
As it stands, energy bills remain nearly double conventional levels prior to the instability caused by both events.
Bumper profits for Telecom Plus
Lindsay’s comments follow Telecom Plus – which trades as Utility Warehouse – announcing record revenues and profits for its bundled household services offering this morning.
The FTSE 250 firm revealed that revenues soared 155 per cent over the 12 months until March, rising from £967.4m to £2.48bn with profits up 55 per cent from £61.9m to £96.2m.
This was powered by customer growth and ultra-high oil and gas prices, with the one-stop-shop for landline, broadband, electricity and gas enjoying a 22 per cent boost in customers, rising from 728,680 to 886,579 over the year.
Shares in the company have risen 6.4 per cent on the London Stock Exchange in this morning’s trading.
Alongside the headline figures, it has ramped up its offering to shareholders – increasing its full year dividend from 57p to 80p per share.
Looking ahead, Utility Warehouse is aiming to scale its insurance business through the establishment of an in-house broker and insurer.
It will also invest further in services and technology with new specialist customer support hubs in Burnley and Selkirk.
