Bristol Energy has sought to reassure customers that it has hedged its position going into winter following the demise of GB Energy.
The municipal energy company also warned that small energy suppliers will have to hike prices in order to stay afloat in the face of rising wholesale markets – and called on regulator Ofgem to ensure new players have adequate resource to last the distance.
“We want to reassure our customers, and anybody looking to switch to us, that you will be safe with us this winter,” said the company.
Backed by the council, Bristol Energy has a solid credit rating and significant financial resource, enabling it to hedge its position. While regulator Ofgem has been keen to foster competition, and has sought to taper social and environmental responsibilities for new market entrants, few small suppliers enjoy that degree of solvency.
Wholesale energy prices have been depressed for the last few years, allowing small suppliers to compete by trading on the short-term markets, which have lesser capital requirements. However, prices have risen in the second half of this year. That development could cause terminal problems for insufficiently capitalised suppliers that have failed to manage exposure to price fluctuations – and which have priced fixed one-year deals very cheaply in order to win customers.
Bristol Energy said it is “very different” to GB Energy.
“Despite being smaller, we have been able to forward buy energy for our customers, meaning we have all the energy we need for this winter and beyond,” said the firm.
Suppliers that do not have the means to hedge their position were “gambling”, said Bristol Energy, and will be forced to hike prices for new customers, or risk going out of business.
“This is not responsible practice – and those who will now be suffering are GB Energy’s customers, the industry and their own colleagues, who will lose their jobs,” the company said.
“We call on Ofgem to demand more rigorous suitability criteria for new suppliers as part of the market entry process, to include how the new supplier plans to buy their customers’ energy, how they plan to look after their energy needs, and to evidence the knowledge and experience their senior team have in the energy industry.”
Bristol Energy is one of a number of new breed municipal energy companies and has previously mooted plans to potentially go beyond supply and into a city-wide smart grid. Nottingham City Council launched late last year, and the company which holds its supply licence, Robin Hood Energy, is set to launch Liverpool City Council’s energy company, ‘the Leccy’, next March.
Elsewhere, the Greater London Authority has been ploughing on with its ‘licence lite’ model, the brainchild of Ofgem, for the last five years. The idea is to supply cheap energy to TfL. However, the venture appears to be facing severe delays.