Octopus to take on failed Avro Energy’s 580,000 stranded customers

Supplier appointed by Ofgem also at centre of speculation that it could bid for rival challenger Bulb

Octopus Energy is taking on 580,000 customers left stranded when Avro Energy ceased trading last week, and is at the centre of speculation that it could bid for another player, Bulb Energy.

As the UK gas crisis continued to wreak havoc on the sector, the regulator, Ofgem, appointed Octopus to take over supplying Avro Energy’s customers following what was described as a competitive process “to get the best deal possible”.

Octopus had 2.5 million customers before the announcement, and Sunday’s move takes this to about 3.1 million. In a message to the new arrivals, the company said: “We have a strong track record in large customer migrations and would like to reassure customers that there will be no interruption or impact to their energy supply.”

The collapse last week of Avro Energy and another firm, Green, which had more than 250,000 customers, brings the number of suppliers that have buckled under the pressure of record gas market prices to seven in just over six weeks, affecting 1.5m households.

Ofgem said the switchover from Avro to Octopus would take effect immediately, and that while this news “may be unsettling”, customers did not need to worry. Outstanding credit balances, including money owed to current and former Avro users, would be honoured.

Octopus will take on Avro’s customers through Ofgem’s supplier of last resort (SoLR) process.

Gillian Cooper, head of energy policy for Citizens Advice, said Octopus must continue to protect vulnerable Avro customers once they transfer supplier.

“Anyone struggling to pay their bills must be supported, and Octopus Energy must make sure that any debt repayment plans Avro Energy customers may have been on before are continued,” said Cooper. “It’s important they continue to provide the warm home discount to all customers who previously received it from Avro Energy. It’s up to the government and Ofgem to work with suppliers to ensure this happens.”

Octopus has been named in reports as one of the suppliers that could consider bidding for a rival challenger brand, Bulb. Bulb, which has 1.7 million customers and made a £63m loss in the year to 31 March 2020, is currently hunting for fresh investment to fund the company.

Both Octopus and Bulb say that they provide their customers with 100% renewable electricity from solar, wind and hydro. Any tie-up between the two would create a large supplier with almost 5 million customers that could pose a stronger competitive threat to the giants of the energy sector.

Bulb’s financial advisers at Lazard have set up a data room to provide potential backers with documents and key information so they can review its finances.

A senior City source said Bulb had been looking to raise funds for some time and there was no reason to believe the company was facing an imminent threat to its survival or seeking a bailout. However, the current turmoil, with predictions of a difficult winter ahead, may mean that it struggles to find new backers.

Octopus entered the market in 2016 and claims to have been picking up 50,000 customers a month. It has been highly critical of the big players that dominate the sector, saying: “The energy industry in Britain is ruled by a handful of complacent dinosaurs peddling fossil fuels, pricing trickery and poor customer service.”

Bulb, meanwhile, says it provides 100% renewable electricity to homes in the UK, France, Spain and Texas in the US, and 100% carbon-neutral gas in the UK.

Talk of a possible bid from Octopus was first reported by Sky News.

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There are fears that millions of households could lose their energy supplier by the end of the winter – providing a growth opportunity for the incumbent supply giants after years of losing customers to smaller challenger brands.

A Bulb spokesperson declined to comment on the speculation, saying: “From time to time we explore various opportunities to fund our business plans and further our mission to lower bills and lower CO2. Like everyone in the industry, we’re monitoring wholesale prices and their impact on our business.”

Asked about Bulb, Octopus said it did not comment on merger and acquisition rumours or speculation.


Rupert Jones

The GuardianTramp

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