Spotlighting potential consumer risks from new energy retail companies

Writing in the prestigious journal Energy Policy, Dr Haar – Senior Lecturer in Finance at the Brighton Business School – argues that the growing plethora of UK retail energy suppliers without generating assets of their own, have a flawed business model. This has underpinned a high rate of failure, poor customer care, plus risks to consumers drawn in by promises of significant savings.

Dr Haar's article – entitled The competitive disadvantages facing British assetless electricity retailers – delves into a market transformed initially by the privatisation and deregulation of the UK’s electricity sector that began with the 1989 Electricity Act, followed by the Conservative-led government's decision in 2010 to open the market to new retail electricity supply firms to tackle a perceived dominance by a “Big Six” of generating companies (Centrica, EDF, E.ON, npower, Scottish Power and SSE).

Dr Lawrence Haar

While acknowledging the introduction in 2019 of a Regulator to set stricter licensing requirements for retail suppliers without generating assets of their own, Dr Haar questions whether these safeguards are sufficient in the face of inherent flaws in the business model itself.

Dr Haar said: "Consumers hoping to save on energy bills by purchasing electricity from the many new start-up firms should think twice. The high rate of failure among firms without their own generating capacity shows their distinct disadvantages, making their promises of savings unsustainable. Meeting the needs of consumers in supplying secure and affordable electricity requires more than setting-up a call centre."