Updated: Nov 24, 2020
Smaller UK energy companies have always popped up to provide another option for those unwilling to pay larger figures with the more established energy giants. And at a time when homeowners and business managers are bracing themselves for a rise in costs from larger energy suppliers due to the fall-out of the Coronavirus, an opportunity is there for more modest, cheaper firms. In theory, they could allow those struggling to pay the big-name businesses to opt for an alternative on a lower budget. But the question must be asked: will these cheaper suppliers be there for the long-term?
Look no further than the case of Robin Hood Energy. This was a small-scale energy supplier set up in 2015 by Nottingham Council, thus becoming the first energy company to be managed by a local authority in the United Kingdom. It quickly rose in prominence, managing to increase its turnover by almost a factor of twenty in just one year, with 125,000 customers benefitting from their service during their busiest period.
Unfortunately, though, its rapid rise was followed by a major fall. It essentially came down to Nottingham Council’s knowledge of the subject matter not being able to match their ambition, and handling the continuous issues that major energy players repeatedly face and overcome. Selling up its customer base to British Gas in September 2020, Robin Hood Energy was set up and shut down in just five years.
It’s safe to say that the idea of a council managing an energy company is an intriguing prospect, albeit one that seems to be unnecessary. Yet we have other examples of smaller, cheaper UK energy suppliers closing down for reasons unrelated to the responsibilities and lack of business understanding from a local authority.
Look at Extra Energy, who sold up to Scottish Power and ceased trading in November 2018. The switchover would affect 108,000 domestic customers and 21,000 business customers, all of whom suddenly had to switch over to an industry leader due to the failure of a smaller alternative to maintain its own business. On paper, the customers’ energy contracts would still be honoured, ensuring that their payments aren’t all for naught. But in reality, they opted for Extra Energy to avoid the situation that they would ultimately, and unintentionally, find themselves in.
We can, however, discuss a success story of a smaller and cheaper energy supplier. GBG Energy began life in Haiti in 2002, and has since grown into an international power player within the energy sector, which includes service to UK-based customers. Not only do GBG Energy provide a refreshing alternative to the likes of British Gas, but they offer a unique method of service delivery with a greater focus towards online functionality and communication.
It’s fascinating that, for a smaller energy player to thrive, it has to essentially escape its humble beginnings and eventually reach the levels of prosperity that its competitors already provide, as the example of GBG Energy shows. But those who light up the scene before fading away immediately show a lack of foresight that only serves to damage the credibility of smaller energy firms as a whole. And it means that customers wanting to avoid the big names end up have to rely on them anyway.
This isn’t to say that customers shouldn’t place their trust into smaller and cheaper alternatives, but we urge these companies to prove that they’re capable of lasting for the long haul, otherwise they only risk compounding the financial impact on potential customers.
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