School of Business and Law

At the School of Business and Law, University of Brighton, we teach, research and consult across the full range of business, management and law disciplines.

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Spotlighting potential consumer risks from new energy retail companies

Earlier this month it was announced that two UK energy suppliers, PfP Energy and MoneyPlus Energy, were ceasing to trade, leaving 100,000 homes without an energy supplier.

Ofgem, the industry regulator, will choose a new supplier for all the customers affected, but Dr Lawrence Haar argues that flaws in the business model of many new energy retailers may further pose risks for consumers.

image of Dr Lawrence Haar

Dr Lawrence Haar

Writing in the prestigious journal Energy Policy, Dr Haar – Senior Lecturer in Finance – 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).

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.”

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Clare Prust • September 15, 2021

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