One of Britain’s fastest growing medium energy suppliers could soon have more than one million customers, as it contemplates a merger with another challenger.
In a move suggesting Britain’s competitive energy market may be undergoing a period of consolidation, Octopus Energy is reportedly in talks to merge with struggling supplier Co-op Energy.
Under the putative deal, first reported by the Times, Octopus—which already has more than 800,000 customers— would acquire most or all of Co-op Energy’s 370,000 customers. Adding those accounts to its rolls would give Octopus Energy more than one million clients, making it one of the largest energy companies outside of the Big Six.
Although neither supplier would comment on deal, Midcounties Co-operative, which owns Co-op Energy, has reportedly been considering options for the loss-making business. And a merger would follow a string of acquisitions by Octopus, which last year picked up 22,000 customers through its purchase of Affect Energy and took on 100,000 customers following the collapse of Iresa.
Octopus, which launched just in 2016, has also been augmenting its rolls with switchers, who have been drawn by the company’s 100% renewable electricity and lack of exit fees. And many of those new converts to Octopus moved from Big Six companies.
Last year across the market a record 5.8 million households moved to a new energy supplier, with a net 1.7 million moving away from the Big Six to small and medium-sized suppliers. Market share for the six largest energy companies, which stood at 99% in 2011, has fallen to just 73%.
As the dominance of the Big Six wanes, a handful of medium-sized suppliers, including Octopus, OVO Energy and Bulb, have emerged to compete for shares of a diversified energy market .
Bulb, another renewable supplier launched just within the last few years, recently catapulted to one million accounts.
Meanwhile, last week it was revealed that OVO is in talks to acquire the energy supply business of Big Six firm SSE. Adding SSE’s 5.7 million customers to its existing 1.5 million accounts would make OVO the second largest energy firm in the UK, after British Gas.
But as medium-sized suppliers have prospered, smaller firms have been washed away. Renewable supplier Solarplicity became the 13th energy supplier to fail when it folded last week. Its chief executive David Elbourne attributed the company’s collapse to “overly onerous interventions” by Ofgem. But the company had drawn condemnation from customers and the Energy Ombudsman, and official censure from Ofgem, for poor customer service and for failing to make feed-in tariff payments.
Consumer groups like Citizens Advice have cautioned that some small suppliers are unprepared to weather the market and that customers are paying the price—treated badly by firms and left stranded when they collapse. Meanwhile, the cost of these failures, estimated to be at least £172 million in unpaid industry bills alone, is felt across all energy bills.
An Ofgem spokesperson said that given the “huge growth in number of suppliers”—from 12 in 2010 to more than 70 today—a “period of consolidation,” with some companies failing and some merging, was expected.
