A few months ago, we appointed the global professional services firm Alvarez & Marsal Europe LLP (“A&M”) to advise on our strategic investment options going forward.
Despite substantial interest and continued negotiations with several suitable parties and best efforts, recent international and national circumstances have created a perfect storm of events which has meant that Utility Point will cease trading and another supplier will be taking over your supply. All of us at Board level have been working hard towards a different outcome, and I wish I had better news to report to you today but regrettably in the end we weren’t able to overcome these external forces.
Now, we must begin switching gears and preparing for the wind-down process, which we expect to begin as soon as this afternoon.
We will enter the Supplier of Last Resort (SOLR) process today, Tuesday 14 September at 14:00. We have already switched all phone lines over to a message which will inform you we have entered this process however you can still get hold of us in an emergency with the usual number provided. You will find our website contains the standard OFGEM message as well as some F&Qs you may find useful and a copy of this letter.
More about why this has happened
Utility Point has undergone a remarkable evolution in the past three years as we’ve pursued our vision to become one of the nation’s leading utility companies, indeed rising to 15th biggest in the UK during this time. Previously I have commented that we have seen – and mastered – many challenging situations and I have always been so proud and inspired by the way our company has risen to these challenges - with flexibility, resilience, and courage, but current global events coupled with the ongoing COVID-19 situation has been a significant challenge and understandably so.
PFP Energy - which had around 80,000 domestic customers and MoneyPlus Energy, which had around 9,000 domestic customers ceased to trade last week, and we expect several others to follow suit in the coming weeks and months.
Pressures will continue to rise in the market as wholesale energy prices have soared to record levels from what has been a 99 percentile move off the back of an increase in extreme weather conditions leading to a global gas supply shortage, inability to provide timely and necessary generator maintenance causing multiple sites to be taken offline simultaneously, lower exports from Russia and rising demand.
To put this in some perspective, prices in the UK have recently hit over 157 pence per therm compared to less than 30 pence per therm one year ago. Power prices closely follow the gas price and have climbed to an unprecedented level of over £540 per MwH. This is more than four times their normal level over the past decade. This has meant that National Grid have asked coal-fired power stations to switch on to help manage demand.
Indeed, it may be worth noting that testing of the Norwegian electricity interconnector continued last week, exporting power out of the UK, even though the UK power market was experiencing a tight system and prices well over £3000 per MWh!
Graph 1 – (Month Ahead Prices. Daily view 14/09/20 - 01/10/21) below, clearly shows the rise in wholesale power over the past year reaching highs of over £145 per MWh just last week however, this has now spiked further to over £540 per MWh as previously discussed. Graph 1 – Month Ahead Prices
You may be aware last year OFGEM announced that all suppliers where required to offer extended payment terms and be more lenient with the collection of debt due to the pandemic, something they are asking to continue into this winter. Utility Point has always supported all its members and understands the variability of vulnerability and that it is not static, supporting many of our members through hard and uncertain times. Unfortunately, this extra support has meant an increase in debt and deficit.
On top of all this the price cap on default tariffs which was introduced to limit the amount suppliers can charge customers has not been covering the costs of supplying energy which means that every supplier is undercharging for energy and that the fair cost for energy that OFGEM was trying to encourage is actually well under the value at which it costs to supply. Although the rise in the level of the price cap is set to increase by £139 from October to reflect rising wholesale costs, bringing the average dual fuel bill to £1,277, this is still over £200 below the cost to supply the energy and it has been impossible to hedge in line with the way the price cap is calculated making the whole market unsustainable to operate in. Indeed, in most cases the only reason that suppliers end up charging more for energy than it costs is to offset the cost of debt and the collection of debt which is a major issue in the industry and one that requires a rethink as those that can, and do pay, end up paying for those that don’t pay.
This toxic mix of circumstances and lack of commercial understanding from the certain powers has made it impossible to continue, indeed the only real outcome for consumers, which will be felt in the coming year, is that prices will rise for the very people that they are trying to protect.
Thus, it is due to this perfect storm and with great sadness we close our doors.
Whether you’ve been with Utility Point for a few months or several years, I hope you know how much we valued your custom and you have enjoyed some of the small perks we have offered along the way. Thank you.
The coming weeks will be difficult as we wind down operations, but I ask my team to continue to hold their heads highs. They have done us proud and, I hope you will join me in wishing them all the very best in their future endeavours.