The boss of Yu Energy, which has taken on 2,000 businesses from the collapsed provider Ampower, has said that passing on rising energy costs to those on fixed price tariffs is “not right” and not something he would do.
Since August, 23 energy companies have gone bust affecting almost 3.8 million households and more than 60,000 businesses, with Bulb announcing yesterday that its UK operations would enter a special-administrator regime, affecting 1.7 million retail and business customers.
Energy companies do not have to offer business customers a price cap as they do for consumers. This means that suppliers can pass on increased costs to commercial customers even if they’re on a fixed price tariff.
Bobby Kalar, 46, founder and chief executive of the AIM-listed Yu Energy, said: “There are suppliers out there who have enforced that clause. In my view the reason that clause has been enforced is because they haven’t hedged, so they haven’t bought that volume [of energy] in advance in preparation for their customer’s usage.
“Once you get into speculative trading what you’re doing is saying, ‘We said we’d sell to you at one price and we should have locked in that trade. But we didn’t and because we’re now paying more for it, we’re passing on that cost to you.’ It’s not right and no, we haven’t done that.”
Kalar said he understood it was an “upsetting” time for small and medium-sized businesses affected by the recent failures in the industry. “Business customers have budgets that have factored in what their fixed costs are going to be — gas, power, water, insurance, everything else — and to be told that [their energy] is no longer a fixed cost and their budgets are no longer viable through no fault of their own is daunting.”
He said the company, which employs 190 staff and has 50 vacancies, was doing “everything we can to make this as smooth a journey as possible” for customers moving across.
Yu Energy acquired Milton Keynes-based Ampower’s customers after it was contacted by Ofgem. “You have to provide details . . . on how you will take on these customers, how you will honour the credit balances and what you will do to protect customers’ supply,” Kalar said. The bidding process is very quick — “it takes hours rather than days”.
After “a number” of conversations with Ofgem, Yu Energy, which is based in Nottingham, was told it had been awarded the customers and would now need to engage with them and migrate them across to its platforms.
“We’re looking to lock these customers into fixed price contracts so they’re not exposed to any volatility that may come as a consequence of what we’re seeing in today’s markets,” he said. Kalar did not rule out price increases for the customers transferred from Ampower. “That is heavily dictated by what form of contract they’re in and when their supply started.”
The company’s revenues are expected to increase by more than £7.5 million a month after the deal. In September, Yu Group said its half year revenues increased by 44 per cent to £65 million, generating a profit of £920,000.
Kalar said being “more agile and entrepreneurial” than the ‘Big Six’ energy providers had helped his company to grow quickly, and hedging had insulated it from some of the worst effects of energy price spikes. “Those companies that haven’t bought that stock in advance — or hedged — they’re buying it off the spot market or the intraday market, which is inevitably higher than they’ve originally agreed to sell their contract to the customer.”
The Yu boss said he believed that financially sound energy companies would come out of the current “reset” in the supply of energy to businesses.
Speaking to TEN before the Bulb announcement, he said Yu Energy would be willing to acquire more customers from failed suppliers. “We will understand and kick the tyres on any opportunity. But we are very clear that any opportunity, whether it be inorganic or organic, needs to fit into our sweet spot in terms of type and size of customer [that] we service.”
Ofgem, the industry regulator, said yesterday that Bulb customers “will see no disruption to their supply and their account and tariff will continue as normal”.