It is unfortunate for it to have become an increasingly familiar reality that multiple sectors have faced major challenges in recent years, and we have become used to seeing headlines highlighting job losses in industries such as retail and manufacturing. Energy has become the latest victim, undergoing the largest shake-up it has faced in decades.
Driven by rising energy prices, regulatory constraints, and other market forces, 22 energy suppliers have collapsed and entered Supplier of Last Resort (SoLR) – regulatory protection to ensure continuity of supply for domestic customers – so far in 2021, with more supplier failures predicted in the coming months. This has subjected nearly 2.5 million domestic customers to an enforced change of supplier and, quite understandably, created concern over the price of future energy bills for many more people.
The elephant in the room
A lot has been written about the energy sector since suppliers began to fall in significant numbers from August 2021, however, little of the consequence to employment for a large number of people who work in the sector has been recognised.
Information in the public domain on this aspect is limited, despite Ofgem gathering employee figures via regular Requests For Information (RFI) from suppliers. However, insight can be taken from the suppliers to have fallen earliest in the year.
Green Network Energy entered SoLR in January and their administrators provided a progress report in September, which revealed that of 210 staff, 174 were retained to assist with the transition period. Natural attrition over the period, with people seeking more stable employment, has seen this number fall to 53.
Simplicity Energy also entered SoLR in January and their latest administrators’ report shows that 23 of 51 staff were retained to provide key functions during the wind-down of their operations.
For smaller suppliers, staff to customer ratios vary considerably depending on a significant number of factors. It’s reasonable to approximate 1 employee per 1,000 customers. Efficiencies are achieved as the organisation grows in customer base and the maturity of their systems and processes improves.
Referring to our earlier figure of approaching 2.5 million domestic customers, we could estimate that 2,500 jobs have been placed in jeopardy already, with the challenges for the industry only expected to escalate as winter progresses. This is before including the more opaque impact to non-domestic customers.
Beyond energy suppliers
Perhaps it is telling of the public perception towards energy suppliers that some of the coverage has reinforced the belief that these companies are getting what they deserve as a consequence of poor corporate strategies, risky approaches to hedging, and a belief that large profits are being made at customers’ expense. This belief persists despite Ofgem’s own report showing that even the large legacy suppliers averaged pre-tax losses of nearly -1.5% in 2019, well before recent wholesale price events.
Further from the public eye are the plethora of agents and services that an energy supplier needs contracted to provide their services. Every loss of an energy supplier causes ripples through all the businesses they work with, from metering agents to software providers, and compounds the jeopardy faced by the whole sector.
Ofgem have come under scrutiny for the way that the sector has been regulated in recent years. Indeed, the former CEO of PFP Energy and a group of energy suppliers have authored a letter of formal complaint to Ofgem, stating that they have no confidence in their regulation of the sector. Ofgem, in their open letter dated 29th September 2021, have remained squarely focused on consumer protections and the people whose livelihoods rely on a semblance of stability in the sector continue to be overlooked.
How might employment in the energy sector change with supplier consolidation and potential market forces from events such as COP26, and what role, if any, should Ofgem have in protecting the people employed in the industry as well as consumers?
