An update on our energy announcement

I want to dedicate my blog this week to the announcement we made on Wednesday regarding our Energy business.

It is true to say that since taking over as Group CEO last August, I have spent a considerable amount of my time learning about this area of our operations. Our Energy business has seen losses mounting over the last four to five years as a result of rising costs, increased regulation and entry to the market by numerous start-up companies offering unsustainable pricing to gain customers without having to pay the regulatory costs that we face. Often, these companies don’t last long, but some are backed by wealthy investors prepared to take longer term losses with a view to getting a return on their investment when the market eventually consolidates.

The introduction of a price cap last year by Theresa May has seen significant reductions in profitability for all companies. Less than five of the sixty plus energy companies are reporting positive profits. The largest, British Gas has recorded a loss at the half year of £450 million against profits of £704 million the year before.      

On Monday we will make a payment of £32 million to acquire Renewable Obligation Certificates or ROC’s. These certificates ensure that a premium is paid to renewable energy generating companies so overall a good thing. These are mandatory for suppliers with more than 250,000 customers and we must present these to the regulator Ofgem. The smaller new entrants don’t pay and some of the larger ones probably won’t pay leading to fines and or eventually be forced out of business.

The one thing that I am certain of is that the problems and losses we have incurred are not a reflection on the hardworking colleagues across our Co-op and Flow Energy businesses. I have been extremely impressed by their commitment and incredible effort in the face of unsustainable and extremely volatile market conditions.

That’s why the decision to make these changes has been an extremely difficult one and has taken almost a year to reach. Along with the Board, we have explored every option possible and talked with numerous external parties. As a Co-operative business, our Board were determined that we should find a solution which would allow us to meet our obligations, continue to provide great service and 100% green energy to our members, keep the Co-op Energy brand alive particularly in developing community energy partnerships and importantly, secure as much continued employment for our colleagues as possible.

Whilst there were other options available to us, it was only the agreement with Octopus Energy that would allow us to fulfil all of these objectives and I am pleased that we have been able to achieve this. Further, in achieving the Board’s objectives, we will also remove the risks to our wider business and the losses which had been projected for next few years.

We still have to deal with the losses this year and the effect this has had for our broader business. There will also be a difficult and risky period whilst we work to transfer customers from our three separate IT platforms on to the Octopus system. This is likely to take three months.  

In paying tribute to our colleagues in Co-op and Flow Energy I also want to stress to all of our colleagues across the wider Midcounties Society that these will be difficult and uncertain times for our five hundred plus colleagues working across our various energy offices. We are working closely with Octopus and consulting with elected representatives on what the arrangements will be going forwards.

As someone who had to face redundancy early in my career, I have some understanding as to how worrying this can be and I will do everything I can to support our colleagues and I know you all will too.