How you know we're here to stay

This blog is more than a year old.

For the latest, head to our Feb 2022 blog Octopus Energy: Built to Last.

In 2018, after several small energy suppliers went under, we wrote about what to look out for in a supplier that's at risk of going bust. Read on for that, as well as a bit about how our unique business model and sound backing mean we're here to stay.

As one of the largest, best backed, best run companies in the sector, we will do all we can to support consumers, government and Ofgem as they work through this.

Over the last 5 years, we've grown to over 3 million customers, expanded globally into the US, Germany, New Zealand, Japan and Australia. Our tech platform, Kraken, is world-leading and licensed to support 25 million customers worldwide. Our business model speaks for itself: despite the pandemic, we are Which? recommended for the 4th year in a row (something that has never been done before), we were named USwitch energy supplier of the year, we're National Technology's 'Tech Company of the Year', and were named 'Company of the Year' by the Renewable Energy Association for the second year running. What's more, we recently announced a major partnership with Generation Investment Management, a sustainable investment fund founded by former US Vice President, Al Gore.

If a deal looks too good to be true, it probably is

This isn't the first time we've seen lots of smaller energy companies go bust. Back in 2018, eight energy suppliers ceased trading and Ofgem asked us to take on the customers of Iresa and Gen4U. Other prominent ones included Extra Energy, Spark Energy, Usio Energy, and Future Energy. Over the last few years, several more companies have followed and most recently Utility Point and People's Energy have folded.

Why are these companies going under?

Small energy suppliers often enter the market and pick up customers by offering dirt-cheap energy tariffs. Consumers paying extortionate rates with major Big 6 suppliers are then swayed into switching, because – it’s all the same energy coming out down the wires, right?

Unfortunately, these tariffs are often too good to be true.

These suppliers are selling energy to customers for less than they paid for it on the wholesale market. While this can mean they’re able to offer cheap energy in the short term, in the long term, they won’t be able to cover the costs of running a successful, honest business.

One of two things will happen:

• Customer service will suffer, because there simply aren’t enough resources to ensure everyone is looked after. Iresa Energy is a good example of this – they had 800 open Ombudsman complaints when they closed their doors in August 2018. (They averaged 9,000 complaints to every 100,000 customers in their last quarter. By comparison, our average was 39 for every 100,000). Or...
• There won’t be enough money left to cover business costs. Or more specifically in the current environment, to afford turbulent wholesale gas prices.

Back in 2018, following several energy companies folding, we sent our customers an email in which we asked customers to tell us what they felt a fair profit margin was. The average they told us was 7.5%. At Octopus Energy we're well under that, at less that 5%.

Read a bit of the original 2018 email here:

'Independent research firm Lazarus Research, in their analysis of Big 6 profits, found they charge an average of 22.6% on top of the cost of supply...

This is obviously excessive, demonstrating both greed and inefficiency. And because that number is spread between loss-leading cheap deals and overpriced standard variable tariffs, a lot of people end up paying far more to subsidise the cheap deals of the few.

So I'd like to know - what do you think is a fair and reasonable amount for us to charge for managing your energy supply. Simply click an option below to let me know.

• 20% of the cost of supply
• 15% of the cost of supply
• 10% of the cost of supply
• 5% of the cost of supply
• A fixed amount each year
• Other'

We've also put our transparency into practice: like our innovative Octopus Tracker tariff, offering fair daily rates based on the wholesale price of energy, with a precise breakdown of exactly where your money is going.