Wed. May 18th, 2022

British power supplier Octopus Energy has warned that it will hit a record $ 100 million this year from record wholesale energy prices.

The private company, which is Britain’s fifth largest electricity and gas supplier, has warned that it is suffering losses because there is currently a £ 600- £ 700 difference between how many suppliers customers can charge below the energy price limit and wholesale market prices.

In the last six months, 27 UK energy suppliers failed as wholesale prices soared. Initially, the crisis affected largely poorly managed companies that did not have the balance sheet strength to withstand price increases or not. sufficient hedge their energy needs, but the warning from Octopus, whose shareholders include Al Gore’s sustainable investment fundshow better managed companies also feel the consequences.

CEO Greg Jackson said the company should absorb higher costs because more households than expected moved from fixed-price transactions when their contract expired to cheaper rates protected by the price limit, which was introduced in 2019.

In a normal market, most of those customers would have agreed on a new fixed-price agreement: these longer-term contracts used to be cheaper than the price limit, but are now hundreds of pounds more expensive. Alternatively, they would have changed supplier.

Jackson maintained that the £ 100 million hit was not “cataclysmic”, but he and others in the industry urged the British government for ways to help them eliminate price volatility for households over a period of several years, but without risking their own balance sheets.

He said the industry is already “full of mechanisms” that allow certain costs to be recovered over a long period of time – for example incentives new low-carbon power generation.

“In the same way, you can inject money into reducing customer bills and then recover it over a period of time,” Jackson said. “We will continue to look at solutions like this.”

Octopus warned against the £ 100 million hit when it published its results for the last financial year ending 30 April 2021.

Its UK energy retail business made an operating loss of £ 84.7 million during the year, compared to a loss of £ 47.9 million in the previous 12-month period, although it blames it on “continued reinvestment in rapid growth” and insisted that if exceptional items and the cost of acquiring new customers were stripped, operating losses would have been reduced to £ 1 million. Revenue rose 57 percent to £ 1.89bn during the year.

Despite the crisis, Octopus Energy Group, the parent company that also owns renewable energy generation assets and technology platforms, continued to attract external investment, including from the Canadian pension fund CPP Investments, his valuation pressure nearly $ 5 billion.

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