Two men now supply a third of households with gas and electricity

It was less than a decade ago that Ofgem vowed to fix Britain’s broken energy market. The regulator said it would revitalise competition and get a better deal for households – watering down the power of the ‘Big Six’ corporate giants that once dominated the sector. 

But years of wasted effort and one costly market meltdown later, the UK has come full circle and just six firms are now in control once again. 

Analysis by The Mail on Sunday has found that almost 90 per cent of Britain’s domestic energy is supplied by British Gas, EDF, Eon, Octopus, Ovo and Scottish Power. 

Fortune: Billionaire Stephen Fitzpatrick owns Ovo, while Octopus, run by Greg Jackson, has bought Bulb

But there is a major difference this time round. Two of the firms – Ovo and Octopus – are controlled by entrepreneurs rather than by giant corporations with a history of generating and supplying energy. The two firms argue they are well funded and offer customers a far better service than legacy rivals. 

The expansion of Ovo and Octopus – run by billionaire Stephen Fitzpatrick and Greg Jackson respectively – has been rapid. 

Their rise has also, at least in part, been thanks to the market’s failure. The pair are now responsible for nearly ten million customers, an incredible one third of all households after dozens of suppliers collapsed. 

So weak were the firms that were launched over the past decade that waves of them failed in the space of a year as energy prices rocketed. This has led to a drastic shift in the number of firms selling us the gas and electricity to power and heat our homes. The number has fallen to its lowest level since 2014, down to 24 from a high of 70 in 2018. But the remaining firms outside the new Big Six are minnows by comparison. 

Tony Jordan, senior partner at energy consultancy Auxilione, said Ofgem’s experiment with competition had failed and had not achieved ‘the good it was hoped for or was intended’. 

The arrival of the new Big Six was ushered in last month when Jackson’s Octopus bought Bulb out of Government-controlled special administration. The taxpayer has already lost billions on the collapse a year ago. But that could increase. 

The Mail on Sunday last weekend revealed that the Government has agreed to cover Bulb’s energy costs over winter, when prices could soar once again, which means the cost could rise by another £2.5billion. 

The deal has crystalised the power base of the remaining suppliers – not least that of Jackson, who has added Bulb’s 1.5million customers to his own. Jackson is founder of Octopus Energy and his stake in the company has been estimated to be £260million.

But fast-growing firms run by entrepreneurs are also rarely as financially transparent as publicly traded corporations. Imagination Industries, owner of Ovo Group, has just two directors. One is Fitzpatrick, a Belfast-born former City trader, and the other is chief financial officer Vincent Casey. The Mail on Sunday revealed last week that Ovo’s parent company paid out £27million in loans to its directors last year. 

We also revealed that Ovo, which has 4.5 million customers, had losses totalling almost £300million over three years. But the scale of losses has so far not held the company back. 

The charity Citizens Advice has complained of a ‘catalogue of errors’ by Ofgem that ‘failed to act against unfit energy suppliers for nearly a decade’. It said that the regulator did not use its enforcement powers against wayward suppliers and that it missed opportunities to reform the market. ‘Long before this year’s crisis, there was evidence of financial weakness, with a number of suppliers reliant on customer credit balances for working capital,’ it said earlier this year. 

Gillian Cooper, head of energy policy for Citizens Advice, called for Ofgem to ‘put consumers at the heart of any future plans for the energy market’. She said: ‘Competition in the energy market can drive down prices, but it’s vital that companies have responsible business models. Supplier failures over the last two years have caused complete chaos for customers and landed us all with a multi-billion pound bill. We need reassurance that this will never happen again.’ 

Jess Ralston, senior analyst at the Energy and Climate Intelligence Unit, said ‘competition has essentially exited the building’ under current market conditions. 

Soaring wholesale gas prices have forced a Government intervention to protect household budgets. But it is not yet clear what reduced competition will mean for bills in the future – or what Ofgem can do about the situation. It is also likely that suppliers will continue to be rocked by Russia’s war in Ukraine and the ongoing gas shortage. 

Tony Jordan added that competition had become largely irrelevant in the current market as the era of cheap energy has been put on hold. 

Ofgem said it has been stress-testing all suppliers – and raised the bar for new ones entering the market.

This post first appeared on Dailymail.co.uk