One fifth of suppliers offering cheapest tariff have exited
Since 2017, 15 suppliers have exited the domestic energy market through Ofgem’s Supplier of Last Resort (SoLR) process. While the exits stem from a range of reasons, many of these companies are likely to have experienced problems in cashflow, several of which have been heightened by very cheap tariffs.
As part of the re-launch of our Domestic Tariff Report, we have been looking at trends in the cheapest 10 suppliers on the market each month. Over 2015 to 2017 on average, four of the 10 cheapest suppliers have exited the market via SoLR or been acquired by another supplier. This decreased to two suppliers on average in 2018 and one in 2019. Exits have come around 16 months on average after appearing in the top 10, although this ranges from within month to 47 months later.
Since 2017, 13 of the 56 individual suppliers with a tariff in the top 10 cheapest have left the market. While the 10 lowest prices are often used to give an indication of the competitiveness of market price, it appears many have been unsustainably low as the companies that have offered them have been unable to support themselves for the long term.
Figure 1 also shows the re-entry of the large suppliers to the 10 cheapest in the market towards the end of 2019, at a time when wholesale prices were falling. Prior to this, from 2017, the large suppliers had been mostly absent from the 10 cheapest suppliers.
Download figure 1 here.
For more information on the re-launched Domestic Tariff Report, please get in touch with Kate Hill at firstname.lastname@example.org.
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