GB Energy ceases trading

29 November 2016

GB Energy ceases trading: comment from Doug Stewart, CEO Green Energy UK

Comment from Green Energy UK, (www.greenenergyuk.com) an independent, customer-owned licenced electricity and gas supplier, established in 2001 and headquartered in Ware, Hertfordshire.

Doug Stewart, Chief Executive of Green Energy UK, has made the following statement after yesterday’s news that the energy supplier, GB Energy, had ceased trading:

“The closure of GB Energy is as a result of loss making tariffs coming home to roost. You can’t make losses without having cash to cover them and when that cash is coming from upfront payments made by customers, the whole pack of cards comes tumbling down when growth slows or stops. There’s nothing left in the Bank to pay the creditors, and the customers’ money is all gone.

Whilst OFGEM, politicians and personal finance “experts” have encouraged people to shop around for the cheapest tariff, the collapse of a small ‘cheapest tariff’ supplier shouldn’t come a surprise — it’s been predicted by the few for some time. The cheapest deal just isn’t sustainable and the failure of GB Energy proves the point; I fear it is the first of many if we have a harsh winter.

What it has also done is put all other electricity consumers in line for is a potential bill increase as the industry fund may need to recompense those customers who have lost their deposits. OFGEM consulted on just such an eventuality in June, so I doubt this business failure is a total surprise; and we flagged our concerns to OFGEM then. http://www.telegraph.co.uk/business/2016/07/09/new-energy-suppliers-could-be-run-like-ponzi-schemes-rival-warns/

In June 2016, Rachel Fletcher of OFGEM said: “We are proposing a safety net to protect customers’ credit balances in the unlikely event of a supplier failure… there are big savings to be made from switching of around £200–£300 and now over 40 suppliers to choose from… These protections are designed to give people peace of mind so they can have complete confidence to shop around for the best deal.”

But this is what the best deal looks like in reality: GB Energy introduced its first tariff under £800 in October 2015 and 12 months later increased the tariff by 30%. Energy is a fast moving industry and those two dates highlight how quickly unsustainable tariffs can cause a runaway train to crash.

I have likened this way of operating to a Ponzi scheme in the past and while some thought the losses made by investors in Bernie Madoff’s Ponzi scheme was just deserts for the greed of the participants, the victims here are families encouraged by the regulator and government ministers to seek out cheaper deals for their gas and electricity — politicians seeking to make energy the battleground for votes perhaps?

While I’m sure there would have been a hue and cry if the public had been asked to make good Madoff’s losses, that’s precisely what OFGEM could be proposing by making other suppliers pay into the industry fund to repay the consumers their deposits!

There is a real price for energy, consumers need to know who they can trust and who run a sound business. We have been in business since 2001, we have grown slowly and profitably within our own cash constraints. We have no debt. And because it’s been controlled and slow, its stable; we haven’t overloaded our staff with work, we haven’t stretched our finances and we haven’t had to compromise on customer service.”