The failure of the UK’s gas and electricity supplier Independent Energy Holdings, which went into voluntary receivership on 8 September, is the first casualty of electricity competition in the UK. And it is unlikely to be the last. But while market competition enabled the company to realise a capitalisation of £1.5 billion when its share price peaked at £37.50 in March, market competition was not directly responsible for its spectacular demise as its share price entered free-fall to just £5 by the time the receivers were called in. But it was the facilitator.
Independent Energy’s billing problems – it was owed £119 million – have been well documented and should serve as a warning to other suppliers eying profitable opportunities in competitive electricity markets. For while it can be relatively easy to convert customers on the basis of cheaper prices, if the new customer databases are not properly input and customer usage properly metered then the value of new customers is lost.
And it is no surprise that Vertex, the United Utilities owned billing and customer services company which Independent Energy used, has been quick to absolve itself of direct responsibility for Independent Energy’s demise. United Utilities is seeking to float Vertex within the next couple of years.
