Collapsed energy supplier Iresa experienced cash flow difficulties and attempts to secure additional funding and a sale of the business were unsuccessful, Utility Week understands.
Difficult trading conditions in the energy sector, such as increases of wholesale gas and electricity prices, along with the provisional order placed on Iresa in March are thought to have impacted on the company’s cash flow.
Iresa ceased trading on 27 July and on 1 August Matt Cowlishaw and Dan Smith, restructuring partners at Deloitte were appointed as joint administrators of the energy supplier.
At the time of the appointment Iresa employed 56 people and no “immediate redundancies” were to be made.
The online energy company based in Nottingham was founded by director Adeniyi Oladeji and granted its supplier licence by Ofgem on 1 July 2014.
Failed attempts to secure additional funding and a sale of the business are thought to have left Oladeji with “no option” but to work with Ofgem to invoke the supplier of last resort process.
Octopus Energy was chosen to rescue Iresa’s 90,000 customers following a competitive tender run by Ofgem to get the “best deal possible” for them.
In a statement at the beginning of the month, Cowlishaw of Deloitte, said: “The administrators will be working with the new supplier to reconcile customer accounts and will be retaining a number of employees to support this.”
Iresa had been under the spotlight for its customer service processes for several months.
The regulator opened an investigation into Iresa in February to determine whether the company breached licence conditions and consumer complaints handling standards. These related to treating customers fairly, complaints and call handling, customer switching, providing refunds and consideration of customers’ ability to pay when in debt.
The energy supplier had also been banned from taking on new customers since March this year as part of the provisional order imposed by Ofgem. The ban was extended in June and the news followed the supplier being named the worst energy company for customer service amid record complaint levels.
Citizens Advice ranked Iresa bottom of its energy star rating table with a score of 0.35 stars out of five for its customer service between January and March 2018.
Matthew Vickers, chief executive and chief ombudsman designate at Ombudsman Services said a failure to adequately deal with complaints led to the demise of Iresa.
Iresa was set up with the aim to create its own “proprietary technology” to reduce the operational cost of energy supply and “pass on the savings down to customers,” according to the company’s website prior to its closure.
It said: “We promise to always be as honest and transparent as possible about your energy supply and do our best to answers any queries or questions you have in a timely manner.”
The company’s licences to supply gas and electricity were revoked as of 1 August.
Ofgem’s regulation of small suppliers has come under fire following problems at Iresa. Critics claim it is too easy for new suppliers to enter the market without the correct processes in place.
Earlier this week, the GMB union reignited calls for “stricter licence rules” being needed for independent energy companies. It said the collapse of Iresa and National Gas and Power was a “clear signal” for Ofgem to act.
An Ofgem spokesperson said: “We’ve acted to improve our readiness to take action if suppliers fail, closely monitoring suppliers’ conduct and any risks to consumers, and strengthening our monitoring of wider financial risks such as wholesale price rises in winter.
“This strengthened monitoring regime, combined with our safety net, ensures that consumers’ supply and credit balances are protected in the event of a supplier failure.
“In June we announced a review of our approach to licensing suppliers to ensure that appropriate protections are in place to address poor customer service and financial instability, and we will update on progress later this summer.”