After Brian lost his wife, he was plagued by loneliness. Wandering along his local high street in Shirley, Southampton, one day in 2019 the pensioner discovered his energy retailer Utilita had opened a shop. Lured by the offer of free energy efficiency advice – and with little else to fill his day, Brian went in.
Four years on and Brian now visits the Utilita Energy Hub several times a week. The prerequisite of a query about energy has long been abandoned and Brian now stops by for a cup of tea and a chat – both with the staff but also the various community groups that use the venue to host meetings.
“It’s not the sort of thing you expect from an energy supplier”, the shop’s manager Kat admits while showing me around. “But for people like Brian we’re a part of the community”.
This Utilita Energy Hub is one of nine operated by the supplier across the country – offering top-up services (for non-Utilita customers as well), energy advice and meeting spaces for community groups, among other services.
He tells Utility Week: “When I was a kid, it was common for utility companies to have a presence on the high street. But after privitisation, they shut them all down and retreated into their call centres. I can’t help feeling the level of trust in utilities started to diminish from that point.
“There’s a lot to be said in the current climate for energy retail brands to be getting back out onto the high street and talking to people. We shouldn’t be hiding behind call centres.”
Bullen could be forgiven for wanting to shy away from the limelight of late, given that public trust in energy retailers sits at a nadir in 2023 and that prepayment meters (PPM) – his company’s speciality – has recently become a lightning rod for that criticism. This follows the appalling allegations from an undercover investigation by The Times into the working practices of contractors for British Gas.
However, Bullen is adamant that we need to start having a “grown-up” conversation, not just about PPMs but about support for customers more generally – and who will pay.
But for that to happen, politicians and the regulators need to stop taking cheap potshots at retailers, he insists.
“I really am very angry about all being tarred with the same brush,” he says, referencing the reaction by government and Ofgem to the British Gas story. “Just because there’s bad practice at one company that doesn’t mean all energy suppliers are doing the same. Yet, time and time again, that’s the impression that’s given. And it’s not helpful to anyone.”
He points out that Ofgem and the government have been keen to “name and shame” bad practice over recent months but asks “why couldn’t they also take the opportunity to name the companies that are doing the right thing in this case”.
Referring to the frequent broadsides from energy secretary Grant Shapps, who has been criticised for conducting conversations with the industry through the media rather than face to face, Bullen says: “This is jumping on the bandwagon. It’s populist politics and may well end up in some bad decisions. For those of us with long enough memories, we remember when prepay was actually banned and pretty soon they decided to go back because the alternative was really awful. Either people end up getting disconnected or the bailiffs end up going round. I don’t think anybody wants that.”
The original disruptor
My visit to Shirley and Utilita’s headquarters nearby in Eastleigh was originally intended to mark the company’s 20-year anniversary, although events overtook any thoughts of a celebration.
Utilita has always been an outlier in the industry. Bullen formed the company with university friends after selling his first start-up (a business retailer) to British Gas. They identified two areas of opportunity – the prepay market and the use of technology. Two years later, the company installed Britain’s first smart meter and has since scaled up to over 800,000 customers. The majority of these are on PPMs, making Utilita a big player in a market of c4.5 million pay-as-you-go users across the country.
Bullen says for years the brand had very little competition either in its start-up ethos or the focus on PPMs. “It was a market most people avoided like the plague. The big guys almost seemed to want to get rid of these customers and when new entrants started coming into the market they were rarely looking at PPM. The ones that did, without exception, copied us in terms of the technology and the way they went about it. We very much wrote the book on this.”
The past two decades have rarely been smooth for Utilita and Bullen admits the company has stared into the abyss on more than one occasion, not least when the price cap for PPM customers was introduced in 2017.
This was the recommendation of the Competition & Markets Authority (CMA) after its two-year investigation into the energy retail sector.
Bullen is scathing about the decision, which eventually led to Utilita threatening legal action against Ofgem, even if he agrees with key elements of the CMA’s findings.
“The whole thing around suppliers offering loss-leading tariffs for new customers and leaving existing ones on much higher ones was always going to end in tears. The big guys could do that because of their large incumbent base and that forced all the new entrants to compete at an unsustainably low price. The CMA rightly called that out.”
He adds: “The problem is the CMA didn’t really do anything about the central problem. They just gave us a massive kicking because the only thing they decided to price cap was pre-pay.”
PPM customers have “always been used as a proxy for vulnerability”, Bullen says but he insists that the bulk of his customers want alternatives to direct debit.
“Even some people that are vulnerable, even some with very serious illnesses, they want that flexibility and that control over their income.
“It’s this lazy, middle-class assumption that prepay is bad. It isn’t. And if you actually speak to our customers you’ll hear that time and time again.”
Cost to serve
Bullen admits that in an ideal world, customers on PPMs would not be paying a higher rate than those on direct debits but he points to the considerable difference in the cost to serve. Rather than a single monthly transaction, PPM customers can vend multiple times per week but Bullen says “the really big difference is the call rates”.
This is why Utilita’s business model is centred around smart PPMs and encouraging customers to self-serve via its app, which was developed in house.
However, Bullen admits that smart technology in isolation will not cut costs and in the short term might actually increase them because of the new functions it offers customers.
They include requesting a “Power Up” emergency credit, which has been accessed 1.7 million times by Utilita customers to date. This was a feature Bullen was inspired to add after hearing testimonies from customers that had been forced to seek payday loans to cover electricity.
“It was a spiral – people who couldn’t cope with their debt problems were just making them worse by paying these appalling interest rates.”
The success of the Power Up function, and the relative decline in fortunes of the high street giants, has meant Utilita would now class as the country’s third biggest pay-day lender (at 0% interest, Bullen would be keen to point out), with £31 million handed out.
Despite this, Utilita was reprimanded by Ofgem in December over its failure to provide extra credit to 25,000 customers, including some identified as vulnerable. The supplier agreed to pay out £830,000 in redress. Bullen has called the reprimand harsh and said Ofgem’s licence conditions around additional support credit lacked clarity.
Bullen adds: “I asked Ofgem whether all the other supply companies had issued these additional support credits to an accuracy of 1.5%. I didn’t get an answer.”
Utilita was also criticised by the Department for Business, Energy & Industrial Strategy (BEIS) for low redemption rates of Energy Bills Support Scheme (EBSS) vouchers among its traditional PPM customers. The company insisted it had tried its best to alert these customers and reiterated its call for a faster smart meter rollout to allow payments to be issued electronically.
Bullen is not afraid to stand up for himself and has previously pondered why “we always seem to be one of the bad guys”.
No one is making a profit
This (for want of a better word) bullishness led to a memorable encounter on Good Morning Britain, in which the visibly frustrated CEO was forced to defend himself against Susanna Reid’s misinterpretation of Utilita’s financial results. The presenter cited the full-year gross profit of £81 million as evidence of overall profitability, as opposed to the reality Bullen painted of losses of c£30 million a year.
He sighs when I bring up the encounter.
“This narrative about energy companies making huge profits is something that is so ingrained in society, it’s hard to shake. But even if you go back before the CMA’s inquiry, you won’t actually see any of the big six making huge profits. The numbers look big because they’re really big companies but the reality is they were only ever making 1% to 2% and no one’s making anything anymore.
“Energy has always been a very sensitive subject. And it is a very politicized subject. It punches above its weight in terms of swaying people’s voting intentions. Consequently, politicians love talking about it.
“But supermarkets have always, even before CMA, been making bigger profits than energy companies. So, why don’t we have an investigation into the supermarkets? It’s just bizarre.”
The consequences of this fixation on energy profits have included financial resilience crackdown by Ofgem, which is proposing suppliers meet a “minimum capital requirement”, set at £110-220 per domestic customer from the end of March 2025.
“Ofgem’s objectives here are completely unachievable and inconsistent” Bullen begins, very much as he means to go on.
“They are basically price capping everyone to death and then saying you’ve got to come up with this massive balance sheet for us.
“For Utilita, this means putting up somewhere between £100 and £200 million on our balance sheet to meet the financial stability criteria. At a time when we’re losing money. So, how does that work? They’re not about to add £50 million into the prepay price cap. And what’s my pitch to an investor? ‘£200 million please. By the way, I can’t guarantee any return whatsoever and I might go on losing money.’ It’s an absolute nonsense.”
Returning to the current fire the sector is fighting, Bullen wants to see the new energy department and Ofgem ban the installation of legacy PPMs but implores them not to continue with the currently self-imposed ban on remote switches. He points out that switches work both ways – from credit to prepay and vice versa – and that halting the process undermines the value of smart meters. He says one of the worst aspects of the relationship between Centrica and Arvato Financial Services was the use of no-install/no-fee incentives, which he says should have been stamped out long ago (and stresses that Utilita has never used them).
However, he returns to his point that BEIS and Ofgem are over-simplifying the issue.
“It’s easy to make bold statements but unless you’re prepared to have a grown up conversation about money then the debate goes nowhere. If these customers aren’t going to pay, who will? Because energy suppliers are already losing money and are people actually going to vote for an increase in their own tariffs to cover the cost of non installation of prepay or an increase in taxes? Or are we just going to let this spiral until it gets to debt collection?
“My point is, this issue is much wider than nasty, old energy companies. There needs to be a solution. But at the moment all we get is name-calling.”
Bullen is adamant that these solutions will be found in engaging with the kind of people that use Utilita’s Energy Hubs.
“We’ve learnt a lot, and there are definitely things we can do but energy suppliers can only do so much. We need targeted support for the people who need it most – and yes, I’m afraid some of us are going to have to take it on the chin.
“But we also have to do something about people burning 20% to 30% too much energy heating draughty homes. It’s a national embarrassment and something the government needs to get to grips with.”
If ministers and civil servants of the new Department for Energy Security & Net Zero are keen to kick off this conversation, there is an open invitation to an Energy Hub near them.