A senior figure at Eon, which has this week announced it will cut 500 to 600 UK jobs, has described the energy retail market as “broken”.
Sara Vaughan, the group’s political and regulatory affairs director, said the risk/reward balance in the sector was out of synch and warned that suppliers would struggle to make the changes demanded of them unless they were given more room to manoeuvre.
Eon, which has around 9,000 workers in the UK, is making its second round of job cuts in just over a year. Last autumn the company removed around 500 roles and is seeking to do so again this year across support activities and managerial positions.
In an official statement the company pointed to the impact of the price cap, which it said had “massively distorted” the market.
Speaking at the Energy UK conference, Vaughan said: “The retail market feels broken at the moment. I have fears about our ability to deliver the great change that we need to unless we see amendments to that market itself.
“We are operating under a price cap which (Ofgem chief executive) Dermot Nolan described as tough. It has been set with the expectation that companies will on average earn a margin of -1 per cent. A number of suppliers have been consistently pricing below cost. An average of one company per month crashed out of the market in 2018, leaving behind £200 million in unpaid bills which the rest of us had to pick up. Other players, even long established ones are bowing out voluntarily because they just can’t see a profitable future.
“The risk/reward balance is completely out of synch. You’re facing 10 per cent of turnover fines if you get things wrong but you’re making no money.
“The joint BEIS/Ofgem consultation document on flexible and responsive energy markets admits that the market has been designed and is structured in a way that has distorted it and led to an uneven playing field.
“It’s no wonder a senior Ofgem director recently referred to the current market as extremely painful and difficult for suppliers.”
Commenting on the plans to further reduce headcount, an Eon spokesperson said: “Suppliers in the UK energy market are facing a significant threat to their futures in a market that continues to be extremely competitive but that is also massively distorted by the energy price cap and the many firms now seemingly content to run at a significant loss.
“Only companies that continue to evolve and adapt to the nature and challenges of the market will be able to succeed. As a result, we can confirm we have announced to colleagues a proposal to reduce between 500 and 600 roles across support activities and managerial positions in the UK.
“We will consult fully with trade unions on these proposals and, as always, involve our colleagues fully with the detail of any proposed changes to how we operate and keep them informed of any developments.”