Six senior executives at Avro Energy were taking home £250,000 per month before the failed supplier went bust with its ex-chief executive admitting he was carrying out other jobs while running the company.
Giving evidence to the Business, Energy and Industrial Strategy (BEIS) select committee yesterday (19 April) at the House of Commons, Jake Brown stunned MPs as he outlined how the company was run before it went into administration in September last year.
Brown told the MPs that being chief executive of Avro was not his only role and he was not paid “directly” by the company, which had around 600,000 customers when it went bust, but received fees from a management consultancy that provided services to a number of different companies.
Six “management personnel” were paid a total of £250,000 per month by the consultancy, which did not “seem excessive”, he said.
Brown also defended the company’s lack of hedging, which left it heavily exposed to the dramatic increase in gas prices in the second half of last year.
He said Avro’s hedging strategy had been “looking at opportunities in the market” to buy “little and often”.
Brown added that the company had been advised that gas prices were likely to drop in the latter part of 2021 as the Nordstream 2 pipeline was due to start shipping gas to western Europe.
He expressed “concern” that Avro would have been exposed to hefty margin calls on any hedges that it had taken out but admitted that the rapid rise in gas prices had tipped Avro into insolvency.
Brown, who set up Avro six years ago while still studying for a law degree at university, also rejected concerns raised by committee members that Avro had too little energy industry experience on its board.
“One of the problems with energy was that it needed people to take a different view.”
And Brown attacked Citizens Advice for being a “dysfunctional organisation” after being pressed by the committee on the repeated concerns raised by the watchdog with Ofgem about Avro’s customer service standards.
Members of the committee were withering in their criticism of Brown at the end of the hearing.
The committee’s chair Darren Jones said: “I’m afraid you pretty much personify the reason we need to change the regulation of energy companies.”
He was backed up by fellow Labour MP and committee member Tonia Antoniazzi, who said Brown and his father Patrick should have been “more risk averse” and that other people were having to pick up the costs of the company’s failure.
Earlier, Bulb founder and chief executive Hayden Wood admitted to the committee that he is still being paid a £250,000 annual salary even though the company went into special administration last autumn.
He said he had stayed on to “support” customers and to help with the sale of company.
Wood blamed Bulb’s downfall on the lack of access, as a recent market entrant, to the long-term hedging arrangements that more established companies enjoyed.