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SoLR process sees largest supplier exit

Kate Hill Senior Analyst

This January saw the largest supplier exit through Ofgem’s Supplier of Last Resort (SoLR) process. Green Network Energy ceased to trade on 27 January, with Ofgem appointing EDF Energy as SoLR for its 360,000 domestic customers shortly after. On the same day, the regulator announced the exit of Simplicity Energy, with British Gas’ brand Evolve appointed as SoLR for Simplicity’s 50,000 domestic customers. Supplier consolidation is now a common part of the domestic market narrative since we recorded “peak suppliers” in 2019. The exits last month are the 11th and 12th in the supply market since January 2020 (including acquisitions, for example the purchase of SSE’s 3.5mn domestic customers by the Ovo Group, see Figure 1) and the fifth and sixth through the SoLR process during that period. Market conditions remain difficult - continuing wholesale price volatility, falling switching rates and higher winter consumption indicate that the challenge for competitors remains at scale. In response to 12 supplier exits in 2018 (the first since two exits in 2016), Ofgem launched a review of the supplier licensing arrangements to ensure appropriate protections are in place against poor customer service and financial instability, some of which came into place on 22 January. These include a Financial Responsibility Principle requiring suppliers to take action to reduce the costs that will be mutualised in the event of their failure; an Operational Capacity Principle to require suppliers to have sufficient operational capability to be able to effectively serve their customers; Dynamic Assessments which can be undertaken ...

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