Octopus Energy has been appointed by Ofgem to take on 580,000 customers of Avro Energy, the largest supplier yet to have collapsed amid the energy crisis.
The deal, which will take the number of Octopus customers to more than three million, took place under the energy regulator’s “supplier of last resort process”.
It is the biggest example so far of consolidation in the industry arising from the record increase in wholesale gas prices that, combined with a government price cap and several under- capitalised operators, is causing distress for suppliers. Avro, run by Jake Brown, 27, failed last Wednesday. Octopus will not be left out of pocket as an industry levy will make up the difference between what Avro’s customers will be charged and wholesale costs.
There is a difference of more than £500 between the level of the price cap from October and the cost of energy on wholesale markets. The levy is ultimately funded by consumer bills.
Avro will be put on Octopus’s “flex tariff”, which is £10 under the price cap. Those who were on fixed-price deals could see increases on their bills. Experts say households could face up to £400 a year more on their bills.
Founded in 2010, Octopus is the fifth largest UK energy supplier. It said customers’ supplies would not be disrupted and that any credit they had with Avro would be protected. Avro Energy expanded rapidly, with its turnover soaring from £80 million in 2017 to £390 million in the 18 months to June 2019. However, a small profit slumped to a £28 million loss.
The Times has revealed that Brown is at the heart of a web of companies that appear to have led to his family earning millions of pounds, with questions over transactions such as an £830,000 interest-free loan from Avro to Berkeley Swiss Limited, a construction company controlled by Brown and his father, and £2.25 million in charges for an advertising agency owned by the family.
Brown did not respond to a request for comment when The Times first reported the story last week.