Ofgem has ripped up 26 gas and electricity licences linked to just five men, as the regulator faces calls to clamp down on pre-packaged energy suppliers after a string of failures in the sector.
Officials revoked licences belonging to 14 different companies on Monday, as none had started supplying gas or electricity more than a year after they were issued.
Most of the firms are shell companies, set up by consultants and sold to aspiring energy suppliers who sell utilities to households or businesses.
The off-the-shelf companies come with an energy licence and often software, and can cost as little as £70,000, according to one industry insider.
The practice has come under pressure from many in the industry for lowering the bar of entry too far, following a series of bankruptcies.
During an Ofgem-run consultation this year “one respondent commented that it was currently too easy to set up a supply company, particularly through the ‘off the shelf’ model”.
Critics say it has allowed unfit suppliers to enter the market.
They point to a series of failures – more than a dozen companies have gone bust since the beginning of last year, costing customers £172 million – as proof that the system needs overhauling.
This move by Ofgem is positive and means these firms can’t start operating without meeting the stricter rulesGillian Guy, Citizens Advice
However, others have praised them for encouraging competition.
Several of the top challenger brands, including Octopus and Bulb, were initially bought off the shelf.
It comes as Ofgem is preparing to update the terms that suppliers need to fulfil to keep a licence.
An initial consultation is due to close on December 3.
The watchdog has already made it trickier to get a licence in the first place.
Gillian Guy, chief executive of Citizens Advice, said: “These licences were granted before a tougher regime for new suppliers came into force. This move by Ofgem is positive and means these firms can’t start operating without meeting the stricter rules.”
She called on Ofgem to make “effective changes” to ensure operating companies are regulated.
One of the companies whose licence was withdrawn, Putney Energy Limited, is connected to Steve Peters, founder and managing director of Toddington-based Utiliteam.
On its website Utiliteam says it specialises in “low-cost entry into the competitive GB energy supply market”.
It advertises “off-the-shelf” licensed gas and electricity suppliers and boasts having licences that “can be purchased by any customer”.
Listings at Companies House reveal that Mr Peters has links to failed energy suppliers Toto and Solarplicity.
A further four suppliers that had their licences revoked were set up by Energy Services Group’s Utiligroup, a company which also has links to failed suppliers URE Energy, Brilliant Energy and Our Power. ESG’s finance director, Steve Gosling, is listed as a director of all four suppliers.
Utiligroup’s strategy boss, Mark Coyle, told the PA news agency: “We are happy that the remaining unused licences are removed and that the sector moves on to an enduring supportable basis of market entry.”
He said the group is a software and services provider and not a consultant to them.
Robert Gildert, chief executive of Gilmond Consulting, which provides software to energy companies, had two companies whose electricity supply licences were revoked on Monday.
Daniel Maitland is linked to three energy suppliers which lost six licences between them. He is managing director of Oxford Cloud Technology, another software company.
Jon Slade, chief executive of Ensek, another energy software provider, has links to four of the companies. Between them they lost eight licences in Ofgem’s latest cull.
An Eksek spokesman said the company had not managed to sell the revoked licences as demand to set up a new supplier had waned over the last 12 to 18 months following supplier failures and the energy price cap, introduced in January.
“We welcome the changes proposed by Ofgem to the licensing process, but think more can be done to safeguard consumers,” he said.
This is good news for customers as it will mean that companies can only supply gas and electricity going forwards if they are more viable and resilientMark Todd, Energyhelpline
Off-the-shelf companies are perfectly legitimate ways of setting up a firm.
Octopus Energy and Bulb Energy, two of the most successful challengers on the market today, were formed by Utiligroup and Utiliteam.
Similar services have also been used by Nottingham Council when setting up Robin Hood Energy.
The companies maintain that they are not responsible for what a supplier does once it has bought a licence from them.
The revoked licences are generally thought to be those left over that the consultants have been unable to sell.
“Ofgem is now getting much tighter on granting licences,” said Mark Todd, co-founder of switching service Energyhelpline.
“This is good news for customers as it will mean that companies can only supply gas and electricity going forwards if they are more viable and resilient.”