TWO of Big Six will disappear as consumers switch from ‘nasty’ firms
Octopus founder has a shock for the energy giants...
SIMON ROGERSON, the livewire boss of Octopus Group, is an early bird. ‘I’m lucky if it starts with a four,’ he says of his wake-up time. ‘Not because I’m stressed; I just don’t sleep very much.’ On the day we meet, Rogerson, 45, has been up since 2.37am. He considered going downstairs to train on his Peloton bike, but then just lay in bed ‘slightly frustrated’.
A sense of frustration, he explains, was the driving force behind the decision to quit a promising career in fund management to found Octopus almost 20 years ago.
Rogerson’s firm fuses two of the least trusted sectors in business – financial services and energy – to offer a better deal to consumers than what he describes as ‘nasty’ blue-chip giants. ‘The power has shifted from companies to people; they are the ones with the voice,’ Rogerson says. ‘Customers will demand new competition, new ways of being served, and that will shift the dynamic in the market.’
Octopus was a vocal campaigner for the energy price cap introduced by Theresa May on January 1, which has wiped millions off his Big Six rivals’ share price and played a role in ending the tenure of Centrica chief executive Iain Conn.
Rogerson is unrepentant. He recalls an elderly customer at an Octopus focus group who had stuck with a Big Six supplier for 13 years out of loyalty, overpaying ‘thousands of pounds’ for her energy as a result. Rogerson says: ‘You have grannies and grandads who are 75, 80 years old who think loyalty’s a good thing and they’re being looked after. They’re absolutely not. British Gas, Eon, Npower – everyone we are competing against in the Big Six – are a nasty industry and don’t look after their customers very well,’ he adds, thumping the table for emphasis. ‘We campaigned for the energy price cap to make things fairer.
‘It’s not OK to bring someone in on one energy deal, and then when they’re not looking 12 months later to hike the prices up by 35 to 40 per cent, which is what every single [Big Six] business did.’
Rogerson says Octopus is more like Ocado or Amazon than British Gas in that it is new, nimble and unhampered by legacy issues. Rogerson wants to make ‘transparency, honesty and openness’ the new normal in the industry.
‘When I send you a bill, it’s going to be a fair price, and it’s going to be correct, and when you’ve got a query, I’ll deal with it really quickly,’ he proclaims. ‘That’s what I get from Amazon; why should it be any different in energy? When you have new technology you can disrupt these markets – and they deserve to be disrupted.’
Octopus Energy has signed up 1.35 million customers since it launched in late 2015 and is adding between 50,000 and 80,000 new accounts a month.
Its Big Six rivals, meanwhile, are on course to lose 2.75million customers this year and will become the Big Five when Eon swallows NPower, which last month announced 4,500 job cuts. Rogerson boldly predicts other major energy firms will exit the UK consumer supplier market.
‘It would surprise me greatly if all of those businesses are still in the domestic market in three years’ time,’ he says. ‘They are losing customers, they’re not making any money, and it becomes a vicious cycle. If I was guessing, over the next three years I would imagine two of them will no longer be [supplying household energy customers in the UK].’
Rogerson would not say which firms could disappear. The smallest in the league – once Ovo’s £500million deal to buy SSE’s household energy business completes next month – are Scottish Power and EDF. Octopus Energy is snapping at their heels in eighth position with a 2.7 per cent market share, according to data from Cornwall Insight.
‘Actually we’re seventh,’ says Rogerson, pointing out that the figures may not include the 300,000 customers Octopus Energy gained through buying Co-op Energy in
August. ‘I knew we were eighth three months ago.’
Octopus’s fund management arm, meanwhile, has accumulated £8.3billion funds under management and 60,000 investors. The overall group’s most recent accounts show a £14.2 million profit on turnover of £340million, up 44 per cent on the previous year.
It’s a long way from the early days when Rogerson and his cofounders Chris Hulatt and Guy Myles spent nine months cold-calling customers from their shared office space above a supermarket in Farringdon. Looking back, Rogerson says ‘naivety’ was the main reason for jumping ship from the rarefied world of Mercury Asset Management, where his global equities team was served coffee by waiters in white gloves and tailcoats. He soon got a dose of reality. Each founder contributed £30,000 of their own savings to the firm’s £2.25 million start-up pot – and when the initial funds ran out, Rogerson sold his flat and used the equity to ‘survive’.
These days, life is more comfortable. The Octopus founders all drive an electric Tesla Model X and Rogerson’s salary has soared from £14,000 in the start-up phase to £720,000 a year, boosted by a bonus of up to 250 per cent of base salary.
The success of Octopus now is testimony to Rogerson’s competitive nature – when the firm introduced a staff penalty shoot-out contest he beat all 1,250 of them.
So it’s perhaps no surprise that an energy boss who fits in a 10km run every day on just four hours’ sleep has no plans to rest on his laurels.
His ambitions for Octopus include expanding its energy supply business to a US state and ‘multiple European countries’ within 18 months. There are also plans for Octopus to become a Carphone Warehouse-style middleman for electric vehicles, providing everything from financing to charging points. ‘Octopus has changed the energy industry,’ Rogerson says proudly. And it’s clear he’s not finished yet.