Will The Big Six Become The Small Six By 2020?

The Big Six may face a loss of a quarter of their customers by 2020 if they don’t improve customer service; will the big six become the small six by 2020? Where this will make room for other smaller suppliers with more competitive tariffs, consumers will still suffer as the average energy bill will be approx 20% higher. A recent report Citi on the changes in the energy market said

“Due to increasing competition we see the market share of the ‘Big 6’ in energy supply declining from 98% in 2013 to below 70% by 2020. When combined with declining  demand and lower margins the total profit pool available to the large energy suppliers could fall [by about] 40% from [about] £1.2bn in 2013 to just £700m.”

Reports like this are grim news for the main suppliers and their shareholders, but a huge inspiration for independent energy suppliers to continue as they are; offering cheaper tariffs. Historically, customer service, or rather the lack of, has been the bugbear of many consumers; energy suppliers didn’t care because they didn’t have to. But now with OFGEM fighting the consumer corner and smaller independent companies coming to the table with no previous reputations, will it force those remaining of the big six to be more conscientious toward their customers needs.

Citi (an American multinational banking and financial services corporation) noted that Centrica; gas and electricity provider under the British Gas label, reported earnings before interest and taxes of more than £600m from residential supply in 2012. They stated

“If the supply market does develop as the current trends suggest and the available profit pool declines by the estimated 40% we may well see some participants simply running their supply business to maximise cashflow in the short term and exit the market at some point,”.

Citi also believes that the the current 70% market share that the big six hold could be reduced to less than 50% in coming years because of the cuts in available renewable energy subsidies twinned with the closure of traditional energy plants. In the past year, the big six’s market share has fallen from 98% to 92% in the last year alone, thought to be partly driven by consumer anger about last autumns price rises.

Independent consultants Cornwall Energy produced figures that indicate customers hold 3.8m accounts with the smaller suppliers and 45.9m with the big six, it will be interesting to see how the balance tips in the coming years.

The Big Six Explained

Within the UK, there are 6 large companies who dominate the energy market; they supply around 95% of all household energy but who are they? They’re household names that everyone recognises, but are also known as ”the big six”. The control they have over the market leaves only a tiny portion to be served by the remaining 12 suppliers.

British Gas
As the UK’s largest supplier, British Gas is the most recognisable UK name with nearly 10 million customers. Part of the British-owned Centrica Group, a huge company also involved in gas and oil exploration and production employing 33,000 people. Profits were £571m for domestic supply in 2013.

Npower is part of the German power giant RWE; one of the five largest energy companies in Europe. Providing energy to 3.5 million customers in the UK they are one of the major providers of energy used in the UK. Profits were £134m for domestic supply in 2013. Last year RWE decided against building any new nuclear power plants in the UK.

SSE was formed in 1998 after the merger of Scottish Hydro and Southern Electric, later adding Swalec to the stable. Generating power and supplying, like the other major UK suppliers. Profits were £318m for domestic supply 2012-13. They employ about 18,500 people in the UK and recently vowed to keep variable tariffs frozen at current price levels until 2016.

Scottish Power
In 2007 Scottish Power became part of the Spanish energy giant Iberdrola. They’re one of the largest UK energy suppliers with profits of £128.5m for domestic supply in 2012.

German company E.On also own the UK company E.On who used to be known as Powergen, but switched to E.On UK in 2007.
12,000 people employed in the UK and 79,000 worldwide, generating and supplying energy including wave power. Like RWE, they recently ruled out building a new nuclear plant in the UK.With profits of £296m for domestic supply in 2013.

As a French state-owned energy company, their UK operations are an owned accessory of EDF Energy, supplying around 5.5 million domestic and business customers in the UK. EDF runs eight nuclear power stations in the UK. Profits were at a £92m loss for domestic supply in 2012.

Although these Big Six monopolize the market, there are 12 other suppliers in the UK! Use our price comparison calculator to see if you could be using a new provider and saving money!

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Energy Market Investigation

OFGEM Investigation in to the Energy Market

OFGEM, the Government Regulator for Great Britain’s Electricity and Gas markets have recently launched an investigation related to barriers of competition in the energy market under the backdrop of increased profits of the leading energy providers and sharply declining consumer confidence. Among the reasons for low consumer confidence is the common practice of energy providers to increase prices for customers who have not switched.

As OFGEM doesn’t have extensive enough powers to address the whole issue, it has referred this case to the Competition and Markets Authority (CMA) to make further investigations and establish a long term solution to help consumers regain confidence. This could mean that the “Big Six” energy suppliers could be split up to create a fairer market.

A month after the announcement, OFGEM started fining energy suppliers for mis-selling their services or for preventing customers from switching.

Recently, British Gas was ordered by OFGEM to pay a penalty and redress of £5.6 million for having blocked business customers from switching suppliers.

E.ON was issued with the most recent and at the same time highest penalty to date of £12 million which was for mis-selling to vulnerable customers which took place between June 2010 and December 2013. E.ON will pay £35 to 330,000 households that receive their “Warm Home Discount” and will write to another 465,000 customers to advise them how to complain if they believe they were treated unfairly. So look out for a letter from E.On if they supply your energy.

We believe this isn’t the last we’ve heard from OFGEM as more dubious practices get uncovered. In the meantime, consumers are advised to frequently switch energy providers to ensure they are not overpaying for the energy they are using.

Here at Switchwise, we are trying to make the switching process as easy as possible for you. We have an easy to use guide on our website on “How to Switch Energy Providers” or pop straight to our postcode checker so you can start comparing immediately.

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