Big Six Market Share Slipping as Quarter of Energy Customers Now with Smaller Suppliers

Consumers are switching energy tariffs at record rates, with many abandoning Big Six suppliers in favour of smaller competitors, a report from Ofgem has found.

The market regulator’s annual State of the Energy Market report, published Thursday, followed trends in the market between June 2017 and June 2018.

It found that increased competition and elevated rates of switching have seen market share of the Big Six fall to 75%, down from 81% the year before and from 100% in 2004. There are now 73 licensed energy suppliers competing for consumers’ bills, up from 60 in 2017, and one in five customers switched supplier last year, searching for a better deal. Rates of switching have been boosted by middleman companies which switch suppliers automatically, Ofgem found.

Many of these switchers were deserting the Big Six, opting for a tariff from a small or mid-sized market entrant. Large suppliers British Gas, EDF, E.ON, Npower, Scottish Power, and SSE experienced a net loss of 1.4m customers between June 2017 and June 2018.

Tough competition and a changing market hit the bottom lines of these big suppliers, with profits at the Big Six falling to £900m, from £1bn the year before. However, the impact wasn’t felt equally across the field. Market leader British Gas, which supplies 27% of all households, registered a profit margin of 8%, while Scottish Power made a profit of just 0.5% and Npower continued to report losses.

The Big Six will soon dwindle to the Big Five, as the Competition and Markets Authority gave final authorisation to the proposed merger between SSE and Npower earlier this week. The market watchdog found that the suppliers don’t compete directly for customers on standard variable tariffs and that high rates of switching and an otherwise competitive market would dampen the impact of market consolidation on consumers’ bills.

But despite new consumer motivation, many households are still paying over the odds for their energy, the Ofgem report found. More than half of households—54%—are still on expensive default standard variable tariffs (SVTs), slightly down from the 57% which were the year before. 61% of customers reported they had never switched or had switched only once, up from 58% the year before.

However, those who do switch are seeing even greater savings. Ofgem found that moving from an SVT to the cheapest fixed tariff on the market would save a household £320 a year, up from £300 last year.

The government has cited the high number of loyal or unmotivated customers on SVTs, particularly among elderly and vulnerable consumers, as a reason from introducing a price cap on energy tariffs.

However, energy bills fell slightly overall last year. The average dual fuel bill for a customer of the Big Six was £1,117, a £52 decline in real terms from 2016. Energy bills took up 8% of lower-income households’ total expenditure, down from 10% the year before. Vulnerable customers continued to be the least engaged and least likely to switch supplier, however.

“We have witnessed many positive developments in energy over the last year, but the market is still not delivering good outcomes for all, especially the vulnerable,” said Dermot Nolan, the chief executive of Ofgem.

Lauren Smith

Lauren Smith has worked as a journalist and copywriter for most of the last decade, covering technology, energy, and consumer rights, in the US and UK.

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