According to Ofgem’s latest data, there are 54 energy suppliers in the UK domestic energy market and this number is growing as there were only 12 energy suppliers back in December 2010.
Out of the 52 energy suppliers, 46 are considered to be small energy companies making us question why new suppliers continue to enter a market which is dominated by the “Big Six”. The simple answer is that UK Households love them for a wide array of reasons from simple tariff plan options to UK based call centers.
According to the figures revealed by the energy regulator Ofgem, February 2017 had a total of 398,150 electricity and 296,055 gas switches in the month. From the total energy switches of the month, net switching gains to small and medium sized suppliers was around 107,000 for electricity and 85,000 for gas.
Reasons behind the gaining popularity of small energy companies
Pricing: Big six companies except British Gas hiked the gas and electricity prices up to 15 percent effective from this April. Due to post Brexit economic downturn, UK households are facing a serious financial crisis and such a price rise has never been expected. Energy prices are a major concern for household energy customers and that is the reason they are embracing small energy companies. According to Ofgem data (28th March 2017), the average SVT (Standard variable tariff) price of Big six suppliers was £1086.31 while the same for other smaller suppliers was £1038.66. Despite the smart metering facility offered by the Big Six companies, customers prefer switching to small suppliers due to fairer prices. Household savings are at its lowest level since the last twelve so customers are fully embracing the frugal energy deals offered by small energy suppliers over the Big Six companies’ expensive tariffs.
Seamless supply and excellent administration: As small energy suppliers don’t have an endless customer base, they can manage the supply and administration very well even with limited staff at their disposal. They adopt advanced technology in order to reduce the operational cost. System failure or technical glitches are considerably less in numbers compared to the Big six companies. The majority of small suppliers believe in simple and easy to understand tariffs so customers typically have fewer queries on their energy bills. According to the Ofgem data, the Big Six suppliers received 1827 complaints per 100,000 customers while small sized suppliers received only 659 complaints per 100,000 customers in Q4 2016.
Quality Support: Small and medium sized energy firms treat their customers personally. Customers can easily reach to top management regarding their complaint or queries so it is resolved in minimal time. Social media handles like Tweeter and Facebook of the small energy suppliers are helpful too. Queries can be easily posted on social media and the reply is often very quick due to the low number of support requests. On average 42% of complaints are resolved by the end of the next working day by small sized suppliers and an average 56% by medium sized suppliers.
Customers’ propensity: Big six energy companies failed to win the customer’s love because of their poor practice of treating customers. Energy regulator Ofgem fined four of the big six companies Npower, E.ON, SSE and Scottish Power for inadequate billing, complaint resolution, call handling and mis-selling of gas and electricity tariffs. All these became headlines in the UK and at the same time new suppliers started entering the market. The small energy suppliers started servicing the frustrated customers and as such become an alternative to the Big six companies. Small suppliers don’t have the budget for heavy marketing such as TV ads or any event sponsorship and therefore rely on promotion from their current customer base. Essentially a satisfied customer is the most promising brand ambassador for small energy companies.
Ofgem’s Backup: Small energy companies were initially not trusted by the customers and this was due to their perceived operational stability. However Ofgem has assured customers that they will never be at risk of financially losing out and will not have their energy services cut should a supplier no longer be in operation. In recent time, GB Energy went into default but Ofgem as per their promise intervened in the energy market and transferred customers to Co-op energy supply at no cost or loss of any credit they had with GB Energy.
Small energy suppliers and smart meters:
The UK Government tasked energy companies to replace the traditional meter with smart meter by the end of 2020. Around 6.78m smart meters have been installed already by the companies but they have to replace all 53million meters by the given deadline. Whilst the Big six energy companies are working hard to achieve this deadline, the small energy customers are found to be idle in the rollout process.
There are quite a few small energy suppliers who don’t have any smart metering technology and many haven’t even started working on the project. People who have smart meter technology and are looking to switch to small suppliers have to be prepared to go back to the same functionality offered by the standard old meters. Whilst a new meter will not be required to be installed, the smart meter will reduce in functionality.
FreePriceCompare.com is a leading energy price comparison site which invites UK households to compare home energy prices online with its user-friendly comparison tool. You can read the helpful energy saving tips set forth in our energy guide to see how little changes in behavior can make a big change on your bill. Also should you prefer, you can speak directly to our energy experts by calling them on 0203 4757 476.