How the Big Six are losing out in the Big Switch –
As a million of us move to a smaller supplier, we look at deals tempting us away
SMALL energy suppliers are using novel approaches to loosen the grip of the biggest providers and inject greater competition into the market. From the newest non-profit making outfit Robin Hood Energy to collective switching, here The Mail on Sunday assesses the deals disrupting the Big Six.
ENERGY customers are constantly nudged to switch suppliers – by comparison websites, financial journalists and even the Government through its Power to Switch campaign. With smaller providers dominating the best buy tables it pays to shun the Big Six of British Gas, E.on, npower, SSE, EDF Energy and ScottishPower.
More households are choosing the challengers over the giants. Figures from industry body Energy UK published in the last few days reveal that nearly a million customers moved from a large supplier to a small one during the past 12 months – 36 per cent of all switches. More than 20 suppliers have joined the sector since privatisation two decades ago and now account for ten per cent of the market. This growing band of challengers is giving big players a run for their money – using technology, better service and even collective bargaining power to bring householders better deals.
FLEDGLING SUPPLIERS
ROBIN Hood Energy, a not-for-profit operation, was launched last week by Nottingham City Council to provide affordable energy to customers across the country.
If offers a standard variable tariff, a one-year fixed tariff and a special rate for Nottingham city residents only. In a trial of 300 customers, the average saving was £237 a year. Last week it had signed up 100 new customers.
James Padmore, head of energy at comparison website comparethemarket, says: ‘This new tariff may be successful in attracting consumers away from the large energy companies because people are likely to have more trust in their local council.’ But he says many other tariffs are cheaper.
GROWING CHALLENGERS
ESTABLISHED challenger energy companies are busy scooping up customers fed up with the Big Six. They include First Utility, Ovo Energy and Ecotricity.
The most high profile is First Utility, which has seen its customer base grow from a modest 30,000 in 2011 to 850,000. Ed Kamm, chief customer officer at First Utility, puts its success down to a combination of low prices – the Warwick-based provider regularly has a tariff in the top 10 best buys – and good customer service.
He says: ‘We help customers understand their energy usage and encourage them to control wastage with our MyEnergy service, which offers online tools for understanding usage and how to save energy.
‘But the most effective trigger for a move to a better deal are our regular prompts to existing customers. We urge them to check their tariff at the time they submit meter readings.
‘This prompt happens 13 times a year compared to just once a year with some of the bigger suppliers. As a result only 20 per cent of customers are on our standard variable tariff. That compares to about 70 per cent for the whole market.’
Bristol-based Ovo Energy is also growing rapidly. As well as keeping prices keen by ‘watching wholesale prices like a hawk’, it is spreading its net by becoming a provider behind energy tariffs for local communities and housing associations.
Customers signing up to dual fuel tariffs offered in partnership with Cheshire East Borough Council, South- end-on-Sea Borough Council and Peterborough Council have already saved on average £250 a year each.
Ovo says: ‘We are successfully converting stickier customers who have not switched for years and who have lost out financially as a result.’
PEOPLE POWER
PEOPLE power is also cutting bills for thousands of householders through ‘collective energy’ switches.
These deals are typically run by local authorities, charities and consumer groups. They do not appear on comparison websites but they can beat market leading tariffs.
Consumer website MoneySavingExpert is running its third collective Big Switch Event, which closes this Thursday. Those who sign up can transfer to a three-year fixed tariff from E.on that will aim to beat table topping tariffs. Even if a customer signs up to the collective deal there is no obligation to make the switch.
Archna Luthra, energy expert at the website, says: ‘Collective schemes are
evolving. Some early deals were great at engaging people, especially council-run ones that signed up those who were not internet savvy and so were missing better tariffs. Our first collective deal a year ago was designed to beat the market’s cheapest deal and we managed it.’
The website uses the collective power of the 1.7million members of its Cheap Energy Club to negotiate a keen tariff. About 125,000 people switched during the first two collective switches, saving a total estimated £20 million on their annual energy bills. Luthra says: ‘We insist everyone does a proper comparison between the deal they are currently on and the collective deal we have arranged before they switch.’
MoneySavingExpert earns £60 from E.on for every switch to the collective deal but gives £30 of this to customers as cashback. The Big Deal also offers a collective deal at thebigdeal.com.
RETAIL GIANTS
ENERGY suppliers big and small are looking at ways to expand their share of the market. British Gas, for example, is the provider behind Sainsbury’s Energy. Sometimes, the supermarket’s tariffs are cheaper than British Gas’s and vice versa. Similarly Scottish and Southern is behind the M&S Energy brand. Boiler manufacturer Flow Energy also offers table topping tariffs.
THE FUTURE
THE Competition and Markets Authority will publish recommen- dations before the year is out to stimulate further competition in the energy supply sector.
It wants customers treated more fairly and to end the apathy that leaves many households stranded on expensive standard variable tariffs. It also wants to wake up the 40 per cent of households that have never switched supplier.
SWITCH NOW
THINK about switching, even if you still have a while – up to seven weeks – before a fixed deal comes to an end and compare tariffs on a comparison website.
Once you have completed the relevant forms, the new energy provider will complete the switch in a maximum 17 days. All you need to do is give final meter readings, pay the closing bill and cancel the direct debit.
If you are left with a credit balance on your account ask for it to be refunded. For a list of energyrelated websites visit ofgem.gov. uk or phone 020 7901 7295.