Main Menu

Business Comment

Terry Murden: Ovo embarrassing the Big Six

Electricity billHow embarrassing. After the “big six” utilities showed they care about customers and cut gas prices, the real victors could be the “small 21”, the independent energy suppliers who could be about to steal a march their better known rivals.

Ovo Energy this morning announced a whopping 10.4% reduction – twice as big as any of the bigger players who must now be wondering what to do next.

Consumer groups will be delighted and see this as more like the sort of cut they would expect. After all, some of those so far announced will save a measly £20-£30 a year which still wouldn’t fill the petrol tank of a mid-sized saloon despite the fall in oil prices.

There is something about the big players that particularly annoys the public. They have inherited the bankers’ mantle for being the companies the public loves to hate. And this is partly because the public refuses to believe their excuses for keeping prices high.

No wonder the smaller suppliers are grabbing customers. Aside from Ovo, they include Spark, Ecotricity,  First Utility and Good Energy. Their market share has risen to 27% of the total market (the total demand for electricity and gas, both domestic and otherwise) from 17% since 2008.

Independent (non-“big six”) suppliers provide more than three-quarters of the non-domestic gas supply market, excluding power stations. The largest independent has grown tenfold in just three years, and now has more than a million customer accounts.

Since 1999, more or less the same period, the big six energy companies have seen their share fall from 99.8% to 92.4%.

The Competition and Markets Authority (CMA) began an enquiry into the big six suppliers last summer, after the regulator, Ofgem, said the market was not working in consumers’ best interests. Ironically, the rapid rise of the smaller players may to that extent play into the hands of the big six who will use this trend as evidence that the market is working.

However, price is the determining factor. Few customers feel any real affinity with their suppliers, particularly when they often do not even know where they are based and deal with them virtually online.

That means the big six could yet use their clout to regain lost customers through aggressive price-cutting. The evidence so far does not suggest that will happen any time soon. Indeed, it points to a growing complacency. Even so, don’t expect them to sit back and watch their customer bases disappear. The odds must favour further cuts later in the year.

Here is a list of those to announce cuts so far:

Supplier               Change                        Comes into effect
Eon                       Gas: Down 3.5%        13-Jan
British Gas          Gas: Down 5%            27-Feb
ScottishPower    Gas: Down 4.8%        20-Feb
Npower                Gas: Down 5.1%        16-Feb
SSE                      Gas: Down 4.1%         30-April
Ovo Energy         Gas: Down 10.4%       1-March


Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.