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Should I switch to a small energy company?

Should I switch to a small energy company?

We all like familiarity, and, when it comes to energy suppliers, that often means sticking with household names, like one of the ‘Big Six’, rather than switching your essential services to an underdog.

But some newer and smaller suppliers offer great deals, and the potential for better customer service. So are they reliable, and is it worth switching?

Peter Earl
From the Energy team
4
minute read
posted 30 MARCH 2020

Why are there more small energy suppliers nowadays?

Before 2013, the Big Six energy providers controlled almost 100% of the UK energy market. Energy regulator Ofgem then introduced Simpler, Clearer, Fairer reforms – to give alternative providers a fair shot at the market and to increase competition.

Ofgem’s changes, and the government-backed Energy Switch Guarantee, have also made it much easier for consumers to switch.

So much so that from January to May 2019, nearly a third (32 per cent) of the total switches for gas and electricity were to small and medium-sized suppliers (according to Ofgem data).

What are the advantages of smaller energy providers?

  • Lower overheads often translate to lower costs for customers.
  • Ofgem found that customers of smaller energy suppliers were more confident that they were getting their provider’s cheapest deal, based on a 2019 survey 
  • More competition leads to greater levels of tariff innovation and variety, and often lower prices.
     

What are the disadvantages of independent energy suppliers?

  • Since many suppliers are new, it can be tricky to dig up information about them and establish confidence in them.
  • Independent providers might struggle to cope with a sudden surge in new customer accounts.
  • They may be slower to respond to customer queries than larger companies that have greater levels of capacity and more established services.

Am I protected if my independent energy supplier goes bust?

One of the biggest worries for customers is whether small suppliers are as reliable as the Big Six. Or whether they’ll be protected if a provider goes bust.

There are an increasing number of smaller suppliers who have collapsed in the last two years. To reassure customers, Ofgem has introduced safety measures to protect customers if this happens:

  • They’ll ensure customers’ energy supply and credit balance is protected if a supplier goes out of business. This means appointing a new provider on the customer’s behalf - known as a ‘supplier of last resort’ (SoLR).
  • They’ll make sure that customers aren’t financially worse-off with a SoLR.
  • They’ll vet any SoLR to be sure they can meet their obligations.
  • They’ll enable customers to either move on to a contract with the SoLR or switch to another supplier, with no cancellation fees.

Taking regular meter readings yourself can also make things easier if your supplier goes bust, since this will minimise the chance that they owe you any money.

Are customers of small suppliers more satisfied? 

There’s a belief that smaller companies provide better customer service. With fewer customers to deal with, they can spend more time caring for the ones they do have. 
 
Throughout 2019, Ofgem reviewed customer satisfaction with small, medium and Big Six energy providers**, to see which suppliers were offering their customers the best experience. 
 
They found that customers of the smallest energy providers had the most difficulty when contacting their supplier. Only 50% of customers surveyed responded that the process was easy, compared to Big Six customers with a score of 59%. However, the happiest customers were those with medium-size suppliers, with 62% stating that contacting their energy provider was an easy experience. 
 
When it comes to customers feeling as though they’re getting the best energy deals from their supplier, small providers came out on top. 73% of customers with the smallest providers feel as though they’re getting the company’s cheapest tariff available. This compares to 69% for medium suppliers, and a significant drop to 54% with Big Six suppliers. 
 
In the end, when it comes to customers wanting to switch provider, Ofgem found that, out of everyone surveyed, only 28% of those considering switching were currently with small providers. This suggests that customers with the smallest energy suppliers are generally satisfied. 
 
**Data taken from the Household Consumer Perceptions of the Energy Market, Wave 3: Quarter 2 2019. 
Big Six suppliers include: British Gas, EDF, E.On, nPower, SSE and Scottish Power 
Medium tier suppliers include: Bulb, Co-operative Energy, First Utility, Green Star, Octopus Energy, Ovo, Utilita and Utility Warehouse 
Small tier suppliers include: all other suppliers. 

Is choosing a small energy company risky? 

The main risk with using one of the smaller energy suppliers is that they are perceived to be less reliable. Nine energy suppliers collapsed in 2019, all of which were smaller and medium-sized suppliers. In 2018, 12 suppliers went out of business. Please see more information below. 
 
While there are certainly advantages to choosing a smaller company, there is a trend of energy suppliers collapsing, which has led to a lack of customer confidence. However, Ofgem has reassured customers that your supply will not be disrupted, with customers with collapsed providers transitioning to a new company automatically. 

Are small energy suppliers reliable? 

It depends what you mean by reliable. The risk of smaller providers collapsing has been an evident trend in the last couple of years, with over 20 suppliers ceasing to operate since the start of 2018. 
 
However, customers tend to perceive the smaller energy suppliers as having better customer experience and complaint handling, offering a better service. If this is just as important to you as simply saving money, it’s worth considering a switch. 

How will new energy suppliers be regulated?

In June 2019, Ofgem introduced more stringent checks for any new suppliers wishing to enter the market, which will hopefully slow the rate of supplier failures, by requiring would-be-providers to demonstrate that they can pass a fit and proper test.

Here’s a list of suppliers that have exited the market since the beginning of 2018, and the suppliers appointed by Ofgem to take over supplies or the acquiring business.

Supplier  Exit date SORL/Acquiring Business
Breeze Energy December 2019 British Gas
Toto Energy October 2019 EDF Energy
Uttily Energy October 2019 Total Gas & Power
Eversmart Energy September 2019 Utilita
Solarplicity August 2019 EDF
Cardiff Energy August 2019 SSE
Brilliant Energy March 2019 SSE
Our Power January 2019 Utilita
Economy Energy January 2019 OVO Energy
One Select December 2018 Together Energy
Spark Energy November 2018 OVO Energy
Extra Energy   November 2018 Scottish Power
Snowdrop   October 2018 Nabuh Energy
Usio October 2018 First Utility (now Shell Energy)
Affect Energy   September 2018 Octopus Energy
Gen4U September 2018 Octopus Energy
ePHase July 2018 Not Reported
Iresa July 2018 Octopus Energy
National Gas and Power July 2018 Hudson Energy
Flow Energy May 2018 Co-operative Energy
Future Energy January 2018 Green Star Energy

The new regulations should help improve standards and keep the energy market fresh and competitive. And that will, hopefully, boost consumer trust in all energy providers.

Where can I compare energy suppliers?

Right here, with Compare the Market’s handy comparison tool.

40% of customers could save up to £422*** per year on their energy bill. So why not compare energy prices with us today, and see if you can save.

***Where a saving can be achieved 40% of people could achieve a saving of £422.00 on their dual fuel energy costs based on Compare the Market data in February 2020.

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