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 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?

We all like familiarity, and when it comes to energy suppliers, that often means sticking with household names 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?

Sofia Hutson
From the Energy team
4
minute read
Do you know someone who could benefit from this article?
Posted 27 MAY 2021

Why are there more small energy suppliers nowadays?

Before 2013, the big-name suppliers 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. In fact, the latest figures from October 2020 show a quarter (25%) of the total switches for gas and electricity were away from large suppliers, whose share of the market has fallen to around 70% (according to Ofgem data).

What are the advantages of smaller energy providers?

  • Lower overheads often translate to lower costs for customers.
  • Impressive customer service ratings
  • Online, digital-first service in tune with the needs of today’s 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 leading to greater levels of tariff innovation and variety, and often lower prices. 

What are the disadvantages of smaller 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 high volumes of customer queries.

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 large suppliers. Or whether they’ll be protected if a provider goes bust.

There is an increasing number of smaller suppliers who have collapsed in the last three 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? 

With fewer customers to deal with, smaller companies are tending to outperform suppliers according to recent polls. So, what do Ofgem figures say?

Customer satisfaction: 73% of customers overall said they were satisfied or very satisfied with their energy supplier in the third quarter of 2020, down from 74% earlier in the year. The biggest drop – four percentage points – was for medium suppliers, while small suppliers were down two percentage points.

Customer complaints: overall complaints rose by 33% between the first and third quarter of 2020, down 17% compared to the same time in 2019.

Complaints to large and medium suppliers, which were up by 39% and 41% respectively on the previous quarter. Small suppliers saw a fall of 53%. However, Ofgem puts this down to the worst-performing small suppliers quitting the market.

When Ofgem reviewed customer satisfaction with small, medium and big-name energy providers against a variety of factors in 2019**, the results were also pretty close.

Ease of contacting supplier: A total 58% of customers surveyed with both smaller and big-name suppliers described the process as easy, while customers of medium-tier suppliers slightly edged them out with 59%.

However, 13% of big-name customers described contacting their supplier as difficult, while 11% of medium suppliers stated the same. This compares to only 8% of smaller supplier customers.

Satisfaction with tariff: More customers with the smallest providers felt they were getting the company’s cheapest tariff available (76%), compared with 73% for medium suppliers, and just 56% with big-name suppliers.

**Data taken from the Household Consumer Perceptions of the Energy Market, Wave 5: December 2019.
Big-name suppliers include: British Gas, EDF, E.ON, nPower, Octopus Energy, Bulb, SSE and Scottish Power
Medium tier suppliers include: Co-operative Energy, First Utility, Green Star, 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’re perceived to be less reliable. Five energy suppliers failed in 2020, while 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 in the table below.

While there are certainly advantages to choosing a smaller company, there is a trend of energy suppliers collapsing This has been put down to a combination of factors, including the energy price cap, lack of investment, the overheads involved in running an energy company, and, more recently, the pressures of the pandemic taking their toll.

The failures have led to a lack of customer confidence. However, Ofgem has reassured customers that your supply will not be disrupted, with customers of collapsed providers transitioning to a new company automatically.

Are small energy suppliers reliable?

It depends what you mean by reliable. The belief that smaller providers are at greater risk of collapsing has been borne out by evidence in the last few years, with nearly 30 suppliers ceasing to operate since the start of 2018.

However, customers tend to think of the smaller energy suppliers as having better customer experience and complaint handling, offering a better overall service. If this is just as important to you as simply saving money, it’s worth considering a switch.

How are new energy suppliers regulated?

In June 2019, Ofgem introduced more stringent checks for any new suppliers wanting 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

SOLR/Acquiring business

Green Network Energy

January 2021

EDF

Simplicity Energy

January 2021

British Gas Evolve

Yorkshire Energy (AKA Daisy Energy)

December 2020

Scottish Power

Effortless Energy

September 2020

Octopus Energy

Bristol Energy

September 2020

Together Energy

Tonik Energy

October 2020

Scottish Power

Gnergy

March 2020

Bulb

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. So why not compare energy prices with us today, and see if you can save.

Get a quote, switch and save up to £121** 

**Where a saving can be achieved, 50% of customers could achieve a saving of £121.47 on their dual fuel energy costs, based on Compare the Market data from January 2021 to April 2021.

Compare energy suppliers

Compare energy suppliers in minutes and you could start saving.

Get a quote
Compare energy suppliers in minutes and you could start saving Get a quote