MSE News

Energy users ditching big six for smaller firms

More customers than ever are switching energy suppliers, with increasing numbers deserting the traditional big six firms in favour of smaller providers, a new report has revealed.

Yet while around one in five households switched energy provider last year in search of a cheaper deal, more than half of consumers are still on a standard variable tariff – which is often £100s more than the most competitive deals. 

Energy regulator Ofgem published its annual State of the Energy Market report today, which tracked energy trends between June 2017 and June 2018. 

It found those who do switch have more choice than ever, with 73 licensed energy suppliers on the market as of June 2018, a rise from 60 last year. 

Ofgem said the high level of competitors joining the energy marked meant the erosion of the big six's market share had continued, and between June 2017 and June 2018 they had a net loss of around 1.4 million customers.

This increased competition means the big six energy providers' market share has fallen to a historic low, with profits falling by 10% to £900 million.

25% of consumers now use small or medium-sized providers - an increase from 2017, when 19% of gas customers and and 18% of electricity customers were with small or medium firms. 

The report also found that the average dual fuel bill for a customer with a big six tariff had fallen by £52 in real terms since 2016 to £1,117, but many will still be able to save by switching and need to act quickly to bag the best deals. See Martin's Sort Your Energy Now warning. 

See if you can switch and save with a free Cheap Energy Club comparison.  

What does the report say?

The report tracked the energy market between June 2017 and June 2018, showing that:

  • A quarter of UK consumers are now with small or medium-sized providers. This has increased from 19% of gas customers and 18% of electricity customers in 2017, as consumers move away from traditional providers. 

  • Fewer people are on default tariffs. The number of consumers on standard variable tariffs has dropped from 57% in October last year to 54% in April this year.

  • More are switching supplier. 19% of customers switched between July 2017 and June 2018, which is up from 17% the year before.

  • But more than half still aren't switching. 61% of consumers either have never switched or have only switched once, up from 58% last year.

  • Those living in social housing or using prepayment meters are less likely to engage with the market. Only 32% of consumers living in social housing or using prepayment meters engaged with the market in some way last year, compared to 42% of consumers as a whole. 

  • Private renters are more likely to be in fuel poverty. 19% of households in England living in private rented property were classified as fuel poor, compared to 11% of all English households. 

  • The number who had their gas or electricity disconnected has dropped. Only 17 households were disconnected this year, compared to 210 last year, but one in 10 prepayment customers 'self-disconnected' by not topping up their meters.
     
  • Households are using less energy. Average household consumption fell by 5.5% for gas and 3.3% for electricity. This could be due to a combination of better insulation, milder winters and people turning off the heating or using less electricity to save money.

Fewer prepay customers are switching from big names

Ofgem introduced a safeguard tariff from April 2017 to protect the four million UK consumers who use prepayment meters. Those on prepayment meters typically have less choice when it comes to switching, and generally engage with the market less. 

The safeguard tariff, which is currently £1,136/year for typical use, puts a cap on how much prepayment customers can pay per year until 2020. 

The Ofgem report says that the price gap between the most expensive and cheapest prepayment tariffs has narrowed, due to suppliers reducing higher prices to comply with the cap. 

But it found that switching away from the largest suppliers has slowed down, and more than 90% of customers are on tariffs priced close to the cap, so could save by switching. 

See our Cheap Prepaid Gas and Electricity guide for more.

'Tens of thousands' are disconnecting their own power supplies

Ofgem found that around 70,000 electricity consumers and 80,000 gas consumers on prepayment meters self-disconnected for more than three hours over the year.

While evidence from its consumer engagement survey suggested most of these cases were related to forgetfulness or not realising the meter was low on credit, the regulator was so concerned about the numbers it said it would be seeking further evidence on the scale of the issue, including whether suppliers are doing enough to help these vulnerable customers. 

One in 10 households on a prepayment meter self-disconnected, it said. "Vulnerable households appear the most likely to face such problems: 88% of the households that disconnected because they couldn't afford to top up their meter contained either a child or someone with long-term health issues," Ofgem stated in its report.

What does Ofgem say?

Ofgem chief executive Dermot Nolan said: "We have witnessed many positive developments in energy over the last year, but the market is still not delivering good outcomes for all, especially the vulnerable.

"Ofgem has introduced the safeguard tariff which ensures that five million households, including some of the most vulnerable, pay a fairer price for their energy. Price protection will be extended to a further 11 million customers on the worst deals.

"We will continue to facilitate the transformation of the energy market to ensure that benefits are captured for all consumers and ensure no-one is left behind."