The UK utility market used to be dominated by six of the largest providers of energy and gas. But in recent years, the market appears to be shifting as shares of these large companies are starting to dwindle. With the option to switch from one supplier to another, consumers are finding themselves taking advantage of better deals from smaller suppliers.
The energy sector of the UK became private sometime in the late 1980s, and the monopoly of six suppliers continued well into the 21st century. Since then, around 60 small suppliers have taken their share of the market and provided a healthy aspect of competition to the conglomerates.
What does it mean for the Big Six?
Of gem estimates that last year, there were 5.1 million consumers who switched energy suppliers where about one-third of this total number transferred to a small firm and not any of the Big Six. In 2013, small and medium suppliers catered to only 4.7% of the market, but this number increased to 21% in December 2017.
It all began with residential consumers moving away from their traditional plans and switching over to smaller suppliers. Eventually, businesses followed suit and large companies also started partnering with small-scale suppliers instead of the Big Six.
Smaller suppliers provide compelling competition
One of the main advantages of smaller suppliers is being able to tap into the dissatisfaction of consumers with poor customer service offered by the Big Six. Small-scale suppliers also started offering unique marketing strategies such as prepaid energy or offering renewable energy alternatives to consumers. Overall, all of the Big Six companies lost market share as a result of the steady popularity of small and medium-scale providers.
An evolving utility market
What was once a traditional model is now slowly shifting towards a market with perfect competition between providers. It also helps that the government started to intervene by setting a price cap. It is also likely that pressure from further regulation will remain a force affecting the Business Utilities market in the coming years.
Another cause for the evolution is the trend to shift from non-renewable to renewable sources of energy. This is also changing the landscape of distribution as smaller power plants are becoming more common.
While it is true that the Big Six will continue to maintain a large share in the market and have the competitive advantage because of their size and portfolio, there is no doubt that they will also need to focus on minimising the effect of customer loss caused by consumers moving to small-scale suppliers.
What does this mean for consumers?
Both residential and business consumers have the advantage of being able to choose from several options offered not only by the big six but also by other small-scale providers. Other good news for consumers is the government intervention to regulate energy prices and prevent consumers from overpaying on their energy bills. Healthy market competition is advantageous for consumers as it may have the effect of further driving down rates and creating better tariffs and plans to choose from.