Smaller energy suppliers could thrive as rivals collapse

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Energy Suppliers:

The UK energy market is going through big changes as some companies, both big and small, are struggling to survive.

A total of eight
small energy suppliers went to the wall in 2018 as wholesale energy
costs proved too much for them. This trend has continued in 2019,
with two more failed suppliers, Economy Energy, and Our Power.
Industry watchers predict there are more failures to come.

It’s been a
challenging year for the remaining energy suppliers, raising
expectations of further company failures or more consolidation and
the continuing need for Ofgem’s safety net, where a stable provider
is called upon to rescue customers stranded by the failure of a
rival.

It all demonstrates
the volatility in the market with some good businesses getting
stronger, while others are struggling to survive in a very
competitive and regulated market. The collapses show how
unsustainable pricing by new entrants place such a heavy burden on
households and landlords when picking up the pieces.

Some suppliers have
been tasked with taking on more than 800,000 displaced customers,
receiving a huge boost to their businesses in the process. With this
instant growth to these mid-market operators they pose a serious
threat to the dominance of the market’s “big six” suppliers:
British Gas, E.ON, npower, EDF, ScottishPower and SSE – which
control 80% of the market.

Trade association
body for the UK energy sector, with a membership of over 100
suppliers, Energy UK, and the energy regulator Ofgem, both welcomed
the entrance of new players as a signal of healthy competition, but
until recently few of these had seriously rivalled the big six.

Those in the frame
to close the gap are three mid-sized firms: Ovo Energy, First Utility
and Bulb.

In the case of Ovo
it has taken on around half a million new customers from the failed
companies, taking its customer base to a massive 1.5 million and a
substantial market share of around 5%, not too far behind npower’s
7.7%.

Energy consultant
Cornwall Insight’s Robert Buckley thinks that although there’s
been a lot of negative comment in the media about the company
failures, there are few signs they’ve caused “any real
degradation to competition in the retail market.”

“The shake-up has
presented an opportunity for several suppliers to grow, changing the
face of the retail landscape in the process,” he says.

There are signs that
the next generation of suppliers will start to close the gap between
them and the big six over the next few years. Consumers see switching
to these new challengers has substantial benefits in terms of price
and service.

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