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Big Six Gas And Electricity Suppliers May Lose A Quarter Of Customers By 2020

 October 11, 2014  /  Comments Off on Big Six Gas And Electricity Suppliers May Lose A Quarter Of Customers By 2020

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The UK’s top gas and electricity suppliers are predicted to lose a quarter of their customers over the next six years, at a cost of £500m a year to their collective profits. The ‘Big Six’ energy companies – British Gas, npower, Scottish Power, SSE, E.ON and EDF – could be driven out of the market altogether according to recently published research from leading analysts Citigroup.

Big Six Gas And Electricity Suppliers May Lose A Quarter Of Customers By 2020

The big six suppliers currently hold a 92% share of the energy market but this is likely to fall to below 70% as the market becomes more competitive, the analysts reported. The report concludes that declining demand and lower margins means the total profit pool available to these suppliers could fall by around 40% – from £1.2bn in 2013 to £700m by 2020.

Major suppliers must now decide whether they will continue to offer higher gas and electricity prices and lose customers to cheaper challenger suppliers, or offer cheaper prices at the sacrifice of their current profit margins.

“We believe there will be a reversal of previous industry consolidation over the coming years as independent suppliers and generators take market share and less competitive players exit,” Citigroup said.

The top energy suppliers would all ultimately need to “restructure their supply businesses drastically to lower their costs and become price competitive, and improve their customer service experience to stem the flow of customer losses”, they claimed.

The big six energy providers are currently under long-term investigation by the Competition and Markets Authority (CMA) after Ofgem claimed the energy market does not allow fair competition. The investigation will look at the possibility of splitting up the top companies and will reach a conclusion by the end of next year.

Last year’s winter price rises saw the top suppliers raise gas and electricity prices in unison by nearly 10% and Ofgem claims staying loyal to the same supplier costs households up to £232 per year. In contrast, those who have switched to a small supplier will save £180 per year on average.

According to research from independent group Cornwall Energy, independent energy companies have increased their share of the market from 0.2% to 7.6% at the same time as the big six have seen a decline, with more than 225,000 households switching suppliers each month.

Britain’s largest independent energy company, First Utility, recently announced it has reached over a million customer accounts, the equivalent of 550,000 customers, and now has a 2% share of the residential energy market. The utility supplier has seen a huge increase in customer numbers in just under three years. Utility Warehouse is the second biggest independent supplier, with some 835,000 accounts and Ovo Energy follows behind with 640,000 accounts.

While greater competition may mean cheaper utility prices for customers, Citigroup warns that household bills are likely to be 20% more costly by 2020 due to inflation, green energy policies and network maintenance.

The forecast has been reduced from the 50% rise predicted last year, which did not account for lower wholesale prices and changes to billing levies.

Colin Urquart is a political commentator and energy blogger. He works with various agencies to support change in the energy sector

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  • Published: 3 years ago on October 11, 2014
  • Last Modified: October 11, 2014 @ 8:51 am
  • Filed Under: Business, Education

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