Independent suppliers disrupting the market
Competition within the energy sector has been a contentious issue for a long time. Regulatory body Ofgem has had real difficulty in trying to establish and maintain a competitive market environment. Despite government pressure and end user discontent, the “Big Six” monopolised the market and genuine competition between them wasn’t evident due to their similar pricing methodologies. However, there has been a big change over the past couple of years. Independent and small energy suppliers have been emerging in the market place, and gaining market share too!
Back in 2010 independent energy suppliers accounted for 1 per cent of the market. That number is now close to 15%. This can only be a good thing for competition and proves that there is a market for start up energy suppliers.
So why are the small guys having so much success? There are three main points that come to mind when considering the “big six” offering:
1. Poor customer service. Consumers are fed up.
2. Passing on wholesale cost increases to the consumer but not passing on wholesale cost decreases.
3. A range of confusing energy tariffs are offered to consumers with it being impossible to analyse which deal is best.
There is clearly an opportunity within the energy sector and new supplier entrants are successfully disrupting the market. Whilst there is no reason to suggest that this trend won’t continue, becoming an energy supplier is still a risky strategy. Up until April this year the wholesale gas and electricity market showed a general downward pricing trend for a two year period. But the market is much more volatile now making it much more difficult for independent suppliers to compete.
2008 will always be the best example of the risks involved for small independent suppliers. In a two week period both Bizz Energy and Electricity4Business collapsed and were eventually acquired by British Gas.
However, if these suppliers can overcome these obstacles then it makes for a very exciting change in the energy sector over the next few years. New suppliers will be quoting to win customer business and new products will come onto the market to give each supplier a shot at beating the competition. For TPIs, it’s important to recognise these new entrants and to work with them to ensure that their customers are being presented with a full spectrum of price results within the marketplace.