With energy suppliers and their downfall featuring heavily in the press of late, an imperative question when choosing a business energy supplier would be- should you opt for one of the ‘Big 6’ suppliers or one of the smaller independent suppliers?
In the UK there are currently over 50 Business Energy Suppliers, from the household brands, for example British Gas, to smaller independent companies like Bulb and Octopus Energy. Both of which entered the energy market in 2015 and 2016 respectively.
Despite the vast number of companies offering energy contracts, the larger suppliers still control four-fifths of the UK Energy Market.
Although there is no definitive answer to which type of supplier you should choose, we can look into key aspects of service provision to analyse it impartially and make the decision process a little easier.
A large proportion of businesses will generally choose a supplier based on price. How do the smaller firms compare to the ‘Big 6’ in relation to this?
Some smaller energy suppliers tend to go to market with very low rates that undercut larger companies, this is because they feel they need to offer more attractive pricing in order to entice new customers on board and see it as a competitive edge. The problem with this is that these lower rates are actually loss-leading tariffs. This means the supplier is actually losing money on those deals in the hope that they’ll be able to renew their customers at higher, profit-making rates at the end of their initial contract.
Unfortunately for the energy supplier, this is not always the case, consumers are becoming more and more savvy. Most will search the market at the end of their initial contract with no qualms in transferring to another supplier if they find a better deal.
As a general rule of thumb, putting aside these initial loss-leading tariffs, the smaller independent suppliers’ pricing is comparable to what’s on offer from larger suppliers.
Customer Service is understandably an important factor for a business when choosing and Energy Supplier. Businesses need to concentrate on the running of the business, not dealing with queries that have arisen around their energy supply, so if a query does arise, they expect it to be dealt with quickly and without hassle.
As you can see from the graphs from Ofgem below, back in 2014 the ‘Big 6’ were experiencing a very high number of complaints, with Npower’s complaints peaking at over 8000 per 100,000 customers, but that trend has been reversed and by the end of 2018 the highest number of complaints received was by Scottish Power at less than 4000 per 100,00 customers.
In contrast, it’s a different story when it comes to some smaller and medium-sized suppliers, with complaints received increasing in 2017/2018 compared to 2014.
These figures and the graphs included incorporate both domestic and business customers.
Graph source: Ofgem
As a business, you need the peace of mind and security that the energy supplier you’re with is well established, with no danger of them suddenly going into liquidation.
This is more pertinent now than ever before, as nine smaller independent suppliers ceased trading in 2018, affecting almost a million business and domestic customers in the UK.
When this happens, Ofgem appoints a supplier to take on your supply, meaning any contracts you had in place would become null and void, along with the prices attached to that contract.
This is something that that many customers will take into consideration now if they move to a smaller independent supplier, as the security on offer by joining a larger supplier is readily apparent.
So, which one is it?
As highlighted, there’s no definitive answer to whether you should choose David or Goliath, but here at The Utility Team we can help by providing clear options for you, highlighting the pros and cons and guiding you through.
By talking to our clients and asking the right questions we can find out their individual needs and situation, therefore allowing us to tailor a contract to meet their needs, taking into account pricing, customer service and the security of a supplier before recommending them.
If you would like to discuss your options, please contact us on the following details:
Article written by Alex Rubboli, Senior Energy Consultant