Supplier Switching Affects Big Six Profits
A report by Britain’s energy industry regulator has revealed that the country’s six largest energy firms experienced a collective decrease in profits by around £100m.
The profit drop has been attributed primarily to customers leaving the Big Six suppliers for smaller and newer energy providers.
Well over a million people switched from a Big Six supplier during the last year. Resulting in a 10% drop in profits for the energy suppliers with the biggest market share. With their collective profits previously at £1bn, this 10% loss means their collective gains dropped significantly down to £900m as their collective market share also dwindled to an all time low of just three-quarters.
Many Customers Still Not Switching Suppliers
Ofgem’s report also discovered that there are a significantly large number of energy consumers who have remained with their long-time suppliers. Regardless of the potential to find better rates available elsewhere.
According to the report, a third of energy customers stated that they had never switched energy supplier. However close to that number had only ever switched once. Well over half of those were still on the most expensive standard variable tariffs, which customers get rolled onto once their original contracts end.
It is the significant number of customers remaining on the standard variable tariffs – and the fact that they are often the most vulnerable people in society – that has caused the Government to introduce the controversial price cap by the end of this year.
Energy Minister Claire Perry said of the price cap, which should affect around 11 million households:
“Many customers, including the elderly and those on low incomes, are still paying too much.”
Energy Price Cap Criticism
There has been a lot of criticism for the proposed energy price cap. Mostly from within the industry itself. With many warning of possible unintended consequences of creating such a challenge for the energy provider companies.
Ofgem remains confident that the price cap will be of benefit to those who need it most, with their Chief Executive, Dermot Nolan, saying: “We have witnessed many positive developments in [the energy sector] over the last year, but the market is still not delivering good outcomes for all, especially the vulnerable.”
Smaller Energy Suppliers Increase Market Share
While the vulnerable remain a concern, more and more people are ensuring they are not among that number. In fact, according to the annual State of the Energy Market Report by Ofgem, it is a relatively huge 1.4 million customers who switched from using one of the Big Six energy suppliers to a smaller provider between June last year and June this year.
Newer and smaller suppliers now hold a quarter of the market share. With 25% of electricity and 24% of gas supplies provided by suppliers outside of the Big Six.