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LONDON (Alliance News) - The drive to encourage more competition within the UK energy market is continuing to push up the amount of customers that are switching in search of a better deal, with smaller suppliers continuing to gain market share from the Big Six.
Over 2.3 million customers switched energy supplier in the first half of 2016, almost 30% higher than one year ago and more than a 53% rise when compared to the first six months of 2014.
Electricity and gas suppliers have been under increasing pressure to lower prices and improve the the level of customer service they offer, especially larger companies, ever since the Competition & Markets Authority launched its investigation into the lack of competition in the sector in the middle of 2014.
The amount of independent energy suppliers has also continued to rise and they are consistently, albeit gradually, taking customers away from the Big Six; British Gas, which is owned by Centrica PLC, SSE PLC, ScottishPower, E.On, EDF Energy and nPower.
"It is great to see more and more customers shopping around over the summer months before winter hits. Over two million people have already switched supplier in 2016 and they have taken advantage of the fantastic deals offered by more than 40 suppliers," said Lawrence Slade, chief executive of Energy UK, the trade body that represents suppliers and generators.
The CMA claimed the Big Six have been taking customers for granted after having a stranglehold on the market for years, but encouragement by the regulator Ofgem and the government has seen increasing numbers of independent suppliers enter the market over the past few years.
Smaller suppliers have been consistently gaining market share over the last couple of years as the larger players continue to lose customers. SSE's total customer base declined 3.5% in 2015 after 300,000 customers moved to another supplier and British Gas lost 602,000 customers, around a 2.0% decline.
Good Energy PLC, an independent firm only supplying renewable energy, saw a 44% lift in customer accounts during 2015, gaining 66,900 customers to push the total customer base up to almost 220,000.
On average, Good Energy has seen its customer numbers grow by around 36% year-on-year over the past three years, wooing customers with deeper price cuts, for example, slashing prices earlier this year by 7.0% compared to the average 5.0% cut made by the Big Six.
More than 360,000 UK customers switched supplier in June and one third of those moved to a smaller or mid-tier supplier from a large supplier, around 120,115 switches, whilst only 51,524 customers went the other way, representing only 14% of total switches.
Notably, switching between one larger supplier to another remains high, accounting for 156,061 of the total switches in June, more than 43% of all the switches in that month. The other 10% of customers moved from one smaller supplier to another.
In 2015, 40% of customers that switched moved to an independent supplier - around 2.4 million people - equal to the total amount of switches made in the first half of this year.
After a lengthy investigation, the CMA decided against introducing a price cap on household bills as many expected, instead opting to introduce a swathe of measures to make switching suppliers an easier task for customers.
Price comparison sites are being given a bigger role to play within the market, for example, allowing suppliers to try to poach customers that have been with their existing supplier for a long time, allowing more tariffs to enter the market to increase choice and by making information a lot more transparent.
Moneysupermarket.com Group PLC said back in April that revenue had increased in early 2016 following the increased level of switching. The Home Services unit reported a 39% lift in revenue in the first quarter of the year after benefiting from a rise in collective switching of energy providers, by which a group of households band together to secure a better deal, and "attractive" fixed-term tariffs being offered.
Zoopla Property Group PLC has also previously said its uSwitch price comparison service also had benefited from the price cuts being offered by energy suppliers and the subsequent increase in customers switching.
The CMA also recommended that small businesses and household customers that have been with their supplier for three years or more should be targeted by rival suppliers to offer them better deals in an attempt to boost switching levels and rid rollover contracts, one of the biggest barriers to switching as suppliers simply renew contracts once they have ended.
The CMA also proposes removing the current restriction that stops energy suppliers from only providing four types of tariffs, allowing new ones to enter the market, some of which could be designed for specific markets.
The latest tool was only launched last month, with the Energy Switch Guarantee introduced to give peace of mind to those customers wanting to switch energy providers.
The guarantee is essentially a list of commitments, 10 in total, that will protect households throughout their switch ? from sign up to billing. British Gas, EDF Energy, E.On, nPower, First Utility, London-listed Flow Energy PLC, Octopus Energy, So Energy, and Sainsburys Energy, owned by J Sainsbury PLC.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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