The alternatives to the big six energy providers

by Rebecca Rutt on 26 November 2012  |  3 comments
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Instead of blindly paying one of the big six energy companies, why not seek out some more competitive deals from a less well-known provider?

Energy companies have rarely left the headlines this year as nearly all of the major providers have announced price hikes

The only remaining member of the ‘big six’ providers which hasn’t raised prices is E.ON, and that's because it promised to freeze prices in 2012. It's widely expect that a price rise for January will be announced soon.

Several of these companies have also angered customers by announcing big profits this year. So instead of just accepting the rises and sticking with your supplier, why not have a look around at some smaller competitors in the market?

The energy market

The main providers on the market, or the ’big six’ as they’re known, are: British Gas, E.ON Npower, Scottish Power, Scottish and Southern Energy (SSE) and EDF Energy. And they absolutely dominate, representing as much as 99% of the energy market.

However, between these providers there is little competition. When one moves, the others tend to follow. Therefore if you're fed up with using one of the energy giants and you want to find a better deal, it's worth looking at the whole of the market before switching.

First Utility, for example, offers the cheapest tariff on the market which costs an average of £1,054. This is £338 cheaper than the average price in the UK so quite a substantial saving for new customers.

Ovo Energy also offers a fixed-rate tariff of £1,139 a year - a saving of £253 - while Co-operative Energy, one of the only companies to recently announce a fall in prices, charges £1,166.

These deals match, and in some cases better, offerings from the main providers so if you’re able to switch it’s well worth doing so.

The cheapest tariffs

* based on average dual fuel tariff costing £1,392 (Source: energyhelpline)

All calculations are for an average usage dual fuel household paying by monthly direct debit. Average usage as defined by OFGEM is 16,500 kWh pa of gas

Do your research

The most well-known alternative companies are First Utility, Ovo and the Co-op but there are still more to choose from.

It’s important to check who owns the company, as in some instances a big six provider will be behind it. This is the case with Ebico and Marks & Spencer Energy which are both owned by SSE and Sainsbury's Energy, backed by British Gas.

Many smaller companies tend to focus on green or renewable energy sources. Good Energy, for example, produces its own energy from certified renewable sources such as wind and water.

As the company then sells this energy back to customers, prices generally stay the same and haven’t changed since April 2009.

Ecotricity works in a similar way and says it was the first company to offer green electricity back in 1996. Any profits it makes go back into funding the building of new sources of green energy – also called ‘Bills for Mills’.

Another company supplying energy is Utility Warehouse. This site promises to give its members the cheapest tariffs available and it works as a savings club with members getting discounts for signing up their friends.

However, there has been quite a bit of negative press around it and it’s been slated for being complicated and unclear. Therefore with this, and any new provider, it’s worth doing your homework first and comparing a few different tariffs before you choose one.

What’s the catch?

Many customers may be put off switching to a small provider because of its size or the way you access it – such as First Utility which is online only.

There is also the danger that if a smaller company brings out a market-leading tariff, the size of the company will prohibit it from dealing with the influx of new customers, as has been the case with First Utility recently. You can read more about that in First Utility struggles with customer service.

We’ve also reported problems with another small provider Spark Energy which has an appalling track record when it comes to customer service.

However, this problem is not unique to any energy company as we’ve also had a lot of complaints in from customers of the big six providers.

If you’re looking to switch the best thing to do is first compare the prices available. It's up to you if you're choosing to switch for cheaper prices or because you prefer how a company works but first make sure you're able to switch without a penalty.

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