Smaller firms ‘trounce big six rivals’

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MANY smaller energy providers are trouncing their “big six” rivals by providing a better deal for consumers, according to a new survey.

The study, by price comparison website gocompare.com, shows that consumers who shop around can see a sizeable amount sliced off their energy bill.

However, Which?, the consumers’ association, says its research indicates that the energy market is still falling short of customers’ needs.

OVO Energy has taken the top spot in gocompare.com’s table of the top 15 cheapest tariffs. Ovo’s Cheaper Energy tariff has an annual cost of £998, according to gocompare.com’s research.

Jeremy Cryer, energy spokesman at Gocompare.com said: “Consumers are becoming increasingly aware that small suppliers work to the same rules as the big providers, and are often competitive on price and customer service.

“It’s also worth noting that below a threshold of 250,000 customers, suppliers are not obligated to meet certain licence conditions such as the paying of green levies and this can help them to offer more competitive tariffs.”

The latest annual Which? energy company survey revealed that the biggest companies fared worse than the smaller suppliers when it came to customer satisfaction.

The Which? research reveals that the overall customer score for energy companies serving the UK has dropped from 49 per cent last year to a new low of just 41 per cent. This is one of the lowest average scores for consumer satisfaction out of all the surveys that Which? produces.

The top spot was held for a third year running by Good Energy, who shared it jointly with Ecotricity on a score of 82 per cent. Both of these firms are small independent providers.

Which? executive director, Richard Lloyd said recently: “Once again the biggest energy companies have been beaten by the smaller suppliers but there are no winners in a broken market that consistently fails consumers.”

Which? wants to see radical steps to improve competition in the energy markets and keep prices in check, such as the biggest energy companies being forced to separate wholesale generation from the retail arms of their business.

Last month, the energy regulator Ofgem said it wanted to remove uncertainty from the energy market by proposing a market investigation by the Competition and Markets Authority (CMA). Ofgem said that a “market investigation will once and for all clear the air” and allow the CMA to ensure that there are no further barriers to effective competition.

Dr Steve Trotter, a senior lecturer in economics at Hull University Business School, said: “For competition to work well in energy markets, existing consumers have to be prepared to switch their suppliers.

“A ‘State of the Market Assessment’ published last month by Ofgem, the CMA and the OFT notes that switching rates have been falling since 2008. There was an encouraging spike in the last two months of 2013, with more customers than usual switching to smaller suppliers, but the rate fell again in January this year. Inertia and the power of the big brands no doubt have a lot to answer for here.

“Many people switch only rarely, and a substantial number have never done so. While the rise of comparison sites has done a lot to facilitate the process, not everyone has access to them, and there may be a justified concern that the switching gains they offer may be only short-lived.

“And, of-course, none of us ever has exactly the levels of gas and electricity consumption used in the illustrative tables. So while the advent and the recent success of smaller companies is to be welcomed, it is unfortunately hard to disagree with Ofgem’s conclusion that there is no evidence of sustained expansion by new entrants at a scale which would provide a disruptive competitive threat.”

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