Who are the UK’s ‘Big Six’ energy companies?
The Big Six is the collective name given to the UK’s six largest energy providers: British Gas, EDF Energy, E.ON, npower, Scottish Power and SSE. These companies each supply electricity and gas to millions of homes around the UK, carving up the majority of the energy market between them.
The origins of the Big Six
The story of the UK’s energy giants begins in 1989 with the Electricity Act that led to Britain’s Central Electricity Generationg Board being privatised and broken up into three separate entities: Powergen, National Power and Nuclear Energy, as well as the National Grid, which handled the transmission of electricity.
An ongoing saga of further privatisation, mergers and acquisitions (largely by foreign companies) led to the creation of the Big Six as we know them today. However, as we’ll see, the Big Six is very much still in flux.
British Gas began its existence in 1973 as a state-supervised gas supplier called the British Gas Corporation, an entity that formed after a long history of merging gas companies and regional gas boards dating back to the reign of King George III in the early 1800s.
The British Gas Corporation was privatised in 1986 after the Gas Act, which saw it floated on the stock market as British Gas PLC. The group was later demerged into several smaller entities, but the core sales, trading, retail and production businesses were brought together under the ownership of British utility multinational Centrica in 1997.
Under Centrica’s ownership, British Gas remains the largest supplier of gas in the country with 11 million customers, as well as supplying electricity to 6 million.
EDF Energy, owned by the French state-controlled EDF, provides gas and electricity to 6 million customers in the UK. It is also the largest energy provider, having acquired nuclear generator British Energy in 2009.
The company itself was formed in 2002 after the acquisition and merger of multiple regional and national British energy companies.
Powergen, the company now known as E.ON in the UK, was one of the original companies formed after the 1989 Electricity Act. It became E.ON in 2007, having been acquired by E.ON AG, a German energy company, in 2002. It is currently the third largest energy provider in the UK, with around 7 million customers.
National Power, another of the companies created after the 1989 Electricity Act, became Innogy PLC in the UK in 2000, when it was demerged to distinguish between its UK operations and International Power activities.
It remained a British company until 2002, when it was acquired by German utilities company RWE and rebranded as npower. The company now provides energy to some 5 million homes.
Scottish Power has around 5 million customers, including many outside of Scotland. The company was originally formed in 1990 out of the privatisation of Scottish energy supply, and still owns a large portion of the distribution network in Scotland and northern England.
The British company was acquired by Spanish energy firm Iberdrola in 2006, bringing it into what then became Europe’s third largest energy company.
SSE – Scottish and Southern Energy – was formed out of the merger of a Scottish hydroelectricity project and the Southern Electricity Board, creating a truly national provider and supplier of electricity.
The British-owned company is currently the country’s second largest provider of electricity, with around 9 million customers, but is currently in the middle of talks that could see it coming under the ownership of the German companies behind npower and E.ON.
Could the Big Six become the Big Five…or even Big Four?
Since Iberdrola’s acquisition of Scottish Power at the end of 2006, the Big Six has been relatively stable. Or that was the case, until SSE, npower and E.ON became embroiled in a number of acquisition cases, causing Ofgem to step in to ensure that competition in the UK energy market won’t be harmed by the proposals.
The long and short of the situation is that E.ON AG has proposed an acquisition of Innogy SE (the company that owns npower), which may stop a proposed merger between npower and SSE going ahead, as this could potentially bring three of the Big Six (npower, SSE and E.ON) under the control of E.ON AG in Germany.
We recommend reading the articles linked to in the previous paragraph if you want to know more, but it looks like the Big Six will be shaken up one way or another whatever happens.
The Big Six’s market share
The Big Six has dominated the electricity and gas markets since they consolidated in the early 2000s, but that dominance is on the wain. Official statistics from Ofgem, the UK’s energy watchdog, show that the influence of these six providers has been steadily declining for the last few years, with small suppliers getting an increasingly larger slice of the pie.
The above graph is very revealing for the Big Six’s recent fortunes. Since 2014, all six suppliers have been in steady decline, a change that’s been counterbalanced by the sudden upturn in the fortunes of smaller suppliers like Robin Hood Energy. If these trends continue, it won’t be long before smaller suppliers start to overtake the Big Six’s smaller members. We’ll look at the reasons for people moving away from these suppliers in a later section.
The story is much the same with gas supply, although British Gas’s larger share of the market makes the changing fortunes of the other companies less pronounced. Scottish Power is the only company not to have sustained losses in their market share since the start of 2013, but their flat line hardly compares with the strong rise in the share of smaller suppliers. British Gas has undoubtedly been the biggest loser since 2012, dropping around 10% of their starting market share.
Criticisms of the Big Six
The decline in the Big Six’s market share has undoubtedly been influenced by a slew of recent criticisms. They made headlines for the wrong reasons in 2014 when Ofgem referred them to the Competition and Markets Authority for an investigation into allegations that the competition in the energy sector was being restricted.
As part of their investigation, the CMA found that there were potential savings of up to £160 a year if you switched from one of the Big Six to a smaller, independent supplier. In fact, price is at the crux of many of the criticisms, alongside the restriction of competition.
Standard Variable Tariffs (SVTs)
At the heart of the financial criticisms of the Big Six are their Standard Variable Tariffs (SVTs), a default rate that’s known for making customers who haven’t done their research pay through the nose.
Ofgem regularly records the prices of Britain’s biggest energy providers. Data from September shows that the SVTs from the Big Six are hundreds of pounds more expensive than the cheapest alternative on the market:
However, the Big Six aren’t only making customers pay more on their SVTs, though its these tariffs that are most likely to make the news. Even on their cheapest tariffs (across a number of different payment methods) customers of the Big Six could be paying a lot more than they need to each year.
The graph below also shows you which of the Big Six are the most expensive by showing how much you could save by switching from them to a cheaper alternative.
Customer satisfaction and switching
Many customers are put off from switching because they don’t want to jump into the unknown. Although they might be aware that they’re paying over the odds with the Big Six, they stay with them because switching seems like a hassle and they’re not sure what kind of experience they’ll get with a new supplier.
In fact, according to the latest Which? customer satisfaction survey, there are 21 energy companies ranked higher than the best of the Big Six (EDF and E.ON), including Robin Hood Energy! One of the Big Six, npower, actually comes in at the bottom of the whole list.
Alongside the better customer satisfaction that you can expect to achieve, switching energy suppliers is normally much easier than most people think (unless you’re locked into a fixed term contract). In most cases, especially if you’re on a Standard Variable Tariff with the Big Six, switching is actually really quick and easy.
What are you waiting for? Get a quote from Robin Hood Energy today to start saving money.
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