Small and medium suppliers serve more than a fifth of households

Following the publication of our Q4 2017 domestic market share survey, we take a look back over the quarter at some of the key trends we have seen in the household energy supply market.

2017 was an exciting year in terms of the movement of consumers between suppliers. Standard Variable Tariff (SVT) price increases at the beginning of the year saw record-high numbers of customers move away from the large suppliers in favour of a smaller alternative. Despite a total of 14 suppliers opting to increase prices at the beginning of 2017, British Gas bucked the trend and implemented a prize freeze until August 2017. The supplier then increased its standard electricity prices in September 2017, at a time when political and media attention was already falling heavily on suppliers.

In spite of British Gas’s efforts to defer any price increases, our Q4 2017 survey revealed that the move may have contributed to one of the supplier’s largest ever customer account losses. Centrica announced in its November trading update that between July and October it lost 823,000 UK energy supply accounts, attributing the losses to collective switching tariffs, white-label fixed price and prepayment tariffs, market switching trends and the impact of its price rise in September. Large suppliers lost a collective 775,000 energy accounts in our Q4 2017 survey, seeing their share fall 1.6 percentage points (pp) to 79.4% (Figure 1).

Increased large supplier losses, particularly from British Gas, and increased switching levels provided small and medium suppliers (SaMS) an opportunity to make significant gains over the quarter. SaMS added 855,000 energy accounts in Q4 2017, increasing their combined share of energy by 1.6pp to 20.6%. SaMS now hold an energy share greater than 20% across all markets, with their largest share recorded in the dual fuel market at 23.7%. Some medium suppliers recorded rapid growth over the quarter, with particularly large gains made by Bulb. After announcing that it had reached 100,000 customers in August 2017, Bulb went on to announce in November 2017 that it had already doubled in size to 200,000 customers. The supplier further stated in December 2017 that is had now surpassed 250,000 customers, marking exceptional growth within the six-month period, and moving into our “medium supplier” classification.  

We have seen an increasing importance placed on the 250,000 energy account threshold over recent months, with growth slowing for some small suppliers as they approach the point at which they become liable to pay the Warm Home Discount and the Energy Company Obligation, while others push through it at a rapid pace, such as Bulb. Flowgroup announced in trading update at the end of November that it will maintain customer accounts just under 250,000, which it estimates will save the company approximately £2.5mn. Directors believe this move will create “a strong foundation for further, profitable growth”, but also marks the first instance in which a supplier has regressed from a medium to a small supplier.

At 31 October 2017, we recorded 50 suppliers with fewer than 250,000 energy accounts, with their combined accounts equating to 5.6% of the total market.