What are the benefits of using a smaller energy supplier?

Harriet Meyer / 30 January 2015

The biggest energy suppliers have been slashing prices, but for householders seeking the best deals smaller rivals are worth considering.



EDF became the last of the Big Six to cut prices in the wake of falling wholesale costs, following SSE, npower, British Gas, E.On and Scottish Power over recent weeks. Yet the cuts remain paltry, with EDF cutting the least, at just 1.3% off bills.

 

Smaller suppliers could be an alternative

Whether it’s price hikes, over-charging or complex tariffs, you may feel you’ve had enough of the Big Six.

The good news is there is a growing range of smaller suppliers to pick from, and they’re providing some of the best deals. A search on average usage on comparison site uSwitch.com throws up a range of options, including minnows such as First Utility, Ovo Energy and Co-operative.

These buy their supplies from the Big Six, so it’s tricky to know how they compete. However, smaller providers claim they can move more quickly to cut prices. When wholesale prices fall back, the biggest struggle to move in tandem as it takes time to implement price changes. In this case, smaller providers have more power.

 

Smaller providers rate well for customer satisfaction

Smaller providers differentiate themselves by other benefits aside from price. In particular, they are known for topping consumer group tables for customer satisfaction.

A survey of more than 10,000 people by consumer group Which? in 2014 placed green energy suppliers Good Energy and Ecotricity top for customer satisfaction, while giants npower and EDF came bottom of the table. 

Other small suppliers that score well for customer satisfaction include Ebico, Utility Warehouse, Ovo Energy and Co-operative Energy. New supplier Extraenergy, which entered the market in April 2014, also has a good track record for customer service, although it’s early days.

These suppliers also tend to have fewer plans to pick from, making it a simpler choice for consumers who want to switch to their services. Co-operative energy likes to shout about simplicity and being consistently competitive, typically offering a single tariff.

Some providers focus on green energy. If you are keen to opt for one of these suppliers you might pick Good Energy or Ecotricity, an environmental champion that invests profits into finding sources of green energy.

 

The downsides of using a smaller supplier

Smaller companies don’t have to offer every payment option, such as cash, prepayment meters or cheque. So you’re more likely to be limited to paying by direct debit.

They also might not take part in government schemes, such as the Warm Home Discount, which  provides certain elderly customers with £140 towards their bills.

 

Reliability of small suppliers

There are some fears about the financial strength of smaller suppliers. In 2008, two small energy suppliers, Bizz Energy and Electrcity4Business, went bust. Yet those that are around now tend to be robust. Even if a supplier goes under, regulator Ofgem steps in to ensure you’re never left without power.

So if you’re fed up with massive energy firms, then it may be worth investigating the alternatives and backing a smaller alternative.


The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.