British Gas and the alternatives:
Which provider is the right business for you?
As the name suggests, British Gas is the dominant utility provider for a magnitude of homes within the United Kingdom. They mainly focus on delivering gas and electricity; however, there are also various other endeavours linked to those industries present. With a catchphrase of “We’re bringing Britain the smooth-running homes of today and tomorrow,” British Gas is the leading energy supplier in England and is almost synonymous with the gas and electricity market.
A breakdown of British Gas and its progenies
The United Kingdom is a union between four countries: England, Scotland, Wales and Northern Ireland. British Gas, founded by its parent Centrica in 1997, is the trading name within England and Wales. Scottish Gas within Scotland and Centrica also operates under Bord Gáis Energy in Ireland, a company they own. The electricity and gas services are not limited to consumers. British Gas also provides its services to businesses and governing bodies. Out of the alternative Gas and Electricity companies available within the UK, British Gas and its divisions is the front-runner with roughly 15 million customers.
The full company title is British Gas Services Limited and British Gas New Heating Limited. Both of these are affiliated with Centrica.
A modern British Gas
While British Gas is not the cheapest provider within the United Kingdom, it is still the favourite provider nationwide. According to Which? British Gas supplies a quarter of the homes within the United Kingdom as of August 2021. More so, they offer various other incentives for their customers. Their rewards scheme is a good example of cross-industry collaboration. Customers are entitled to personalised offers, including days out at popular attractions, discounts for events, chain restaurant offers and even claim various freebies.
The conglomerate receives mediocre marks on a variety of its services. One aspect of success is that they have a higher than average ranking for customer service. It can be inferred that their dedication to providing high quality and reliable customer service builds trust with their customers. Simply put, even if they are unexceptional in the services they provide and even sometimes less cost-efficient than their competitors, the fast and reliable customer focus and quick response time make them convenient for many customers who wish not to be burdened with problems.
One customer was quoted: “I think it’s probably more expensive than some providers, but I trust it.” This is collaborated by others, and the genuine consensus is that British Gas is a convenient company and that its meter reading tends to be incredibly reliant. If anything, it is a company with which you could sign a contract and never have to revisit again due to its trouble-free and uncomplicated nature.
It would seem that British Gas represents the standard service level expected of a gas and electricity provider in the United Kingdom. They have a friendly and family-oriented demeanour where they are focused on “putting you first” and vow to place effort into “treating customers fairly”.
Revisiting the history of British Gas
The 1986 Gas Act passed by the British government was the catalyst that allowed British Gas to form. The Gas Act greenlit the ability to privatise the gas supply industry in the United Kingdom. Before the act, gas and electricity supply was a nationalised industry. Privatisation allowed for the modern-day competitor market that we see today, where many different gas and electricity suppliers exist.
A note to remember
The 1986 Gas Act allowed for the industry’s privatisation. Therefore, while British Gas might be the most popular company for consumers, it cannot hold a monopoly over the industry. Competitors should not be dismissed, and they pose a high risk to British Gas – the company loses thousands of customers annually to other companies.
The British gas and electricity market is also regulated by a governing body, as per the 1986 Gas Act. The Office of the Gas and Electricity Markets, or more commonly referred to as Ofgem, is the main governing body. They are tasked with regulating the market and overlooking the endeavours of every company to keep their fair and true.
The structure of British Gas as a business
British Gas and its partner corporations can only remain on top of their industry by providing a satisfactory service to their customers. Their sheer size and demand mean that their business operations function on a mammoth level – the company is gigantic, and their customers’ reliance means that they must ensure a dependable and ongoing supply of electricity and gas. Even a small break in the circuit could prove to be disastrous for their image and their wallets.
How do gas and electricity providers work?
Companies source natural materials such as naturally occurring gas and oil across the world. Once extracted, it is shipped to a power plant and becomes converted into energy. The above operations are offloaded to partners and other companies. Energy suppliers only begin their work once the energy is present for them to distribute.
The electricity is supplied to households and businesses throughout the UK by the national grid. All energy suppliers share the grid. The real energy supplier operations begin once the electricity is refined and ready to deliver to their customers.
There is not one inherently cheapest or most reliable supplier. Depending on various factors such as location, usage, environment and timing, different suppliers will bring forth deals they will offer your household.
The Big Six dominating the gas and electricity market
British Gas is the leader of the Big Six – Britain’s leading electricity and gas providers that supplied over 90% of UK households in 2014. In order of popularity measured by the number of clients in the UK, the Big Six companies are generally acknowledged as being:
- British Gas (parent company Centrica)
- Largest British energy company and deemed the greenest supplier of energy of the Big Six.
2. SSE (parent company OVO Energy)
- Second largest British energy company and deemed the second greenest supplier of energy of the Big Six.
3. Npower Limited (parent company E. ON)
- Smallest of the Big Six with a focus on further expansion into the renewable wind and hydro-electric power production sector.
4. EDF Energy (parent company EDF)
- UK extension of the French parent company, which dominates the supply market of many European countries and has a reach of approximately 55 million within the UK.
5. Sottish Power (parent company Iberdrola)
- A favourite underdog which supplies power to 1 in 10 British households.
6. E. ON UK (parent company E. ON)
- UK extension of the German parent company that has a reach of roughly 7 million customers within the UK.
While the Big Six is accepted to comprise the six companies mentioned above, in reality, identical parent companies and various mergers have witnessed a natural decline in the amount of choice for the consumer when deciding their gas and electricity provider. If a parent company owns one or more of the main providers, they have an unfair advantage within the market and authoritarian control of the direction it progresses.
Therefore, the Big Six, in reality, is more like the Big Five as there are five governing parent companies. As of 2019 where Npower Limited was acquired by their fellow major player E. ON UK.
What are the alternatives to the Big Six?
Since 2014, the big six have been in decline. Innovative competitors have found a chance to flood the market in a new age of gas and electricity, making the market share much more varied. According to Ofgem, in 2019, the Big Six’s share fell to 70% of the British market, a 20% decline from 2014.
Some examples of the smaller energy suppliers include:
- Octopus Energy
- Utility Warehouse
- First Utility
- Good Energy
- Ovo Energy
How trustworthy are small energy suppliers?
When we see a good deal, we are inclined to believe that it cannot be true. More so, it must be a scam. With that logic, many customers fail to experience the advantages of switching to a small energy supplier.
In reality, small electricity and gas suppliers benefit the British energy market that the Big Six does not. Due to the government initiative to diversify the energy market and make it more competitive, they have allowed the smaller companies to be exempt from the Energy Company Obligation (ECO). The ECO scheme keeps bigger companies accountable and regulates their carbon emissions. They have an energy efficiency scale that they must adhere to that smaller companies do not. Therefore, the smaller companies can supply energy at a more affordable cost and supply cost-effective deals to their customers.
Therefore, the trustworthiness of companies cannot be calculated on their sheer size or dominance of the industry.
Are small energy suppliers the future?
According to Which? small electricity and gas suppliers have a, on average, higher level of customer satisfaction. Their contracts are usually more cost-effective, and a smaller company means a more tailored and unique experience for the customer.
Customers do express a worry which puts new and innovative companies on the backburner. They worry about the lifespan of these providers and if their history, or lack thereof, will be a cause of instability. Some customers express apprehension as they fear new companies will not survive against the Big Six and go out of business.
According to Ofgem, this is very unlikely, and the Big Six do not inherently threaten the possible success of new and innovative electricity and gas suppliers. Moreover, when an energy supplier does go out of business, regulations are present that protect customers. A household is bound to continue to receive electricity and gas as they desire, and a switch to a different supplier will be done automatically.
Why aren’t people switching providers?
There are many reasons why customers might fail to change electricity and gas suppliers, even when they are aware of the new innovative companies or the fact that they are in a cost-ineffective contract.
A household will rarely switch their gas and electricity supplier in the UK, with under half of UK households being reported to have taken a new provider. There is a general consensus that changing suppliers is not worth the effort as it can be costly and time-consuming. While this might have been correct in the past, the changing market has had to modernise and adapt to the ever-increasing competition.
In reality, changing electricity and gas provides is a straightforward affair. By providing the new company with your postcode and latest energy usage measures, multiple online services can compare deals for your household.
You will also not experience a power outage as all energy suppliers provide the electricity and gas using the same communal means via the grid. In reality, only the provider’s name and the cost of your contract differentiates you from your fellow neighbours.
The advantages of the Big Six vs the advantages of smaller energy suppliers
Advantages of the Big Six:
- Higher satisfaction with customer service
- Supply most UK households
- Not geographically limited
- Historical records show reliability
- Not very environmentally conscious
Advantages of smaller energy suppliers:
- Cheaper deals
- Newer companies tend to be more concerned with their environmental footprint
- The higher general customer satisfaction rate
How should a business decide their energy supplier?
A business, in the same way, that a household does, must decide its energy supplier. Whether your business is situated in an office, it’s a shop or even a restaurant. You will most likely require gas or electricity, or both.
In essence, choosing an energy supplier for a business is much the same as choosing one for your household. The four core things to consider are:
- Flexibility: With small and even micro-businesses in a constant process of change, a flexible supplier will do wonders. Knowing the current structure of your business and having a rough idea of the growth you want to achieve can be very helpful when choosing a good provider whim can adapt alongside you. Perhaps consider a contract-free option or one with a cost-effective breaking clause? Pay attention to the contract duration and the rate too.
- Dependability: A energy supplier should be like your silent and unproblematic partner. You don’t want to have any issues causing you the hassle. Check out the reviews from other customers, especially ones who are also entrepreneurs and business owners. Please pay close attention to how reliable their customer service is. Your priority is to have an almost invisible relationship so smooth you forget it is even there.
- Affordability: Quality often requires cost, and so you must consider what type of service you require and how much you are willing to pay for it. The most competitive price will be the best option for a small business to offload unneeded costs.
- Sustainability: The world cares about our planet, and so should you! Making sustainable choices right from the beginning will set up your business as a pioneer. An eco-friendly supplier who cares about sustainable energy sourcing and transparent, honest and fair practices had great morals and is an ideal partner to have.
Tips and practices for business owners to remember when choosing the right energy supplier:
- Within your notice period and before your contract comes to a close, take this chance to review and compare different suppliers. You might believe that you have a good deal going but take the time to analyse the data and see what’s out there. It might be tedious, but you could be saving hundreds if not thousands a year!
- The energy market is just that, a market. There are no rules when it comes to offers and so negotiate yourself a price that you deserve. Your business is important, so don’t underestimate your significance as a customer. Your current energy supplier does not want to lose you, and you should see how far they will go to keep you. Then you also argue against taking to the competition and give them a chance to beat it.
- Don’t forget to switch, and sometimes we do all this hard work and research for our contract to renew automatically. Don’t make this mistake and stay on top of the dates and the fine print. Select a handover day and supply your final meter reading. That’s when you know it’s final.
Which provider is the right business for you?
We’ve provided you with the information, but the question still stands, and only you can answer it. Whether you want to stick with the Big Six or explore a new supplier, choosing the right business supplier is not as difficult as you may believe. Time and patience are required, but the reward is astronomical – you could not show your business any better care than making sure you have the right deal for you.
Would you like to learn more abotu the market share held by each of the big 6? You can do so here.
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What is an SME Business?
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