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Business Energy Suppliers

Business Energy Suppliers, who are they?

The 'Big 6' are the 'traditional' big energy suppliers we all know...

The same 6 suppliers who dominate the domestic market do the same, though to a lesser degree in the business market.

How did they get to be the Big 6?

Put simply they have grown out of or have been acquired from the old regional electricity and gas boards of the mid to late 20th century.

Of course, they look very different now from those nationalized organizations and are under both foreign and domestic ownership however their roots can be clearly traced back to the pre-privatization era.

We can generally summaries the Big 6 energy suppliers as being 'vertically integrated' meaning that they own both generation capacity and retail business. In other words, they produce the energy that they then sell on.

This means they can earn money from both the energy they generate and the energy they supply.

Additionally, they can de-risk their own supply business by providing it with the generation volume it needs so they don't have to trade in the volatile wholesale market.

Many people outside of the Big 6 do not like this model, as it is not seen as transparent.

One major concern is 'the transfer price', or the price the supply section 'pays' to the generation section for the energy provided. The level of this is not clear. As such it is difficult to ascertain the true profitability of each arm and as a result market watchers, commentators and the regulator Ofgem get jumpy. Additionally, the model is seen as detrimentally impacting the liquidity of the market. This is because rather than selling their generation output to the market thereby enabling all-comers to 'access' this product it is retained 'in-house' solely for the use of the retail section.

Non-Big 6 Suppliers

There are considerably more suppliers in the business energy market than does the domestic market. The business energy market deals with all sizes of commercial operations.

It is a fact that not all suppliers can fulfill the requirements of all customers. Some suppliers solely focus on gas, some only on very large users and some focus entirely on renewable energy. When it comes to both numbers of suppliers and the prices and products on offer, the level of choice to both number of supplier and the prices and products on offer.

It isn't all about the price of course as even the cheapest headline rate will become expensive very quickly if there are bad estimations on the account or if you have to spend time on the phone trying to sort out billing issues. So it pays to know that your supplier offers both a good deal AND has the ability to service your needs properly.

Being a business energy customer you don't even need to worry whether your chosen supplier is the latest kid on the block or the oldest institution, in the event of (rare) failure, all suppliers and customers are covered by a mechanism called 'supplier of last resort' whereby your supply and contract will be picked up by another supplier so your energy will continue to flow unrestricted even if your supplier doesn't.

Suppliers, who to choose?

So the 'Big 6' vertically integrated energy businesses are inherently unfair and new entrant, smaller, independent and growing suppliers are models of virtue?

You would think so from some of the commentaries in the media and industry and at times the 'Big 6' makes it difficult to argue with their viewpoint but that is an over-simplistic and unhelpful picture which will only limit the options for a customer when they enter the business energy market.

By and large, the 'Big 6' was borne out of a monopoly market where owning everything from the pipes and wires to the high street shops 'selling' electricity and gas was the standard model.

Although the ownership of these businesses has changed, firstly into private hands and latterly through multinational consolidation the fundamental structure of the businesses has not.

The owners of these businesses have invested in and grown them from their immediate post-privatization positions.

Of course, the 'Big 6's whole reason for being is a commercial one and their intent is purely to return on investment for the shareholders but they have invested in and created businesses that are in a position to reap the rewards of the structure they inherited.

When it comes to a small, new entrant, independent and growing suppliers it is worth recognizing that in contrast to the 'Big 6' these businesses can and do operate to different commercial and ethical motives. That isn't to say they are better, it is just to say that unencumbered by legacy positions they are able to create a business born and raised in a different era.

As such it would be as remiss to denigrate the vertically integrated 'Big 6' suppliers as it would be to shower unqualified praise on small, new, growing independent suppliers. Both are equally able to undertake excellent activities as well as less commendable ones.

It is a reality that most of the small, new, growing and independent suppliers have been drivers of improvement in the market. The most successful suppliers of these have produced a place solution that separates them from their competitors, whether it is through green energy, smart metering, flexible energy contracts or simply a more transparent and customer-centric approach.

There are however some that have got it wrong, investing too little in their customer support and too much in their customer acquisition leading to poor user experience.

Fundamentally every supplier has a role to play in the market, the 'Big 6' has taken the lead of smaller suppliers and become more innovative, suppliers still get it wrong, and some perennially lags behind the rest but choice is very real out there and the benefit of choosing correctly can add massively to the profitability and cash flow of a business.

If you'd like to know more about how your business can benefit from engaging in the energy market call us on 0800-208-8301, we'd love to hear from you.

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