LONDON • The latest threat to the dominance of Britain's six biggest energy suppliers is coming from small technology start-ups that automatically switch consumers to the cheapest deal.
Their emergence could not come at a worse time for the industry, which is already beset by lawmakers capping rates and suffering from perennial mistrust by consumers. On top of that, utilities are getting squeezed by surging wholesale natural gas and power prices.
A record 5.5 million customers switched electricity supplier last year. So far, price comparison websites have provided the easiest way for consumers to compare tariffs. But now, companies like Labrador and Look After My Bills have taken it a step further. They move clients to the best tariff automatically.
A recent investigation into the energy markets by the Competition and Markets Authority found that 70 per cent of customers of the "Big Six" were on the most expensive default tariff and could save £300 (S$530) a year by switching. The findings led Prime Minister Theresa May to introduce a price cap on those contracts, starting by the end of the year.
The utilities are responding - after seeing their combined share of the electricity market drop to 78 per cent in the first quarter from 100 per cent seven years ago.
SSE, Britain's second-biggest supplier, got approval last Thursday to merge its retail arm with Innogy SE's Npower to create the nation's second-biggest power and gas distributor. The Scotland-based company has seen its customer numbers drop to 14 per cent of the total from 20 per cent in 2011.
Centrica, the largest supplier, said it is already committed to making switching faster and easier. The automatic switching services are free for customers, charging suppliers a fee instead. Calculating how much money can be saved can be done using an old bill or, more accurately, a smart meter.
If households already have a smart meter or want one, they are valuable to some suppliers who are struggling to meet a government deadline to roll out the devices to everyone by 2020.
Automatic switching could go some way to addressing the problem of customers who just do not care enough to change provider. Even though more people than ever are switching, the number is still only 18 per cent of the total market.