Is small beautiful when it comes to energy?

Covered mag, presented by Gocompare.com
  • | by Kristian Dando

Last week, consumer group Which? published the results of its annual energy satisfaction survey. The results, at least for Britain’s cabal of ‘big six’ power companies were damming – they were roundly trounced by smaller suppliers which offer simpler, sometimes greener and even occasionally cheaper deals on gas and electricity.

Of course, larger energy firms having poor reputations for customer satisfaction is hardly news – just before the survey arrived, British Gas and Npower were slapped with fines totaling £4.5m for their poor handling of complaints.

But why are customers of smaller energy companies so much happier with their provider than those of the big boys? Sylvia Baron, a researcher at Which? who worked on the survey, believes that the level of satisfaction given by small energy companies has just as much to do with the customer’s values, and what they prioritise. “The smaller companies tend to offer something different – their customers are people who tend to be engaged with energy,” she says. Smaller companies, such as Ecotricity and the table-topping Good Energy have clear and tangible ‘green’ policies, which their customers are happy to pay for.

Damon Hart-Davies, an entrepreneur from London switched from SSE to Ecotricity, a company which uses its money to build wind turbines to produce renewable energy. “I wanted to reduce my carbon footprint, and I liked the fact that all money on bills would be put to building turbines,” says Hart-Davies. “We’re on an an all-green tariff – a bit like buying papal indulgences - not necessarily going to do you any good, but makes you feel better.”

Likewise, the Rev. Ian Spencer, who manages a retreat in Worcestershire owned by the Church of England, switched to Good Energy when he found that the larger companies didn’t reflect his priorities. “It was really important that we stayed ‘close to the land,’ and we wanted our energy company to have the same ethos,” he says. However, for the majority of people, the most important aspect of their energy plan is the price.

Because of the economies of scale, you’d be forgiven for thinking that smaller energy companies might come at a premium – but it’s not necessarily the case. Charles Ford, a recruitment consultant from West Oxfordshire, switched from British Gas and Southern (for gas and electricity respectively) to small supplier Ovo Energy in early 2010, and saved 36 per cent in his first year. “Big energy companies have so many rates – it seems virtually impossible to get the cheapest rates which they advertise. To me, that’s no straight business. The big six seem to want to squeeze as much out of you as they can. But Ovo Energy is just dead simple.” The personal touch that customers get from smaller companies also seems in stark contrast with experiences elsewhere. “Frankly, they just seem to give a hoot,” says Ecotricity customer Hart-Davies.

In fact, the process of being seemingly shoved from pillar to post by customer service is driving customers away from larger utility companies. “Customers may have had such bad problems with their bills that they won’t go back to a cheaper member of the big six, because of the experience they've had,” says Kenny Griffith of Energylinx, Gocompare.com's energy comparison partner.

Of course, it’s certainly a lot easier to provide a more personal service when the amount of customers the smaller companies have is much less than their larger rivals. “Would the smaller companies still be able to give that level or service if they got much bigger?” asks Which’s Sylvia Baron.

The ‘Big Six’ claim they’re getting their act together. An Npower spokesman told us: "We are committed to putting our customers first and continually improve our service. These are difficult times for consumers and we don't like to hear that some of our customers feel dissatisfied. We're always working hard to make sure our customers get good service, that's why we're investing £200m in new systems to help our staff give the best possible service to our customers."

 Meanwhile, a British Gas spokesman said: “We take great pride in our customer service. The vast majority of customers have no cause for complaint. But when one of our customers has a complaint we work hard to resolve it. Consumer Focus recently awarded us a four-star rating for our complaints handling.”

The energy watchdog Ofgem has already stated its aim to break up the hegemony of the big six and allow new, smaller companies to enter the fray – whether this will happen in the future remains to be seen, but if the results of the recent Which? survey are anything to go by, we might well see a lot more happy energy customers as a result.

At a glance – some of the smaller energy firms shaking up the industry

 

Good Energy

Founded in 1999, it was the first British supplier of 100 per cent renewable energy. It is owned by 1,700 shareholders, 90 per cent of which are Good Energy customers. Topped the 2012 Which? energy satisfaction survey.

Ovo Energy

Ovo Energy was started by Stephen Fitzpatrick, an entrepreneur from outside the energy world who was fed up with the complex charges found in the industry. It also has a three per cent monthly interest award on customer balances.

Ebico

A non-for-profit company, Ebico prides itself on ‘fairness.’ it has one single price for all customers, regardless of payment methods – pre-paid or meter.

Ecotricity

The company which ‘turns bills into mills’ – all its profits go into building sources of renewable energy.

Utility Warehouse

Owned by Telecom Plus PLC, Utility Warehouse doesn’t advertise on TV or radio, preferring to spread its business (in which members enter a ‘discount club’_ by word of mouth. It came second in the 2012 Which? survey.