Record numbers switch to small energy firms: how safe are they?
According to Energy UK, the trade association for the British energy industry, 481,677 customers switched electricity supplier in June, with nearly half moving to a smaller firm, the highest figure ever recorded in a month.
Despite sweltering temperatures, switching levels continued to increase last month with 19% more customers changing energy company, potentially saving over £300 on their energy bills.
Over 2.7 million customers have switched supplier so far in 2018, ahead of the 2.6 million recorded this time last year.
Lawrence Slade, chief executive of Energy UK, said: “The record numbers switching to small and mid-tier suppliers show that more and more customers are taking advantage of the ever-growing competition and choice out there.
“And, with suppliers of all sizes facing increasing cost pressures, which went up by nearly 15% over the last year according to Ofgem, it’s a particularly good time to check you’re on the best deal and consider ones that could fix your bills for the next year and beyond.”
Can you trust small suppliers?
There’s been an explosion of new entrants into the energy market in recent years, shaking up the market dominated by the Big Six suppliers – British Gas, EDF, E.ON, Npower, SSE and Scottish Power.
While new players should bring more price competition to the market, some people may be nervous about entrusting their gas and electricity supply to an unknown name.
Such fears are not totally unjustified. At the start of the year, regional supplier Future Energy became the third energy supplier to enter administration since 2008. It had 10,000 customers, mainly in the North East and Yorkshire.
But these failures shouldn’t put people off switching. Ofgem will not allow a company’s collapse to affect customers’ supply. If an energy company goes bust they are automatically moved to a new supplier, they continue to have an energy supply and their credit balance is protected.
In November 2016, for instance, GB Energy went bust and 160,000 customers were transferred to Co-operative Energy.
The only drawback is customers are put onto a new contract with their new supplier, which could be more expensive than the tariff they were on. But they are able to switch to a better deal at any point.