More than six in the mix

Mathew Beech profiles three of the companies taking on the big six, each in its own way.

First Utility

First Utility is the biggest energy supplier outside the big six. Its 125,00 dual fuel customers take it past the 250,000 customer account threshold that makes it liable to pay into the Energy Company Obligation (Eco). In fact, members of the Energy and Climate Change select committee, when discussing Eco, recently referred to the big six-and-a-half.

So what’s to stop First Utility falling into a no-man’s land between the niche suppliers and the big six? “I don’t think there is a chasm,” says First Utility’s chief executive, Ian McCaig. “For me, there absolutely is a place for an alternative. There is space for a scale alternative and actually, because the market is so big, I don’t think there is that risk of being ‘stuck’ in the middle – the middle is a good place to be.

“You’re big enough so that from a confidence point of view you are seen as a robust enterprise and seen as a real alternative, but for people who want something different, who would want to go with a niche brand, you still represent that as well.”

That proposition has been working well for First Utility so far. It only entered the retail energy market in 2008. The thing McCaig pushes as First Utility’s unique selling point is its guarantee that it will be cheaper than any of the big six on standard tariffs. “From a basic pricing point of view, even though the lack of liquidity in the wholesale market disadvantages us, in terms of how we use contemporary technology to build a business we’re more efficient and have a lower cost base, which we pass on to our consumers,” he explains.

Another difference? First Utility was one of the early adopters of smart meters and offers them to all its customers, along with a data comparison programme to encourage customers to cut their energy consumption. “We already have consumers who are on smart meters. By using all the tools we’ve given them – these are super users if you like – they have taken 30 per cent off their energy bills. That’s really significant,” McCaig concludes.

Contract Natural Gas

While there is more choice of supplier in the non-business sector, the big six still have a significant grip there. Contract Natural Gas (CNG) has been trading in this space for 19 years.

The Yorkshire-based gas supplier believes the fact that it is a smaller company – it has 77 employees – is a benefit because it has the flexibility to offer customers a bespoke service. “Some people want something different sometimes, not your standard product that’s off the shelf,” says Martin Needham, head of sales at CNG. “Customers think ‘actually I don’t want to be a small fish in a massive pond. I want to be a bigger fish in a smaller pond’. They want to be looked at as individual businesses rather than just a number.”

Needham is also keen to say that CNG’s sales team is one team. “In the big six you have an SME [small and medium-sized enterprise] team and a corporate team. If there is any crossover between the two, they can’t deal with it. From our perspective, it’s… unique that we’ve got one team that looks after all our supplies. Everything is dealt with on one site.”

Needham believes that while the large suppliers will continue to have the lion’s share of the market in the short term, in the longer term, customers are set to become more demanding and will begin to look elsewhere. “The market is changing – there’s no two ways about it,” he asserts. “The big six are out there, but we’ve seen other players coming in and I think people are switching on to the fact that there are all of these independents out there.

“We need independents in the market to make the big six sit up and take notice. That’s where the independents will make a difference. And that’s certainly what we’re finding in the industry at the moment.”

Flow Energy

Flow Energy is the new kid on the energy supply block. Formed in April this year, the company hopes its innovative micro-combined heat and power (CHP) boiler will entice domestic customers to sign up. In fact, this boiler is at the very centre of what Flow is all about.

“What we wanted to do is launch an energy business and use it as a route to market for the boiler,” says Tony Stiff, chief executive at Flow Energy.

The boiler uses the mains gas supply to heat the boiler and generate electricity at the same time, which can also help reduce the peak load on the grid. Flow pockets the associated feed-in tariff revenue.

Stiff is aiming to get 100 units installed before winter for an in-home trial. “One hundred is a relatively low number, but we’re making sure it is reliable. There will be monitoring equipment in place with these boilers so our people can make sure they are working as we expect them to,” Staff says.

The mass rollout of the boilers is planned to start in April 2014. Flow has designed and developed the boilers from scratch and plans to give them away free when a customer’s existing boiler needs replacing or when a customer requests a replacement. It currently has 36,000 customers on its books.

Coupled with this, Stiff confidently claims Flow can also offer cheaper energy bills to customers. He estimates that about 40 per cent of the average household’s electricity could be generated by the boiler, with “£70 of gas producing about £250-worth of electricity – saving the consumer on their overall bill”.

Plus there is scope for the boiler to go beyond Flow’s own customer base. Stiff says it could be licensed out to other suppliers. “There are 1.5 million boilers exchanged in the UK every year, so there is a huge market. We could expect, in a few years, 200,000 to 300,000 of these to be our product.”

He concludes proudly: “We’re building a power station brick by brick, boiler by boiler, in people’s homes.”

This article first appeared in Utility Week’s print edition of 19th July 2013.

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