Scrapping big six label ‘shows competition has worked’
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Ofgem’s decision to adopt a new classification of domestic suppliers by market share reflects how the market has changed in recent years, industry experts have said.
Utility Week has previously written about what defines a large supplier, and whether the term “big six” should be used.
Market observers believe getting a correct definition helps with measuring switching figures to keep track of how the retail landscape is evolving.
The energy regulator recently wrote to suppliers to announce that from the end of November it will classify suppliers as small, medium or large based on their market share.
Going forward large suppliers (currently British Gas, Eon/Npower, Ovo/SSE, EDF, Scottish Power, Bulb and Octopus) will be those with a market share in terms of meter points equal to or greater than 5 per cent in at least one fuel.
Medium suppliers will have a market share of less than 5 per cent in both fuels and a greater than or equal to 1 per cent market share in at least one fuel. Currently, this is Shell Energy, Utilita, Utility Warehouse, Avro Energy and Green Network Energy.
Small suppliers meanwhile will have a less than 1 per cent market share in both fuels, which is currently all other suppliers.
The energy regulator said this was to make its indicators “more robust and suitable to analyse the evolving retail market structure”.
A spokesperson for Ofgem confirmed this has no implications for any existing or future suppliers’ reporting obligations, which are established in licence conditions.
Speaking to Utility Week in response to the announcement former Npower boss Paul Massara welcomed the new definitions.
“I think this is a useful reclassification, which reflects the changing reality in the market place as a result of both mergers and significant organic growth. It also reflects the degree to which previously new entrants have managed to scale and compete against the traditional players, which shows that competition has worked”, he said.
Ben Bugg, principal, strategy and transaction advisory, BFY Group, agreed and said: “I think in some ways they’ve tried to make it simple to understand and easier to categorise.
“Overall I’m quite positive about it, I think it’s a good thing that shows the market has moved on and we need to stop talking between ‘big six’ and challengers because the challenger market itself has evolved as well to the point where we have these large, medium and smaller challengers.”