One of the advantages of getting in touch with a specialist energy consultant is that they can help audit and analyse your energy usage and navigate the complexities of the market to find the tariff that is perfect for you.
This is made possible in no small part thanks to the opening up of the energy market throughout the 1990s, which was itself made possible thanks to the privatisation of both sectors.
Very quickly, the market calcified around six major companies, which have been collectively known as the Big Six, and from the late 1990s until the late 2010s, they almost completely controlled the energy market in the UK.
How did this happen, where did they come from and what fundamentally changed to create the energy market as we know it today?
The End of The Central Boards
From the 1940s until the 1980s, many of Britain’s energy industries were nationalised, something that was in no small part the result of an extreme level of fragmentation caused by the piecemeal development of the UK energy sector.
Up until the Second World War, there were over 600 electric power companies in the UK, which were merged into just 12 area boards by the Electricity Act 1947.
A very similar approach was taken with the gas industry, with the Gas Act 1948 taking over a thousand private gas companies and merging them into 12 area boards.
This was the state of affairs until the 1980s, when many of the same industries that were nationalised in the 1940s, 1950s and 1960s were privatised in the 1980s, including the water, gas and electricity sectors, starting with the Oil and Gas Act 1982.
Following the Gas Act 1986 and the Electricity Act 1989, the Central Electricity Generating Board was broken up into PowerGen (later E.ON), National Power (later npower), Nuclear Electric (later EDF Energy) and the National Grid Company.
The Establishment Of The Big Six
The privatisation process started to take shape for business and domestic customers starting in 1996, as the UK government sold its remaining shares in what were previously nationally owned energy supply companies.
Originally consisting of 15 companies (12 regional electricity companies, the two Scottish power companies and British Gas), within just three years of the complete liberalisation of the market there were just six left:
- British Gas
- E.ON UK
- EDF Energy
- Npower
- Scottish Power
- SSE
These companies, known as the Big Six, had a dominant monopoly over the remainder of the energy market, and by 2008 supplied power to 99 per cent of domestic customers and small businesses.
What was worse was that 70 per cent of customers had stuck with the suppliers they used back when they did not have a choice; unlike in the water sector, customers were invited and often encouraged to switch providers to get the best tariff.
As well as this, just 0.3 per cent of the market was supplied by entrants post-2002, which would all lead to an investigation by Ofgem, the official regulator for the market and a referral to the Competition and Markets Authority.
The End Of the Big Six
Following a two-year investigation, Ofgem and the CMA made a number of recommendations to help support alternative suppliers to the big six, which included great support for price comparison websites, a price cap on standard variable tariffs and the establishment of a database to allow competitors to contact people on expensive tariffs.
This would start to create serious competition for the Big Six, led by a rise in alternative energy companies that relied on renewable suppliers. These included Ecotricity and Bulb Energy, although both would have very different fortunes in the 2020s.
Within five years, the combined market share of alternative energy suppliers would increase from less than one per cent to 13 per cent, and the absolute monopoly of the Big Six would begin to crack.
The Big Six would end and become the Big Five in 2019 when Innogy engaged in a deal with E.On to effectively merge the latter with Npower.
Amidst the chaos in the wholesale gas and electricity sector in 2021, SSE would similarly sell its retail energy business to OVO Energy, a process that would complete in 2023.
The final end to the Big Six (or Big Four as it had become) was the spate of acquisitions made by Octopus Energy, which made it the UK’s largest domestic and small business electricity supplier by number of customers, the first time that distinction had been held by any company not part of the Big Six.
With the continued rise in renewable energy shuffling the deck, there are greater opportunities than ever to save money on energy prices.
Author Profile
