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Can small energy firms offer a better deal than the Big Six?

Close up of a gas hobFour of the UK’s Big Six energy firms have hiked prices in the past two months, but there are a number of smaller firms offering gas and electricity. Are they cheaper?

Scottish Power, British Gas, Scottish and Southern Energy, and now E.ON have all announced increases in the cost of gas and electricity in recent weeks.

Around 20 million households have now been affected by these price hikes, adding an average of £176 to annual bills* and leaving many customers wondering how they’ll afford to heat their homes this winter.

The energy firms blame an increase in the cost of wholesale gas – the amount they pay for energy – for customer price hikes.

But watchdog Consumer Focus says that despite recent rises, wholesale prices remain around a third lower than at their 2008 peak.

Industry experts say price rises from the remaining two Big Six firms who have yet to increase bills - EDF Energy and nPower - are likely. But what about the UK’s smaller energy firms?

Not just the Big Six

There are around 13 smaller energy firms in the UK, supplying gas and electricity.

Usually, they tend to go for a niche market: Ecotricity, Good Energy, Green Energy and LoC02 are green; First Utility were the first energy firm to offer customers smart meters, ahead of government plans for a roll out to all UK homes from 2014; retailers’ brands such as Sainsburys Energy and Co-operative Energy offer store-related incentives; Utility Warehouse engages customers who want all their utilities covered in one bill.

Small firms winning price war

And it seems when it comes to price, these smaller suppliers are competing with their bigger rivals.

Here at Confused.com we put together a best buy table across all suppliers offering dual fuel tariffs – where a single firm supplies you with both gas and electricity.

The small energy suppliers came out on top, making up four of the top six firms offering the cheapest prices.

The only two of the Big Six to grace the top half of the table are those yet to announce price rises – EDF Energy and nPower.

Average UK bill for standard dual fuel tariff for a medium user paying by direct debit as at 12 August

SupplierAverage UK dual fuel bill
Co-operative £1,023
OVO Energy £1,050
EDF Energy £1,051
nPower £1,054
Spark £1,061
Utility Warehouse (Telecom Plus) £1,068
EBICo £1,100
E.ON £1,190
Scottish Power £1,190
M&S Energy £1,200
Scottish and Southern £1,200
British Gas £1,286
Utilita £1,328
Good Energy £1,350

Best buys

Lisa Greenfield, energy analyst at Confused.com, says: “Usually, the smaller suppliers aren’t the cheapest on the market.

“However, there have been some notable exceptions in the past, like when First Utility took on the Big Six back in 2009, and OVO Energy entering the market by undercutting the best available tariffs from anyone else on the market.

“Of course, it’s important to remember that best buy tables are based on the average UK bill. Because of this they’re useful but don’t give us the full story, only an indication, as there’s no one size fits all as to who’s the cheapest. The only way to know is to do a quote and enter your usage details.” 

Many smaller suppliers are also are bucking the Big Six trend of raising prices. Green energy supplier Good Energy froze its prices recently. It was able to do this due to having less reliance on imported energy than its Big Six counterparts, says Greenfield.

“Opting for a green energy supplier could be one way that consumers can protect themselves against double digit hikes for both gas and electricity.

“While these providers may be viewed as niche suppliers, the Big Six should take note because the savings are going to become increasingly attractive to customers.

“Renewable energy suppliers often don't come top in the best buys but as global wholesale prices continue to be blamed for increasing costs, the future is bright for innovative utility companies and their customers."

If money’s the bottom line

Of course, if money is the bottom line for you, then the advice remains to opt for a fixed or capped tariff.

These tariffs set the unit price (also known as the kilowatt hour or kWh price) of your gas and electricity for a certain period of time, although with capped tariffs, if prices fall, you’ll pay less.

Greenfield says: “We’ve been saying this for some time now - since Scottish Power were the first of the Big Six to raise prices in June - that if you’re worried about the price rises, opt for a fixed or capped energy tariff.”

Energy firms also offer further discounts to customers who pay by direct debit and manage their accounts online.

*£176 is the average gas and electricity price increase across 9m British Gas, 2.5m Scottish Power, 5.3m SSE and 4.4m EON customers. **Energy regulator Ofgem defines a medium user as using 16,500 units of gas and 3,300 units of electricity a year.




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Naphtalia Loderick

Naphtalia Loderick

Naphtalia Loderick covers all things consumer for Confused.com. She started out on a weekly newspaper, via a national news agency and a stint in the fun but ‘not as glamorous as it appears on screen’ world of TV at the BBC researching consumer films for The One Show.

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