UK Energy Industry

The UK Energy Industry is split into three distinct parts:

Suppliers - the companies who supply and sell electricity and gas. From a customer perspective the suppliers are the most important group as these are the real contacts the customer will have with the energy industry.

Distributors - the distribution companies are responsible for getting the energy to you. This means that they are responsible for the pipes or cables in the road and the meters within your property. The suppliers effectively have contracts with the distributors to provide these services and all of these costs are already included in whatever price the supplier asks you to pay.

Generators - just as the name suggests the generators are responsible for generating the energy we use in our homes and businesses. At one time in the UK the major generators were all burning massive amounts of coal to generate electricity. Over the years the predominance of coal has declined in favour of more environmentally methods of generating energy.

All customers, regardless whether they are domestic, commercial, or industrial have been able to change their gas or electricity supplier since May 1999. Since then, over 19 million customers have changed supplier, with many domestic consumers seeing savings of up to £150 on their energy bills. As a result of competition average UK energy prices have fallen by 13 per cent in real terms since 1999.

Despite the fact that competition was introduced into the electricity market later than the gas, currently some 160,000 domestic consumers change electricity or gas supplier every week and with the current rate of switching, at 38% for electricity and 37% for gas it is higher than any other comparable industry.

There is almost no difference in the degree of changing supplier by method of payment, social class or income level. Switching rates among prepayment meter customers have now caught up in the last year with those paying by cash or cheque.

A MORI survey commissioned by Ofgem and conducted in September 2001 shows that around 44% of direct debit customers have switched supplier, 32% of quarterly credit customers and 31% of prepayment meter customers.

Competition in the electricity and gas markets was phased in over an eight year period, due to the sheer size of the task in terms of the number of customers and the technical complexities involved. In April 1990 the first tranche of the electricity market, covering about 5,000 large customers with a maximum demand of 1 MW and above, was opened to competition. Ten years later 81% of customers in this market were supplied by a non-local supplier. In 1991 British Gas also opened their market to competition with the first tranche affecting customers with a consumption in excess of 25,000 therms per annum. The second tranche of the gas market was opened between 1992 and 1995, dependent on location and affected customers with a consumption of between 2,500 therms and 25,000 thems per annum. In April 1994 the second tranche of the electricity market, covering about 50,000 medium size customers with a maximum demand of 100 kW-1MW, was opened to competition. This market competition has also developed well and now more than 50% of customers are supplied by a non-local supplier.

The last and the largest tranche of the electricity market covering about 26 million customers with an annual consumption of up to 12,000 kWh, so called 'designated customers', including domestic and small business customers, was progressively opened up for competition between September 1998 and May 1999. Slightly earlier, in May 1998 the domestic gas market, some 18 million customers, was fully opened to competition. By the start of 2001 around 11 million (38%) of domestic customers had switched supplier at least once. About 100,000 electricity customers are switching supplier each week, of these 56,000 in net terms are choosing to leave their former regional supplier, according to the latest Ofgem figures.

Whilst the principal reason for not changing supplier is simply inertia, as a result of consumers being satisfied with their current supplier, these non-switchers are not taking full advantage of the competitive market that now exists. Consumers who do change supplier are able to make substantial savings of up £150 simply by changing supplier using Energylinx services.

Both the gas and electricity markets have unfortunately been recognised as a easy targets for unscrupulous selling techniques and a number of well known supply companies have been fined by the industry regulator, Ofgem, as a result of the activities of some of the direct selling companies that they employed to sell contracts. This is where Energylinx comes into the fore as being able to provide an independent, entirely free searching service where consumers are able to search, without commitment, for details of the lowest cost electricity and gas suppliers for their home. Consumers are able to switch free of charge online and take advantage to the competitive terms now on offer throughout the UK .

Please feel free to try out our energy price comparison calculators, where not only can you switch supplier but you also have the opportunity to save your search results for future reference. You will also see under News Section the opportunity to register for future industry and supplier news - please feel free to do so.

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UK Energy Industry