Are the Big Six suppliers losing their grip on the UK energy market?

12th March 2018 | Residential Energy

There are multiple cogs operating together to keep the gas and electricity networks going. The UK gas network was privatised in 1986 and the electricity network followed suit soon after in 1990, allowing households to choose suppliers.

Major power plants are connected to a central transmission system that transports high-voltage electricity to smaller distribution networks, which lower the voltage and deliver the power to homes and businesses.

National Grid plays a unique role by operating this central transmission system in England and Wales, and is responsible for balancing supply and demand of electricity in the market. The transmission network over central and southern Scotland is operated by Iberdrobla, with the rest of Scotland being served by SSE.

Big Six

There are eight distribution networks delivering electricity to the end user, which are ultimately owned by companies including (but not limited to) SSE, Iberdrola, PPL Corp, and Berkshire Hathaway Energy.

National Grid is also the operator of the gas transmission system that transports gas to eight regional distribution networks, one of which it also partly operates. The other distribution networks are backed by the likes of sovereign wealth funds and investment trusts.

In response to the changing environment, SSE and Npower are currently merging their retail energy supply arms to create a new listed company, two-thirds of which will be owned by SSE. A name is yet to be decided.

The rate of change in the UK energy market has accelerated over the last couple of year and the sector has drawn criticism from both the Conservative government and the opposition Labour party, the latter of which has threatened to renationalise the industry along with other industries like water and rail.

The most significant change has been the government’s draft bill to introduce a temporary price cap on standard variable tariffs, the most popular option in the market and the option which around 60% of households find themselves on. The tariffs have been criticised, as they often have no end date and, on average, are more expensive than shorter fixed-term tariffs.

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