Should you switch to a small energy company?

As yet more go bust, do cheaper energy prices outweigh the risk of a smaller energy company going under?

I’m always encouraging you to compare energy prices and switch if you can find a better deal. You can potentially save hundreds of pounds every year doing this. It will take you just 10 minutes when using a comparison site. Easy money.

And a huge number of people are doing it, with one in five homes moving electricity supplier for cheaper bills last year, and around two-thirds of switches were to small or medium suppliers, away from larger provides (classified as Bulb, British Gas, EDF, E.On/NPower, Octopus, Ovo/SSE and Scottish Power).

So if not one of these well-known energy companies, who? When you go through a comparison site you’ll probably spot that the lowest prices are usually with a company you’ve never heard of. There are now dozens and dozens of new companies to pick from.

So should you pick one? Understandably there’s concern about moving to a provider you know nothing about. But that doesn’t mean you should just stick with the devil you know.

Here are a few things you need to know:

There’s no difference to your power supply or use

A lot of the reluctance is around worry about the quality of the gas and electricity you’ll get. Well, you can relax, as there’s no difference to what comes through the pipes and wires.

Even if you sign up for green energy, it doesn’t suddenly mean you are using renewable energy. It’s exactly the same whoever you pay.  Which means you won’t suddenly experience power blackouts, or find the fuel less efficient.

But customer service does change

All that actually changes when you switch supplier is who bills you and the customer service you receive. So for most it just means your direct debit goes to a different company. So you won’t really notice anything.

Of course, when something does go wrong it does help to know you can get through on the phone, or that complaints are dealt with quickly and efficiently. And bad service isn’t exclusive to new providers. It would be hard to find worse than my nightmare experiences with NPower’s customer service.

So, even though the price is likely the leading factor when choosing to switch, you might decide to pay a little bit more for a provider with good feedback.

You can check out customer reviews on Money Saving Expert’s switching service (which is my pick of the comparison sites), while Which? magazine has ranked the best providers against the worst.

What happens if your energy supplier goes bust?

Sadly, it seems every month or so one of the smaller energy companies goes bust. We’ve seen two close in the first month of 2021, while in the previous two years 13 have gone under.

This is where the second major worry comes in. What happens if your energy supplier shuts down?

First, you won’t be cut off. You’ll still get the same power supply. The energy regulator Ofgem will switch all the customers to another provider who’ll then start billing you. Since your bills could well rise as a result you are free to then choose to switch to another company.

If you do have any credit built up then you won’t lose this, though it might take a while for you to get that money back. More likely it’ll be deducted from your future bills.

So yes, it would be annoying if this happened to you, but it’s not a reason to avoid a smaller company. 

Are smaller energy companies always cheaper than the big providers

There’s a huge amount of competition, and the larger companies can still offer decent rates. I’m actually with British Gas thanks to a decent switching rate and cashback offer. It worked out as just a few quid more over a year than the next cheapest fixed-rate, and I decided to give it a go.

The only way to know what’s best for you is to head to a comparison website and search. It’s well worth doing.

Doesn’t the energy cap mean you don’t need to switch?

No, you can still save on your bills by doing a full comparison and finding the lowest rate. Though the amount you can save each year is likely lower since the cap was introduced, Citizens Advice has found you should be able to cut your bills by around £150 each year, if not more.

What’s more the energy price cap changes every six months, and it’s set to jump up by £96 in April 2021. So it’s likely everyone on variable tariffs will see their prices jump up when that comes into force.

> You can read more about the energy cap and whether it’ll save you money in my article from last year

How to switch your energy

I’ve written extensively about the ways you can switch energy. It’s really easy and should take you less than 20 minutes (I can do it un under 10 minutes!).

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