Big six become big three: E.ON takeover of Ovo leaves three firms supplying most homes

Almost three-quarters of households in Great Britain are now supplied by just three energy companies, after E.ON Next completed its takeover of Ovo Energy despite concerns about competition.

The deal concluded on Thursday after the Competition and Markets Authority (CMA) cleared it, despite warnings that fewer suppliers could mean less choice for bill payers and less incentive to cut prices.

There will be no immediate change for Ovo's 4 million customers.

A new pecking order

E.ON Next already supplied 5.6 million households. The takeover gives it 25% of the household market — 13.45 million gas and electricity accounts — making it Britain's second-largest supplier.

It sits narrowly behind Octopus Energy, which holds 26% of the market with 14.3 million accounts, and ahead of British Gas, once the dominant supplier, which now serves about 23%, or 12.5 million accounts.

Including EDF and the next-largest firms, about 90% of the household market will now be held by just five suppliers.

A decade of reform undone?

The deal marks a striking reversal of a decade-long effort to break the dominance of the old "big six" — British Gas, EDF Energy, E.ON UK, SSE, Scottish Power and npower.

Those firms controlled about 85% of the market in 2016, when a landmark CMA investigation concluded that customers were overpaying by roughly £1.4bn to £1.7bn a year because of weak competition.

In the years that followed, dozens of challenger suppliers entered the market, many promising cheaper tariffs and better service. But the energy price crisis of 2021 and 2022 wiped out around 30 of them as wholesale costs soared beyond what they could pass on to customers.

Since then, the market has consolidated rapidly as stronger firms absorbed weaker ones.

"The big six have become the big three, and there have been questions raised over how this will impact household choice and the health of the market," said Tom Goswell, energy supply lead at the consultancy Cornwall Insight.

'Fiercely competitive'

E.ON rejected the concerns. Chris Norbury, chief executive of E.ON UK, described the market as "fiercely competitive" and said the company's "flexibility and scale" would allow it to "deliver for customers now and to transform for the energy system to come".

Supporters of consolidation argue that larger suppliers are financially sturdier and better able to invest in smart meters, heat pumps and new tariffs that reward households for using power when it is cheap.

Critics fear that with fewer rivals, there will be less pressure on companies to offer good deals or improve service, and that households who never switch will lose out.

What it means for bills

Most households in Great Britain pay prices linked to the energy price cap set by the regulator Ofgem, which limits the rate suppliers can charge for standard tariffs. That cap is unaffected by the deal.

But competition matters for fixed tariffs, customer service and the speed at which suppliers pass on falling wholesale costs.

Ovo itself grew from a Bristol start-up founded in 2009 into one of the largest challengers in the market, and in 2020 bought the retail business of SSE, one of the old big six. Its sale to E.ON underlines how few of the independent challengers have survived as stand-alone businesses.

Ofgem, the energy regulator, has tightened financial rules for suppliers since the crisis, requiring them to hold more capital so that customers and taxpayers are not left picking up the bill if a company fails.

Supporters of the deal point out that the bigger firms have been among the most active in rolling out smart meters and time-of-use tariffs, which could help households cut costs as more electric cars and heat pumps arrive.

For Ovo customers, the practical changes will come later, when accounts are migrated to E.ON systems. Consumer groups will be watching closely to see whether that process runs smoothly — and whether the new big three keep competing hard for customers.