E.ON Next Acquisition of Ovo Energy Leaves UK With Three Major Energy Suppliers

Almost three-quarters of households in Great Britain are now served by just three energy suppliers following the completion of a deal by E.ON Next to buy Ovo Energy. The takeover was concluded on Thursday after being cleared by Britain’s competition watchdog, despite fresh concerns that a shrinking number of household energy suppliers could reduce customer choice and weaken incentives for companies to lower bills. While there will be no immediate changes for the four million customers belonging to Ovo, the transaction means that E.ON Next, which already supplied 5.6 million households, now holds 25% of the household energy market. This positions the company as Great Britain’s second-largest energy supplier, placing its market hold narrowly behind Octopus Energy at 26% and ahead of legacy incumbent British Gas, which serves about 23% of households. The development deals a blow to decade-long efforts intended to dismantle the dominance of the former 'Big Six' energy suppliers and increase market competition to lower energy prices. Cornwall Insight energy supply lead Tom Goswell stated that the big six have become the big three, raising questions over the impact on household choice and market health. These concerns were rejected by Chris Norbury, chief executive of E.ON UK, who described the market as fiercely competitive and asserted that the firm's flexibility and scale would enable it to deliver for customers and transform for the future energy system. The legacy big six suppliers, which included British Gas, EDF Energy, E.ON UK, SSE, Scottish Power, and npower, dominated roughly 85% of the energy market in 2016. At that time, a landmark investigation by the Competition and Markets Authority warned that customers were overpaying by approximately £1.4 billion to £1.7 billion annually due to weak market competition. Following the E.ON transaction, about 90% of Great Britain's household energy supply market is now held by only five suppliers when including EDF Energy and Scottish Power alongside the new big three. Although a surge in new energy start-ups followed 2016, led by Octopus, Ovo, and Bulb Energy, the market began to contract after SSE sold its household supply business to Ovo in 2019. Dozens of suppliers subsequently went bust during the 2021 and 2022 energy crisis. Octopus became the largest supplier after taking on 1.5 million customers from Bulb, which entered administration in 2022. Goswell noted that larger suppliers bring a degree of stability, which is significant after approximately 30 firms dropped out of the market and left customers uncertain about their billing. However, he cautioned that fewer suppliers could reduce competitive pressure, diminishing the incentive to keep prices low and offer differentiation. Goswell added that while major suppliers possess resources to provide real choice, the test over the coming years will be whether households shopping around encounter a genuine range of deals rather than three versions of the same offering.