Up to half of the country's electricity companies are expected to disappear in a wave of mergers and acquisitions once the market opens to full competition and businesses fight to win new customers, says accountancy firm Coopers & Lybrand.

Toby Lowe explains why things are set to change

A report by the firm concludes that about seven out of the 15 existing operators will vanish within the next six years.

Competition will intensify for new customers once the market becomes fully open and users can pick and choose their supplier.

A combination of pressure to cut prices and strong new market contenders such as British Gas will be the key factors, the report says.

The report, "Electric Transformation", was produced after extensive interviews with board level directors from 14 out of the 15 electricity supply companies.

Murray MacFarlane, a Coopers and Lybrand partner responsible for the survey, said: "In an open market, new entrants with strong brand names are predicted to be an attractive option for consumers, particularly in the longer term.

"In the short term, the industry predicts that prices will be driven down, but will level out to only marginal differences between suppliers.

Technology will also play a part in the companies' future, the report said, as it will be key to winning new customers.

Major players 'to survive'

Businesses such as Scottish Power, Eastern Electricity and Northern Ireland Electric are expected to emerge from the fight.

Scottish Power welcomed the finding that "only a handful" of companies would be around by 2005.

Finance director Ian Russell said the company had solid grounds for confidence about its future.

"The size of customer base is all-important and we already supply one in five UK households with one or more of our multi-utility services."

Pressure on margins

Analyst Nigel Hawkins expects widespread consolidation

Current margins on the supply side of electricity and gas provision are small compared to those on the distribution side of the business, according to utilities analyst Nigel Hawkins of Willams de Broe.

This will mean a major shake-up as the pressure of competition forces firms to reassess how they operate, he said.

Mr Hawkins told BBC's Business Breakfast that he expected to see consolidation across the utilities' sector.