Scots utility giants SSE and ScottishPower have lost hundreds of thousands of customer accounts as households continue to switch away from the “big six” players to smaller rivals.
Perth-based SSE blamed a “highly competitive” market after total customer accounts in the UK and Ireland dropped by 230,000 to 7.77 million in its first quarter to the end of June, from some eight million a year earlier.
Meanwhile, Glasgow-based rival ScottishPower said it expects “fierce” competition in the energy supply market to continue “for the foreseeable future” as it revealed a 100,000 fall in customer numbers and a 76 per cent slump in profits at its generation and supply arm.
ScottishPower, owned by Spain’s Iberdrola, said underlying profits at the division tumbled to £48.8 million for the first six months of 2017, down from £205.9m a year earlier, which it blamed on milder weather conditions.
Domestic power sales were down by about 7 per cent and domestic gas sales fell 8 per cent. ScottishPower’s thermal generation dropped by 40 per cent during the first half, due largely to the closure of Longannet power station in Fife.
ScottishPower ended the first half with about 5.3 million customer accounts, down from 5.4 million a year ago.
The firm’s renewables arm bolstered onshore wind production by 43.8 per cent to 1,701 gigawatt hours for the half year thanks to better wind conditions and increased capacity.
SSE, which raised dual fuel prices by 6.9 per cent on 28 April, said it also came under pressure in the first quarter as the warmer weather saw households use less gas and electricity.
The group said the average temperature in the UK over its first quarter was 0.9C warmer than a year earlier after Britons sweltered in the hottest June since 1976.
SSE chief executive Alistair Phillips-Davies said: “As expected, 2017/18 is presenting a number of complex challenges to manage.”
The UK government has watered down its election pledge to knock £100 off energy bills for households through a price cap, with regulator Ofgem instead consulting on a proposed “safeguard tariff” for vulnerable customers.
In its latest update, SSE said: “Competition should be at the heart of the retail energy market and in line with that promotes a range of tariffs, products and services.”
ScottishPower’s chief corporate officer, Keith Anderson, said: “We have seen fierce competition in the UK and we expect this to continue for the foreseeable future. Even with this backdrop, our customer numbers are stable and we have still retained more of our customers over the last five years than any other large supplier.
“We will continue to work hard to offer customers good-value products, and continue to lead the large suppliers in encouraging customers to move away from standard tariffs. Abolishing standard tariffs is more effective than any price cap in ensuring more customers are on the best value deals for them.”
Ofgem has told energy network companies to brace themselves for a more stringent regime from 2021 and said investors in these firms must prepare for lower returns as it pledged to deliver “even better value for customers”.
It came amid claims in a report from Citizens Advice that networks are exploiting consumers to enjoy £7.5 billion in “unjustified” profits, while accusing the watchdog of being too generous towards energy firms.
SSE also said it was continuing to target increases in the full-year dividend of at least RPI inflation. George Salmon, equity analyst at Hargreaves Lansdown, noted: “Having consistently raised its payout year on year for a quarter of a century, SSE has been a dividend machine for investors.
“However, recently the group’s cash flows have been consistently weak, and it looks like tougher regulation could well be on the way.
“SSE has several new wind farms coming online in the next year or so, but unless these can deliver a noticeable improvement in cash flows, its policy of raising the dividend by at least the rate of RPI inflation is going to look like an ever more weighty burden.”