Perth-based SSE plc – one of Britain’s Big Six integrated energy generators and retailers – yesterday reported a 40% rise in profits from its retail arm, despite losing more than 500,000 customers over a year.
The near-Biblical scale of the exodus of retail customers from SSE confirms that Britain’s ‘Big Six’ household energy suppliers are haemorrhaging business to smaller, ‘independent’ providers and reflect recent figures issued by Energy UK, the trade association for the Big Six and other providers.
The Big Six have been stricken by a chronic lack of consumer trust over ‘prices that rise like rockets, but fall like leaves’ and frequently-chronicled suspicions that retail and business consumers alike are not offered the best value for money deals via impersonal and customer-unfriendly websites and call-centres. See also;
Scottish Energy News 14 May 2015: http://goo.gl/sk2sVg
Fear and confusion continue to drive customers away from Big Six energy suppliers
Scottish Energy News: 12 March 2015: http://goo.gl/MejDkZ
SSE’s retail arm saw a rise in operating profit to £456.8m in the 12 months to the end of March. This included a 50% rise in profits from retail energy supply. It made an average profit of £69 from each dual fuel customer, it said. This, it said, returned profit to a similar level seen in 2012-13.
However, its profit margin in energy supply was 4.6% in 2014-15, compared with 2.9% in 2013-14 and 4.2% in 2012-13. The energy supply profit margin had averaged 3.9% over both the past five and three years, it said.
However, across its whole business, SSE reported an adjusted pre-tax profit for the 12 months to the end of March of £1.56 billion, compared with £1.55 billion in the previous year – a rise of less than 1%
Meanwhile, in a ‘difficult’ decision, SSE confirmed it would shut its Ferrybridge power station in Yorkshire by March 2016. The company said the plant’s 172 employees would be redeployed “where possible”.
The broadly flat profits reflected a ‘challenging year’ for SSE with tough market conditions and lower output in its wholesale division.
An SSE spokesman said: “Costs at the 48-year-old Ferrybridge-C power station have been rising due to its age and it is forecast to lose £100 million over the next five years.
“This – combined with the impact of environmental legislation and tough market conditions – make it unsustainable.
“As the UK moves towards a cleaner and more sustainable energy mix, coal is gradually being phased out and the Government and other parties have made it clear that unabated coal doesn’t have a role in the future.”
However, due to more favourable forecasts for gas fired plant, SSE intends to re-open its Keadby gas fired power Station in Lincolnshire by October 2015 – to where it hopes to deploy some Ferrybridge staff.
The same market pressures which have forced the closure of the Ferrybridge power station closure are also the same market – and regulatory – pressures which have sounded the death knell for Scottish Power’s coal-fired power station at Longannet on the Forth estuary.
Following SSE’s statement that Ferrybridge power station is to close, one of the UK’s leading energy experts has called for a new national energy strategy to be put in place as a matter of urgency.
Phil Taylor, Professor of Electrical Power Systems and Director of the Institute for Sustainability at Newcastle University, said that the UK ‘ can’t continue to rely on fossil fuels’ and that change needs to be driven by carefully considered strategy, not just market forces. He added:
“We simply can’t continue to burn coal – it’s one of the most environmentally damaging fossil fuels and is an inefficient and expensive way to meet our energy needs.
“It’s inevitable that coal-fired plants like Ferrybridge will close, with severe consequences for local jobs. The fact that this happens – driven by market forces rather than as part of a well-considered energy strategy – threatens the country’s energy security. This is why we need a long-term, progressive energy strategy in place urgently.
“Carbon capture and storage is still far behind where we need it to be, and we need to make sure workers affected by these shutdowns can get the transferrable skills and jobs they deserve. The solution to this is a long-term, well-considered national energy strategy and a system architect, maintaining security of supply.”
SSE chairman Lord Smith of Kelvin, explained: “The 2014/15 financial presented a number of major challenges.
“Politics and regulation loomed large with the first-ever auction for electricity generation capacity, the CMA investigation into the energy market, final proposals from Ofgem on the eight-year price control in electricity distribution and the extended build-up to the recent UK general election.
“Market conditions for thermal power stations have been persistently difficult, requiring us to take the difficult decision to end coal-fired generation at Ferrybridge power station by March 2016.”