SSE chief praises consumer benefits of competition in the energy supply market – then justifies mega-merger with N-Power which will REDUCE competition

A senior manager at SSE has lauded the benefits of increased competition in helping to keep down the prices paid by consumers in their household gas and electricity supply bills.

But at the same time, Richard Westoby Director of Retail Economics at SSE – which wants to merge its retail division with another Big Six British energy supplier – has defended the proposed mega-merger with N-Power.

SSE – the Perth-based  utility – launched its controversial merger plan last year. It would consolidate and increase its market share and a move which would eliminate competition and is consequently opposed by the GMB trade union and MPs on the Westminster parliament’s energy select committee.

Big Six firm Npower has an appalling customer-service and customer-dis-satisfaction rating and  finished in last place again in last week’s annual survey of the electricity supply sector by Which? – the consumers’ association.

Westoby said yesterday: “Three trends best characterise the high levels of competition now seen in the British energy supply retail market.

* “Firstly, low barriers to entry and expansion for new-entrants mean there are now more than 60 suppliers actively competing for customers. This rapid growth has been enabled through a number of regulatory measures such as the Warm Home Discount (WHD) and Energy Company Obligation (ECO) exemption, which have allowed small and medium-sized suppliers to widen their discounts and compete fiercely on price, as well as other factors such as customer service.

“All the evidence suggests smaller suppliers will continue to grow their market share – in October 2017, 32% of all those who switched supplier moved to a small or medium sized supplier.

* “Secondly, in recent months a number of experienced new-entrants from overseas markets have moved into the GB energy supply market, including the French supplier ENGIE and the Swedish supplier, Vattenfall.

Separately, Shell has signed an agreement to acquire the largest mid-tier supplier, First Utility. These additions to the market are likely to strengthen and diversify the tariffs and products available for customers.

* “And thirdly, consumer engagement in the market continues to increase as demonstrated through ongoing increases in switching rates.

“Last year a record 4.5 million customers took steps to save on their energy by switching electricity provider. Price comparison websites have helped make it even easier for customers to compare the price of energy and related services from a range of providers, enabling them to make informed decisions about which provider to choose in order to save money.

“Taken together, these trends are characteristic of a market that has become increasingly competitive and which is delivering benefits to customers. Of those customers who switched in 2017, 91% said they were motivated to do so because better value tariffs were on offer.

“As competitive pressures in the market continue to intensify, one of the biggest longer-term challenges will be how market participants remain sufficiently agile and flexible to ensure they are focused and capable of delivering competitive and innovative offerings for customers.”

He said the future British energy supply market will be subject to significant technological change. Consumers will be empowered through the roll out of smart meters, which will end the need for estimated billing by providing real-time information on consumers’ energy usage. 

Alongside this, connected homes, domestic household batteries and blockchain all have the potential to disrupt traditional business models in the UK energy supply market. However, this shift to a smarter energy system will require suppliers to be focused on the future, with the capital to invest in innovation to ensure they are able to respond to changing consumer demands.

Westoby claimed: “It is against this backdrop that the proposed merger between SSE Retail and N-power has strong strategic logic.

“By creating an efficient new independent retail energy supplier, the new business will be better able to respond to customer expectations on tariff innovation and technological development.”

He added that a standalone retail business (ie the SSE-N-Power merger) benefiting from its ‘own dedicated board’ of directors and ‘specialist management’ team, the proposed new supplier will be better positioned to compete against the 58 other suppliers in the market.

He stated: “By adapting and responding to the changing dynamics of an increasingly competitive market, the proposed new supplier will drive significant benefits for customer.”


See also:

Energy MPs call for Competition Authority to probe SSE and N-Power merger


GMB energy chief calls on Labour to voice opposition to SSE & N-Power merger plan


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