SSE squeezes higher profits from household energy customers

Xavier Trudeau
Mai 19, 2017

SSE revealed that 70% of its customers are on the SVT, making the energy company even more vulnerable to a price cap imposition than British Gas.

The Big Six provider said 4.76 million of its 6.76 million United Kingdom domestic customer accounts could be affected by a cap on standard variable tariffs (SVTs). Standard prices tend to be higher than fixed-rate deals, so companies with a greater proportion of customers on SVTs are able to make bigger profits through the energy cycle. "It supports a stable United Kingdom carbon price, a continued commitment to cost-effective renewable energy, an evolving role for electricity distribution networks and the retention of competition at the heart of retail energy supply", said SSE.

The company announced a 2.1% rise in adjusted pre-tax profits.

The company added that it backed changes to policies such as the capacity market that made the market more "level", but warned of unintended consequences of other interventions, such as capping prices.

Preliminary results show the Big Six power provider generated revenues of £29 billion in the year to March 31, a marginal improvement on the £28.78bn of a year earlier.

SSE said it still expects to be at the lower end of its dividend cover range in the new financial year, despite securing a lower-than-anticipated clearing price in the 2017 year-ahead capacity market auction and the anticipation of lower profits from its Networks division spurred by the SGN sale. The hike added £73 on average to those with a dual fuel bill pushing it to £1,142 a year.

SSE said it saw a "small overall" rise in annual underlying earnings at its household supply arm, although it said adjusted operating profits fell 2 per cent overall in the energy supply division, to £389.5 million.

SSE's annual results come as the energy sector comes under pressure in the run-up to the election with the Tories promising a price cap and Labour planning to nationalise part of the industry.

But Prime Minister Theresa May has said 17 million households will benefit by up to £100 from the cap on poor value SVTs. The margin is more than five times the 1.25 per cent that the Competition and Markets Authority a year ago concluded would be fair. It found that customers with a standard variable tariff were overpaying by a collective £1.4 billion every year, compared to those energy customers with one of the cheapest tariffs on the market. Adjusted profits from business customers fell year-on-year because of higher non-commodity costs and lower volumes.

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