Utility Week

14 | 8TH - 14TH MARCH 2019 | UTILITY WEEK Policy & Regulation Analysis T he energy retail market is in a state of flux as pressure on suppliers increases. The big six have long dominated the market but are now rapidly losing market share as more and more smaller, more agile new entrants flood into the sector. In its lat- est State of the Energy Market report, Ofgem revealed that these six suppliers, which together held 99 per cent of the gas and electricity markets until around 2012, now hold just 75 per cent – their lowest ever. The report also said there are 73 suppliers in the market (as at June 2018). A webinar held by Utility Week for BT sought to establish just how bad things in the market are for the big guys (and smaller suppliers), and how much of an impact political pressures such as the price cap and Brexit are having. Hardman and Co utilities analyst Nigel Hawkins said he expects to see "major change" in the energy supply market over the next five to six years, as the big six begin to reposition themselves. For some time now, these companies have been reporting large customer losses. For example, SSE recently announced it had lost 160,000 customers in the three months to December 2018. It finished 2018 with 5.88 million customer accounts in Great Britain compared with 6.45 million a year previously. Npower reported in November 2018 that it had lost half a million customer accounts since the beginning of 2018. Even the largest supplier in the market, British Gas, has suf- fered the effects of tough market conditions, reporting a loss of 372,000 domestic energy supply accounts in the four months to the end of October 2018. The state of the UK energy retail market There is a host of issues keeping energy retail chief executives up at night, and things are unlikely to get easier any time soon. But the future looks bright for the market, a Utility Week webinar finds. Hawkins suggests most of the big six have become less interested in pursuing the retail side of their businesses. "Currently, of the big six, four are overseas-owned and, frankly, the two German ones – RWE and Eon – are far more interested in their generation assets in mainland Europe rather than the UK," he says . "Iberdrola's interests are in its superb investments in renewable energy, which aŸer 10-15 years are really bearing fruit. With regard to EDF, it's effectively privatised but run by the French government, which owns well over 80 per cent of the shares, and EDF's agenda really is nuclear in France." Increased competition and tough mar- ket conditions have prompted some larger retailers – such as SSE and Npower – to look again at the retail side of their businesses. In November 2017, these two companies announced plans to merge their retail arms to form a new "independent" retail energy company. The proposal prompted concern from some in the market, who thought it would mean the big six becoming the "big five" – and a further stifling of competition. However, despite being approved by the Competition and Markets Authority in Octo- ber 2018, the merger plans fell through just two months later. The two companies blamed "adverse developments" in the retail market and "regulatory interventions". Hawkins says: "SSE has been pretty hon- est and said it makes far more money out of networks and regulation on distribution and transmission in Scotland. That's its priority, as it indicated when it tried to deal with its retail business via the failed Innogy deal rel- atively recently." Peter Siggins – energy and utilities expert at PA Consulting – also foresees big changes ahead, but he remains "relatively positive" about the market. "There's certainly a lot happening in terms of the competitive land- scape, but in general I would see that as healthy rather than unhealthy competition. Albeit with the spate of recent failures there are things to be improved." Brexit uncertainty At the forefront of every business's mind at the moment is Brexit, which is making everything uncertain. At a recent Utility Week roundtable held in association with Oracle, attendees expressed concern that the Brexit conundrum was having a bigger effect on their businesses than was originally anticipated. Siggins suggests Brexit per se will ulti- mately herald an increase in retail prices. "I'm not familiar enough with interconnec- tor agreements or the detail of it to know MARKET EXITS Source: Cornwall Supplier Date of exit Supplier of last resort Domestic customers GB Energy Supply Nov 2016 Co-op Energy 160,000m Brighter World Energy Dec 2017 Robin Hood Energy (transfer) n/a Future Energy Jan 2018 Green Star Energy 10,000 Flow Energy May 2018 Co-op Energy (acquired) 130,000 Gen4U Jul 2018 Octopus Energy 500 Iresa Jul 2018 Octopus Energy 95,000 Affect Energy Aug 2018 Octopus Energy (acquired) 20,000 Electraphase Aug 2018 All customers switched away c100 Usio Energy Oct 2018 First Utility 7,000 Snowdrop Energy Oct 2018 Nabuh Energy (transfer) 6,000 Extra Energy Nov 2018 Scottish Power 108 ,000 Spark Energy Nov 2018 Ovo Energy 290,000 One Select Dec 2018 Together Energy 33,000 Economy Energy Jam 2019 Ovo Energy 235,000 Our Power Jan 2019 Utilita 31,000

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