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UTILITY Week 6th October 2017

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28 | 6TH - 12TH OCTOBER 2017 | UTILITY WEEK Customers Market view T he big six energy companies in Great Britain have been experiencing a dif- ficult time lately. Elexon data shows that from March 2016 to June 2017 they lost 1.22 million electricity customers – this rep- resents a drop of 4.6 per cent, or roughly 76,000 customers a month. For consumers, the choice of alternative supplier has never been greater. On aver- age, five new suppliers will actively enter the market every three months. With almost 100 suppliers, competition is really heating up. This exodus of customers from the big six is reflected in a recent financial result. Scot- tish Power announced a 76 per cent drop in its net operating profit for first half of 2017 across its generation and supply business compared to the same period last year: from £205.9 million to £48.8 million. Chart 1 shows the number of meters reg- istered to the big six suppliers compared to the total number of meters in GB. So how indicative is this decrease com- pared to the whole UK market? Well, during the same period (March 2016 to June 2017) we have seen the total number of electric- ity meters in GB grow by 300,000. That's approximately an extra 19,000 customers the big six are failing to capture each month in addition to the customers they are losing. Where have these extra 300,000 custom- ers come from? The answer can be found in single rate domestic metering figures, other- wise known in the industry as profile class 1 metering. As illustrated in the customer growth chart opposite, the number of domes- tic customers with single rate meters grew by a staggering 470,000 between March 2016 and June 2017. This can be partly attributed to the number of new homes built in the UK, but also an effort from suppliers to move cus- tomers on multi-rate domestic tariffs (profile class 2 metering) to single rate tariffs. The Goldilocks zone Back to the original conundrum; the pie chart shows where these lost big six custom- ers have fled to. The data is grouped based on the number of meters each supplier had in March 2016. Suppliers that had zero cus- tomers, or were non-existent at this time, are categorised as "new suppliers". It would seem the suppliers that took most advantage of the big six's losses were suppliers that were not too big (up to 250,000 meters), and not too small. So what is the driving factor? Analysing tariff prices over the past quarter (Q2 2017) reveals that new suppliers, and suppliers up to 50,000 meters, regularly offered the 15 cheapest tariffs to domestic customers. From the 15 cheapest domestic tariffs available, 43 per cent were regularly offered by new sup- pliers, and 40 per cent from suppliers up to 50,000 meters. Suppliers up to 250,000 meters accounted for 12 per cent, while only 5 per cent of the 15 cheapest domestic tariffs were regularly offered by the big six. In conclusion, it is clear that there is a strong appetite from consumers to shi away from the traditional big six suppliers, and based on current trends this is set to continue. For new and emerging suppliers, it would appear competitive pricing is the business model of choice. However, once a supplier becomes established, it can begin to grow the business through different means. Ban Mac, market analyst, Elexon Big six customer losses Not only is the total number of customers served by the big six shrinking, but it is doing so while the total number of customers is rising. Ban Mac crunches the numbers. Single rate domestic Multi-rate domestic Big six (LHS) GB (RHS) Suppliers up to 250k meters Suppliers up to 50k meters Suppliers up to 1m meters New suppliers WHERE CUSTOMER LOSSES WENT WHERE THE CUSTOMER GROWTH CAME FROM Source: Elexon 10% 13% 39% 38% 23.9 23.8 23.7 23.6 23.5 23.4 23.3 23.2 23.1 5.0 4..9 4.8 4.7 4.6 4.5 4.4 4.3 4.2 4.1 4.0 Meters (million) Meters (million) Mar 16 Apr 16 May 16 Jun 16 Jul 16 Aug 16 Sep 16 Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 Mar 16 Apr 16 May 16 Jun 16 Jul 16 Aug 16 Sep 16 Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 Source: Elexon NUMBER OF REGISTERED METERS Source: Elexon 26.4 26.2 26.0 25.8 25.6 25.4 25.2 25.0 24.8 24.6 24.4 31.0 30.9 30.8 30.7 30.6 30.5 30.4 30.3 30.2 30.1 30.0 Meters (million) Meters (million)

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