Energy giants shed customers amid fierce competition

● Despite fall in account numbers, SSE targets dividend hike of at least inflation

Scots utility giants SSE and Scottishpower have lost hundreds of thousands of customer accounts as households continue to switch away from the “big six” players to smaller rivals.

Perth-based SSE blamed a “highly competitive” market after total customer accounts in the UK and Ireland dropped by 230,000 to 7.77 million in its first quarter to the end of June, from some eight million a year earlier.

Meanwhile, Glasgow-based rival Scottishpower said it expects “fierce” competition in the energy supply market to continue “for the foreseeable future” as it revealed a 76 per cent slump in profits at its generation and supply arm and lower customer numbers.

Scottishpower, owned by Spain’s Iberdrola, said underlying profits at the division tumbled to £48.8 million for the first six months of 2017, down from £205.9m a year earlier, which it blamed on milder weather conditions.

Domestic power sales were down by about 7 per cent and domestic gas sales fell 8 per cent. Scottishpower’s thermal generation dropped by 40 per cent during the first half, due largely to the closure of Longannet power station in Fife.

Scottishpower ended the first half with about 5.3 million customer accounts, down from 5.4 million a year ago.

The firm’s renewables arm bolstered onshore wind production by 43.8 per cent to 1,701 gigawatt hours for the half year thanks to better wind conditions and increased capacity.

SSE, which raised dual fuel prices by 6.9 per cent on 28 April, said it also came under pressure in the first quarter as the warmer weather saw households use less gas and electricity. Chief executive Alistair Phillips-davies said: “As expected, 2017-18 is presenting a number of complex challenges to manage.”

The group said it was continuing to target increases in the full-year dividend of at least RPI inflation. George Salmon, equity analyst at Hargreaves Lansdown, noted: “Having consistently raised its payout year on year for a quarter of a century, SSE has been a dividend machine for investors.

“However, recently the group’s cash flows have been consistently weak, and it looks like tougher regulation could well be on the way.

“SSE has several new wind farms coming online in the next year or so, but unless these can deliver a noticeable improvement in cash flows, its policy of raising the dividend by at least the rate of RPI inflation is going to look like an ever more weighty burden.”

Scottishpower’s chief corporate officer, Keith Anderson, said: “We have seen fierce competition in the UK and we expect this to continue for the foreseeable future. Even with this backdrop, our customer numbers are stable and we have still retained more of our customers over the last five years than any other large supplier.”

Ofgem has told energy network companies to brace themselves for a more stringent regime from 2021.