UK Big Six Retail Profits Fell in 2017: Ofgem

British energy regulator Ofgem said the market share of Britain’s six largest gas and power suppliers fell to a new low in 2017 and that their annual profits from retail fell for the first time that year since 2014.

In its latest annual State of the Energy Market report published October 11, Ofgem said that domestic supply profits aggregated across the Big Six suppliers, measured as earnings before interest and tax (Ebit), fell for the first time since 2014, from £1bn in 2016 to £0.9bn in 2017. The Big Six continued to make most of their profit on gas sales in 2017, but to a lesser extent than in previous years.

Retail profit margins fell significantly for both E.ON and Iberdrola-owned ScottishPower, down to 5% and 0.5% respectively. EDF recorded a positive margin of 0.9% for the first time since 2009 and Innogy-npower reduced its retail loss to -5%. Centrica (British Gas) and SSE made positive margins of 8% and 7% respectively, little changed from 2016.

Ofgem argued that competition benefited more energy consumers in 2017, but it also identified that 1 in 10 of the more than 70,000 pre-payment customers “self-disconnected” from their electricity or gas supply because they did not top up their meters – and said that it would investigate next month if suppliers were doing enough to help such vulnerable customers. The report found that energy made up about 4% of average household bills last year (8% in poorer homes), down from 4.4% and 10% respectively in 2016.

Average household energy consumption continued its long-term decline, falling by 5.5% for gas and 3.3% for electricity in 2017, it noted.

Two retailers, SSE and Innogy-npower, are to merge next year. The British energy retail market may become yet more concentrated if a multi-billion-euro deal between RWE and E.On announced in March 2018 is cleared, enabling E.ON to take over Innogy. A tie-up of SSE, Innogy and E.ON's retail arms, if permitted, would be larger than current market leader Centrica. 

The regulator  said it is working to have a new retail price cap in place by the end of 2018, as mandated by parliament. Ofgem regulates the energy markets only in Great Britain, Belfast-based Uregni does that job in Northern Ireland.

Unusually cold weather – the ‘Beast from the East’ – drove up heating demand in March 2018 to its highest level since 2010, but Ofgem said that gas and power networks proved resilient in meeting it.