Losing customers but increasing profits...

davidgmmafan

I thought it might be interesting to discuss this artcile and whether or not the scenario outlined above is a further sign that the market is broken or just a company doing a good job of making money.

http://www.dailymail.co.uk/news/article-3597871/Energy-firm-s-profits-defy-customer-exodus-SSE-accused-unfair-pricing-announcing-1-5bn-earnings-despite-losing-370-000-users-rivals.html

Farway

I am a shareholer in SSE, claps hands that profits continue to roll in, those dividends help towards my energy bills :j

backfoot

Definitely broken and ripping off a huge volume of customers. The differential in price from standard to online is scandalous and evidence enough.

The same product (energy supply) costing vastly different amounts.:(

How the legislators have allowed this for so long and continue to do so is criminal.

backfoot

Farway wrote: »

I am a shareholer in SSE, claps hands that profits continue to roll in, those dividends help towards my energy bills :j

Certainly revelling in the misfortune of the elderly and vulnerable.:o

You must be very proud.

footyguy

I saw essentially the same article on EHL a couple of days ago. Coincidentally I also just saw an SSE electric bill at that time.

It states the cost breakdown as:
Buying the energy - 50%
Delivering the enegy - 25%
Government environmental & social schemes - 9%
Looking after you which includes billing, customer service & IT - 6%
VAT - 5%
our supply business profit - 5%

(The exact figures will vary depending on fuel, region & tariff)

I therefore came to the conclusion the report is confusing the generating side of the business (and other parts such as distribution) with the supply side ... and considering it all one company.

The problem being as SSE generate the energy, they can effectively then charge the supply side whatever they want.
Of course other suppliers probably also buy off SSE, but at what price? Who knows, as that would presumably be considered commercially sensitive information.
And who are those other suppliers buying off SSE, and what increase in customers do they have? Or perhaps more importantly, what change in generation did SSE experience over the period? Well we all know how the price of oil plummeted, and wholsesale gas is linked to oil price, and electricity is often generated by that.
But oil price is now rising (currently at least 50% more than it's recent lows)

Edit: I'm not sure of the accuracy of your thead title
"Losing customers but increasing profits..."

From the article you linked to
"SSE’s overall profit for last year [£1.5billion] was slightly down on 2014"

and

"Profits from its retail business, which sells gas and electricity direct to families, were £455.2million.

This was virtually identical to the year before..."


But it was no doubt good news for Mark Todd & EHL, as such a report may well make some people consult a comparison site again, and every fuel switch a customer makes via EHL will earn EHL about £30
Ker-ching!

Farway

backfoot wrote: »

Certainly revelling in the misfortune of the elderly and vulnerable.:o

You must be very proud.

You must be very clever, FYI I fit the into the "elderly and vulnerable" category myself

Not proud, just forward thinking in my younger days

I also own shares in National Grid, so another lot of dividends derived from energy :j

backfoot

Farway wrote: »

You must be very clever, FYI I fit the into the "elderly and vulnerable" category myself

Not proud, just forward thinking in my younger days

I also own shares in National Grid, so another lot of dividends derived from energy :j

Thanks. You have absolutely made my point. The profit element in each of the segments of our bills goes to pay shareholders of each of those companies.

So from generating, to distribution and through to metering and finally supply we are having to fund the equity interests of shareholders.

You are most fortunate to be such a shareholder benefitting from others who are less fortunate. Not only that, but the final bill can be easily 50% higher if you aren't able to manage your account online or suffer debt management problems. Why should such an artificial penalty exist for such a daily essential commodity?

The Original Post asked for comments about whether this was a broken system. I have given my reasons for arguing it is broken and have yet to see a reasoned counter argument.

All you did, in both posts, was to gloat about your personal benefit of such a system. I find that sad.

Bigphil1474

On one hand, the wider argument is that we all benefit from their profits - company tax revenue to HMRC, pension dividends for operators who have shares in them, secondary benefits from beneficiaries having additional spending power etc. I'd say the point about profits increasing is largely valid IMO, if they have less customers but profit has remained roughly the same, then profit per customer has increased.
On the other hand, the system is clearly broken where those not in the know are paying vastly over-hyped prices to buy the same product that the savvy can get for much less. You wouldn't go into a supermarket to buy a bottle of milk and expect different customers to pay a different price based on what they know of the market.
There are similarities with the petrol market where you have producers selling to their retail arms, and claiming that it's a cost of supply. I'd strongly support energy producers being regulated to ensure that they don't over price sale of their own production to their own retail business. Let's face it's all a big cartel taking as much money off us as they can get away with.

Bark01

Your forgetting 'customers' doesn't just relate to residential customers.

The issue with what being discussed is that the parent companies profits have increase where as the residential customer numbers have decreased. Its not a like for like comparison.

From a supply side you need to factor in SME and I&C, and there can be wildly different consumptions between each. The difference in consumption between I&C can be insane so even just looking at the customer number wouldn't be good enough.

You'd also need to factor the supply side customers i.e. other suppliers.

Simply comparing customer numbers to profit isn't going to produce an accurate guide of profit Unless that profit is just the residential supply profit. The article even states that residential profits on there own were down. However profits can be fairly easily moved from generation to supply.

The only thing I can think of that might make a good case for comparison is total consumption. How much wholesale energy did they sell to the market and how much energy did they sell as a supply business.

davidgmmafan

"SSE confirmed its profit margin per customer last year was 5.2 per cent, which was up from an average of 4.1per cent for the past four years."

I'd like to see more openness so we could have a better quality debate but given the confusopoly these companies have created I am not hopeful.

Sorry I missed this at the time, should've checked back sooner.