UK Utilities Residential Margins: Unbundling Supplier Maragins in 2004

Content

• Chapter 1 Executive Summary
• Chapter 2 Introduction
  • Who is the target reader?
  • How to use this report
• Chapter 3 Methodology
  • This report unbundles energy retail costs into their wholesale, transmission, sales and service components for 2004 to allow supplier cost structures to be individually analyzed
  • Costs are separated into 6 groups to allow both a regional and supplier analysis
  • For a clear understanding of the terms used in this report, the following definitions have been used
  • Assessing the wholesale buying strategy of suppliers was a key element of the price unbundling
• Chapter 4 Analysis By Customer Tier
  • The costs of electricity accounts were almost independent of Tier, however the price for Tier 1 accounts was on average 4% higher
  • All suppliers had greater profitability in their Tier 1 regions with EDF Energy and the Scottish suppliers having the highest of these
  • All suppliers with the exception of Centrica sold gas in 2004 to consumers at negative margins as a result of both wholesale price increases and to protect valuable Tier 1 electricity accounts
• Sse, Edf Energy And Centrica Were The Only Suppliers With Profitable Dual Fuel Products
  • Centrica was the only supplier to have significantly more gas than dual fuel accounts, reflecting its unique position, as well as having the smallest fraction of stand alone electricity accounts
  • EDF Energy had the highest proportion of electricity Tier 1 accounts and the second highest number of gas accounts within its home PES region
  • EDF Energy had the most profitable electricity accounts and had also the highest fraction of Tier 1 customers
  • Centrica and SSE made the highest dual fuel margins with customer bases containing large proportions of Tier 1-2 accounts
• Chapter 5 Analysis By Meter And Tariff Type
  • Both the costs and the profitability of E7 accounts were lower than that of Single Rate
  • Electricity prepayment meters consistently commanded the highest margin while standard credit customers always attracted both the lowest margin and the highest costs
  • The average gas supplier margin was negative across all payment methods except PPM as tariffs lagged behind wholesale prices
  • Supplier electricity margin depended upon its mix of tariffs, with Powergen profitability suffering from its high fraction of E7 accounts
  • There were large differences in the proportion of Single Rate and Economy 7 accounts between different PES regions
  • Powergen had the highest proportion of Standard Credit electricity accounts and Centrica had the least
  • Centrica had the lowest proportion of Standard Credit gas customers of any supplier
• Chapter 6 Supplier Profitability
  • The suppliers that have stayed with their ex-monopoly fuel to the greatest extent achieved the greatest profitability
  • EDF Energy had the largest profit from electricity sales, despite both being the fourth largest supplier and making almost no margin from Tier 2 accounts
  • EDF Energy had the largest profit from electricity sales, despite both being the fourth largest supplier and making almost no margin from Tier 2 accounts
  • Powergen had the highest electricity revenue, yet due to it's high percentage of E7 accounts was third behind EDF Energy and SSE in overall profit
  • Only Centrica made an overall profit from gas sales, reflecting the profitability of its Tier 1 customer base
  • Three suppliers; Centrica, EDF Energy and SSE managed to make slight profits in dual fuel, the bulk of this from Tier 1-2 accounts
  • The three SSE PES regions had the lowest fraction of competition from Tier 2 suppliers
  • npower has made the greatest movement away from it's ex-monopoly fuel, receiving 37% of it's revenue in 2004 from gas sales
  • EDF Energy was the most profitable supplier at the same time as being the supplier that had the lowest exposure to gas sales
• Chapter 7 Appendix - Market Share And Price Movements
  • 2004 saw multiple price increases from all suppliers, with dual fuel pricing having an important effect on customer switching
  • Electricity Tier 1 price rises were large in 2004, especially in the last quarter
  • Tier 2 electricity prices, while not as high as Tier 1, also showed a steady series of increases throughout 2004
  • The UK electricity retail market shows very low price elasticity as suppliers have gained accounts pricing both significantly below and above market average
  • ScottishPower gained the highest proportion of new dual fuel customers with a competitively priced product
  • ScottishPower both spent the highest fraction of its revenue in S&M and increased its total accounts by the greatest percentage in 2004, sacrificing margin at the same time
  • How to contact experts in your industry
• List Of Tables
  • Table 1: Tier Location of Supplier Electricity Accounts
  • Table 2: Location of Supplier Gas Accounts in PES Regions
  • Table 3: The proportion of SR and E7 accounts by PES region
  • Table 4: Proportion of SC, DD and PPM accounts held by each electricity supplier
  • Table 5: Proportion of SC, DD and PPM accounts held by each gas supplier
• List Of Figures
  • Figure 1: Unbundling of electricity supply costs by tier
  • Figure 2: Unbundling of electricity supply costs by tier and supplier
  • Figure 3: Unbundling of gas supply costs by tier and supplier
  • Figure 4: Unbundling of dual fuel costs by supplier and tier
  • Figure 5: Comparison of accounts by supplier and Tier
  • Figure 6: Relationship between percentage of Tier 1 electricity accounts and overall electricity margin
  • Figure 7: Relationship between percentage of dual fuel Tier 1-2 accounts and dual fuel margin
  • Figure 8: Unbundling of electricity supply costs by tariff
  • Figure 9: Unbundling of electricity supply costs by tariff and meter
  • Figure 10: Unbundling of gas supply costs by tariff
  • Figure 11: Relationship between percentage of E7 electricity accounts and electricity margin
  • Figure 12: Electricity operating costs and profit by supplier and tier
  • Figure 13: Electricity operating costs and profit by supplier and tariff
  • Figure 14: Gas operating costs and profit by supplier and tier
  • Figure 15: Dual fuel sales and profit by supplier and tier
  • Figure 16: Electricity operating costs, profit and total revenue by PES region
  • Figure 17: Gas and electricity turnover
  • Figure 18: Gas and electricity operating profit
  • Figure 19: Tier 1 domestic electricity price excluding DUOS and TUOS, 2004
  • Figure 20: Tier 2 domestic electricity price excluding DUOS and TUOS, 2004
  • Figure 21: UK gas price by supplier, 2004
  • Figure 22: Net electricity accounts movement vs. price position, 2004
  • Figure 23: Net gas accounts movement vs. price position, 2004
  • Figure 24: Net dual fuel accounts movement vs. price position, 2004
  • Figure 25: Relationships between S&M spend, change in overall accounts numbers and profitability