SSE Energy Services
SSE Energy Services is a market leader in the supply of electricity and gas and in other energy-related services such as electrical contracting to business and household customers.
SSE Energy Services supplies electricity and gas to around 6 million household and business accounts under the brands SSE, SSE Scottish Hydro, SSE Southern Electric and SSE SWALEC.
The main responsibilities of these businesses are to:
- Secure enough electricity and gas to meet customers’ needs as affordably as possible;
- arrange for electricity and gas to be distributed to customers’ premises through the relevant networks;
- provide a high quality of associated services such as customer service, metering and billing; and
- deliver on obligations in respect of energy efficiency and related social or environmental schemes mandated by government.
SSE Energy Services provides other energy-related goods and services to customers, covering home services including gas boiler cover, central heating and wiring maintenance and installation; telephone line rental, calls and broadband services; and metering supplying, installing, maintaining and reading meters in the household, commercial, industrial and generation sectors in Great Britain.
Updates on the future of SSE Energy Services
22 May 2019
The following is an extract from SSE’s Preliminary Full-year Results for the 12 months to 31 March 2019 …
SSE Energy Services, comprising SSE’s domestic energy supply and energy-related services businesses in Great Britain, is the third-largest supplier in the GB energy market. Since it stepped away from a planned merger with npower in December 2018, SSE has been actively progressing a range of options for the future of SSE Energy Services, including a possible sale, alternative transaction or standalone listing. In these considerations, the interests of customers, employees and shareholders have been paramount. Although SSE Energy Services remains a separate entity within the group for the immediate future, SSE is still of the view that the best long-term future for the business lies outside of the SSE group and is therefore continuing with steps to increase its autonomy and independence.
To that end, SSE has appointed Katie Bickerstaffe as Executive Chair of the SSE Energy Services business. Katie will take up the new role on 23 June 2019, alongside Gordon Boyd, who joins as Interim Chief Financial Officer, with a mandate to deliver a new future for it outside the SSE group and continue progress towards a listing or new, alternative ownership by the second half of 2020. She will form a new, dedicated SSE Energy Services Board, which is expected to have both executive and non-executive representation from the SSE Group, as well as an independent non-executive director. The business will therefore be able to operate with greater day-to-day autonomy and independence, while still being subject to oversight by the SSE plc Board while it remains within the group.
Katie and Gordon will work closely with Stephen Forbes and Tony Keeling, who, having run the business since 2017 as Co-Heads, are confirmed as Managing Directors and will join the new Board as well as being key members of a new Executive Committee. Their priority will be to ensure the business has the strongest possible track record as it approaches a future outside the group.
Following its update on 28 March 2019, SSE has also held further positive discussions with third parties about the provision of collateral and trading services for SSE Energy Services. Such a deal would further increase SSE Energy Services’ independence from the SSE group by enabling it to trade and operate on a standalone basis as required. It currently relies on the SSE group’s credit rating and procures energy through SSE’s Energy Portfolio Management division.
As outlined in SSE’s notification of close period statement, SSE Energy Services was profitable and cashflow positive in 2018/19 and is expected to be so again in 2019/20. However, it made an adjusted operating margin of 2.4% compared with 6.8% in the previous year. This reflects the decision to shield customers from wholesale price increases during 2018, together with the impact of the Default Tariff Cap between January and March 2019 and lower customer numbers, only partially offset by the expiry of a Power Purchase Agreement (PPA).
Operating margin is expected to be further restricted in 2019/20, and is likely to fall below 2% due to the full-year impact of the Default Tariff Cap; however, SSE Energy Services is in the process of transforming its business to reduce its operating costs and stabilise customer numbers.
Reducing operating costs
SSE Energy Services has continued to drive efficiencies across its business in 2018/19. However, to have a sustainable and competitive business under a tight price cap, it must go further and fundamentally transform its operating model to regain its cost leadership position and offer more value to customers. As well as simplifying business processes and right-sizing to reflect customer demand, SSE expects to drive additional efficiencies by: investing in digital to increase the proportion of customer service transactions completed online; automation of back-office processes, and growth of its data and analytics capability to provide smarter, tailored and more cost-effective solutions for customers.
In 2018/19 SSE continued to perform strongly in a range of external service league tables. It was named best large supplier in the uSwitch Customer Satisfaction Awards and was consistently highly ranked in the Citizens Advice Energy Supplier Performance report, most recently outperforming large and small competitors alike to rank second of 34 suppliers assessed. As a responsible essential services provider, SSE is also committed to meeting the needs of vulnerable customers and in May 2018 achieved the British Standard for Inclusive Service Provision, the gold standard for any company looking to embed flexible customer service practices and means SSE can identify vulnerability in different forms and adapt its service accordingly.
Stabilising customer numbers
As of 31 March 2019, SSE Energy Services had 5.78m gas and electricity customer accounts and 0.47m energy related services customer accounts. Throughout the year, a number of strategic partnerships were secured with trusted brands including Dixons Carphone Warehouse and Leaders Romans Group, which are helping to reach and attract new customers. Non-energy performance was also strong with the number of sales of phone and broadband packages doubling in 2018/19.
Despite the high levels of competition seen in the market, there are early indications that the market is beginning to consolidate. In part, this is due to an increase in non-cost reflective tariffs and unsustainable business models operating in the GB energy market. During 2018/19, 12 suppliers ceased trading, activating Ofgem’s ‘Supplier of Last Resort’ process. SSE Energy Services was pleased to be appointed by Ofgem as the new energy supplier for Brilliant Energy’s 28,000 customer accounts.
Looking ahead to 2019/20, SSE Energy Services aims to stabilise its overall customer base to help facilitate longer term growth. Key to this will be leveraging its broad product offering encompassing energy, broadband and boiler care by offering bespoke, value-adding propositions and bundled services, supported by targeted investment in marketing and incentives. This will be supported by ongoing improvements to digital channels that will make it easier for customers to sign up for products and manage their accounts online. At the same time, SSE Energy Services is building its data and analytics capability, enabling it to improve customer segmentation, price more intelligently, and better tailor products and services to customers’ changing needs.