Brand loyalty may have been part of the undoing of the business. Scots have been more loyal to the legacy companies from those state-owned days than others in the British energy market. That goes for Scottish Power too (formerly South of Scotland Electricity Board, or SSEB). Those who had always been with Scottish Hydro stayed with it, even as their bills rose on the standard variable tariff. Its business model was more dependent than most on those more profitable customers. So when the UK government and regulator Ofgem stepped in with a cap on the variable tariff, it hit SSE particularly hard. That was the problem – described as a “particularly challenging market” – that scuppered its planned merger of the retail division with nPower, falling apart last December, and starting a new search for a way of offloading nearly four million customers. Over that time, the number of customers has been falling quite fast, so it now stands at around 3.5 million. There was a time, not long ago, that it would make sense to re-invest and re-invigorate the retail arm of SSE. When the Russians cut off gas to its neighbours in south-east Europe 10 years ago, energy utilities moved swiftly to secure upstream resource. A full, vertically integrated model – from offshore gas field and nuclear power stations to servicing the household central heating boiler – seemed the way to go for the Big Six. Centrica (Scottish and British Gas) and EDF were among the most integrated with upstream investments in oil and gas. But in a fast-changing energy market, that model has changed. That may be a sign of more mature and settled markets. The politics of depending on Russia’s gas pipelines remains a very hot issue in central and eastern Europe. But a lot has happened to reduce western European dependence on Russian gas, including development of LNG, liquified natural gas, shipped in by tanker from Qatar and the Gulf of Mexico. Meanwhile, those who bought upstream oil and gas assets were stung by the downturn in prices.
BBC 13th Sept 2019 read more »