Scottish Power’s retail arm has recorded a £12 million loss for the first quarter of 2022, with the company citing the price cap methodology as causing a strain on earnings.
The energy giant, which at the end of March served 4.8 million customers, said earnings before interest, taxes, depreciation and amortisation (EBITDA) fell by £118 million, or 111.5% year-on-year.
It explained that the EBITDA reduction of its retail business is primarily gross margin related and that the six-month delay in updating the price cap mechanism has led to “continued strain on earnings”. Gross margin also includes the impact of milder weather year-on-year.
Overall EBITDA was £497 million (-£62 million, -11% year-on-year), with reductions on the prior year driven principally by pressures on the retail business.
Elsewhere the company reported more positive results for its generation and network arms.
Onshore wind production increased by 43% on the first three months of 2021 due to windier weather conditions across the UK.
Both increased production and higher energy prices saw Scottish Power Renewables’ EBITDA rise year-on-year by £41 million (19.5%) to £250 million.
SP Energy Networks meanwhile also recorded EBITDA of £250 million (+£15 million, +6.2% year-on-year).
The £15 million increase in gross margin was mainly from transmission revenues.
“Think out of the box”
Scottish Power chief executive, Keith Anderson, said: “Our first quarter has seen onshore wind generation increase by over 40% demonstrating the huge role it has to play in delivering for the GB energy market going forward, coupled with offshore wind and our planned investments in new technologies like green hydrogen and battery storage.
“However, UK households are facing a cost of living crisis that is unprecedented and is only set to get worse with energy prices likely to rise further in October.”
Anderson added that the scale of the issue is “too big for one industry to deal with” and that Scottish Power believes in a new approach which could see government reducing bills by £1,000 for the most vulnerable with a targeted fund.
“Government, consumer groups and industry are unanimous in the view that something needs to be done to soften the blow for consumers – it’s time to think out of the box on the solution to support those most in need,” he added.
Keith Anderson recently wrote an article for Utility Week in which he expanded more on these points. You can read it here.