Price elastricity (Retail electricity market, SSE)

Competition and price elasticity in the retail market (Case of SSE)

Since 2006 as many as 2.95 million customers were gained by SSE (fig. 1) with a help of its direct sales force. SSE claimed lower energy prices in comparison with the market leader (British Gas) in order to gain the market share.

sse-rising-energy-customers-due-to-lower-price

Fig. 1 Customer gain and loss – 2006 to 2014 (Source: SSE annual reports (2006-2014)

Due to negative publicity following price rises and sales irregularities, OFGEM fined SSE £10.5m in April-2013. SEE’s customer based peaked at £9.65m in 2011, however almost half a million customers were lost by Dec-2014 (fig. 1).

Price elasticity is very high in the retail market. Big six suppliers including SSE face challenges form small and independent energy supplies (e.g. first utility and OVO energy). Since 2013, small energy suppliers gained more than 2 million new customers. As indicated in fig.2 demand is shown to be perfectly elastic for SSE from 2011 to 2014.

sse-price-elasticity-2010-2014

References:

Begg, D. and Ward, D. eds. (2012). Economics for Business; 4th edition. McGraw-Hill higher education

SSE plc, 2008, Annual report 2008. [Online] Available at: http://sse.com/media/108185/2008AnnualReportAndAccounts.pdf [Accessed on 05 May 2015]

SSE plc, 2009, Annual report 2009. [Online] Available at: http://sse.com/media/108215/2009AnnualReportAndAccounts.pdf [Accessed on 05 May 2015]

SSE plc, 2010, Annual report 2010. [Online] Available at: http://sse.com/media/108238/2010AnnualReportAndAccounts.pdf [Accessed on 05 May 2015]

SSE plc, 2011, Annual report 2011. [Online] Available at: http://sse.com/media/108348/SSE_AnnualReport2011.pdf [Accessed on 05 May 2015]

SSE plc, 2012, Annual report 2012. [Online] Available at: http://sse.com/media/108440/SSE_AnnualReport2012.pdf [Accessed on 05 May 2015]

SSE plc, 2013, Annual report 2013. [Online] Available at: http://sse.com/media/108594/SSEplcAnnualReport2013_optimised.pdf [Accessed on 05 May 2015]

SSE plc, 2014, Annual report 2014. [Online] Available at: http://sse.com/media/241200/2014AnnualReport.pdf [Accessed on 05 May 2015]

Back to Top