Scottish Power is the latest energy firm to post a hefty revival in profits, powered by Ofgem’s decision to permit more generous allowances for suppliers this year.
The Big Six Energy firm, home to 4.6m customers, posted a 58 per cent year-on-year increase in pre-tax profits, which rose from £481m to £1.16bn its first six months of trading in 2023.
This was chiefly fuelled by a resurgence in profits across its retail arm, which recorded a £662m swing – rising from £82m in the red to £576m earnings in gross earnings.
The results follow chunky earnings from both EDF and British Gas owner Centrica’s household retail divisions.
Such a hefty upsurge was mostly fuelled by Ofgem’s decision to allow supplier to retrieve outstanding monies as part of its price cap changes.
The regulator adjusted allowances to help suppliers looking to claw back funds from the price cap being set too low during the early stages of the energy crisis, with much of the industry engaged in the costly process of onboarding new customers from fallen firms.
This meant suppliers have been able to claim more back from household bills at the start of the year, despite customers being squeezed in a cost of living crisis.
A Scottish Power spokesperson said: “Throughout 2022, extreme market volatility forced all UK energy suppliers to buy energy at peak prices and then sell it to customers at a loss, until Ofgem could amend the price cap to reflect the costs borne. Last year, Scottish Power’s Retail business made a loss of £271m because of this and today’s figures reflect Ofgem’s move to return those costs to all suppliers this year.”
Scottish Power considers these profits to be one-off funds, with the business also benefitting from improved margins after prudent fiscal management.
It comes as households continue to face energy bills nearly double conventional levels, with the price cap still set at over £2,000 per year.
Elsewhere in its business, its networks division posted a 12 per cent hike in earnings, rising to £336m due to robust revenue pricing, while its renewables arm suffered a 11 per cent decline to £239m offset by lower production and less windy weather conditions.
Scottish Power is owned by Spanish energy giant Iberdrola, and posted its figures within its parent company’s half-year results.
Iberdrola has raised its profit outlook for the second time this year after a strong performance across Europe drove a 21 per cent increase in net profits over the first half of 2023.