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Introduction
 
When NETA was introduced into England and Wales, Scotland was left with an arrangement little changed from the 1990s. As there was no traded wholesale market, energy producers were required to sell their output to ScottishPower and Scottish and Southern Energy at a price set by the regulator. Thus the two Scottish based utilities controlled almost the entire generation output of Scotland.
 

 
Scope
 
An explanation of the background to BETTA and its key features.
 
An evaluation of contradictory arguments about the affect that BETTA will have on energy retail in Scotland.
 
Analysis of the residential pricing strategy of 10 suppliers in the residential market.
 
Prediction of the wins and losses for each major utility, in both the residential and I&C markets.
 
Highlights
 
The relative sizes of transmission and distribution charges may go some way to explaining the lack of residential switching in Scotland, but this is in no way conclusive. To date, Centrica has driven most of the residential switching in Scotland, indicating the importance of the ability to cross-sell
 

 
ScottishPower's residential market share is likely to fall to approximately 50%; SSE's pricing strategy and remote location will help it protect market share. Centrica will hold its Scottish residential market share steady; RWE npower will grow to approximately 6% of the market
 

 
Datamonitor expects the market share in Scotland's I&C sector to become more like the one in England and Wales. If the Scottish I&C sector becomes like England and Wales ScottishPower will lose market share dramatically, principally to EDF Energy, British Energy and RWE npower.
 

 
Reasons to Purchase
 
Understand what BETTA means to the retail department.
 
Gauge how much market share the Scottish incumbents are likely to lose.

TABLE OF CONTENTS
 
CHAPTER 1 EXECUTIVE SUMMARY 3
 
Datamonitor believes that BETTA will stimulate retail competition in Scotland – ScottishPower will be the biggest loser 3
 
CHAPTER 2 BACKGROUND TO BETTA 8
 
Introduction 8
 
Key findings 8
 
Before BETTA, the Scottish wholesale power market was controlled by SSE and ScottishPower but prices were set by Ofgem 9
 
BETTA involves the introduction of a traded wholesale market and fundamental changes to power transmission management 10
 
CHAPTER 3 BETTA WILL CHANGE ENERGY RETAIL IN SCOTLAND 12
 
Introduction 12
 
Key findings 12
 
There are cogent arguments both for and against the proposition that BETTA will change the retail landscape in Scotland 13
 
The retail market will change 13
 
The retail market will not change 13
 
There has been less residential switching in Scotland than in comparable regions in England and Wales 14
 
Non-Scottish suppliers have had almost no success in penetrating the Scottish residential market 15
 
The relative sizes of transmission and distribution charges may go some way to explaining the lack of residential switching in Scotland, but this is in no way conclusive 16
 
The prevalence of the Scottish suppliers in Scotland’s I&C sector poses questions over previous market effectiveness 17
 
Explanations based on brand and location do not explain the lack of switching in the I&C market 19
 
CHAPTER 4 RESIDENTIAL SALES STRATEGIES AFTER BETTA 20
 
Introduction 20
 
Key findings 20
 
All four non-incumbents will be eager to acquire residential customers in Scotland and all but EDF Energy seem to have the capability to do so 21
 
Only the new entrants are pricing cheaply enough to win dual fuel customers from ScottishPower offline 22
 
RWE npower is the most aggressively priced major brand for dual fuel in the Scottish Hydro region, an indication of its intentions 23
 
Centrica, SSE and RWE npower are the suppliers most likely to win electricity customers in the ScottishPower region 24
 
SSE’s electricity prices in its own region are too competitive for other suppliers to win many customers from it 25
 
CHAPTER 5 FUTURE TRENDS IN SCOTTISH MARKET SHARES 26
 
Introduction 26
 
Key findings 26
 
To date, Centrica has driven most of the residential switching in Scotland, indicating the importance of the ability to cross-sell 27
 
ScottishPower’s residential market share is likely to fall to approximately 50%; SSE’s pricing strategy and remote location will help it protect market share 28
 
Centrica will hold its Scottish residential market share steady; RWE npower will grow to approximately 6% of the market 29
 
Datamonitor expects the market share in Scotland’s I&C sector to become more like the one in England and Wales 30
 
If the Scottish I&C sector becomes like England and Wales ScottishPower will lose market share dramatically, principally to EDF Energy, British Energy and RWE npower 32
 
BETTA poses tougher challenges to ScottishPower in the residential market than to SSE, but SSE is more able to deal with them 34
 
Neither Scottish supplier is in a strong position in the I&C market, although ScottishPower seems likely to suffer most 35
 
The E&W based suppliers will benefit most in the I&C market whereas most new entrants will find life more difficult in both sectors 36
 
CHAPTER 6 APPENDIX 37
 
Research methodology 37
 
Future readings 37
 
Report writing team 37
 
How to contact experts in your industry 38
 

 

 

 
LIST OF FIGURES
 
Figure 1: Incumbent residential share in each PES region (Dec. 2003 18
 
Figure 2: Residential retail load in Scotland (2003/04) 19
 
Figure 3: Transmission and distribution as % of total residential bill 20
 
Figure 4: I&C retail load in Scotland (2003/04) 21
 
Figure 5: All E&W based suppliers would like to acquire customers in Scotland, and only EDF Energy is unlikely to acquire many 24
 
Figure 6: Dual fuel prices in the ScottishPower region 25
 
Figure 7: Dual fuel prices in the Scottish Hydro region 26
 
Figure 8: Electricity price in the ScottishPower region 27
 
Figure 9: Electricity prices in the Scottish Hydro region 28
 
Figure 10: Residential market share in Scotland (Dec 03) 30
 
Figure 11: Estimated decline in customer numbers for incumbent 31
 
Figure 12: Estimated residential market share (Jan 08) 33
 
Figure 13: Percentage of total volume in E&W (2005) 34
 
Figure 14: I&C volume in Scotland if the market grows to resemble E&W 35
 
Figure 15: Net change in I&C volume in Scotland if the market grows to resemble E&W 36
 
Figure 16: Bulls and bears for the Scottish incumbents in the residential market 37
 
Figure 17: Bulls and bears for the Scottish incumbents in the I&C market 38
 
Figure 18: Bulls and bears for the E&W based suppliers in the Scottish residential and I&C markets 39