Utilita takes 7.7 per cent margin on prepay customers

Prepay independent supplier Utilita has made a 7.7 per cent profit margin on its pre-pay customers in the last year, more than double the margins made by big six suppliers who stand accused of profiteering.

Utility Week understands that at almost 8 per cent Utilita’s profit margins for energy supply are some of the highest in the industry. The margin levels are more than double the average profit margin of 3.3 per cent made by the big six, as identified by the ongoing Competition and Markets Authority (CMA) investigation in its provisional findings in July.

The big six have been forced to repeatedly defend their profits in recent years. In 2013 the Energy and Climate Change select committee investigated whether the companies are profiteering following a spate of energy tariff rises as wholesale prices climbed. At the time British Gas said its profit margin for residential energy supply had averaged at 5 per cent over the previous 5 years.

More recently the CMA said in its provisional findings that the average profit margin for the big six on residential customers was 3.3 per cent. The CMA also concluded that customers have been on average overcharged by 5 per cent on their energy prices.

Utilita’s head of communications Jem Maidment said this was the first time the company had turned a profit after making losses “for the lion’s share of the decade.”

Maidment said: “This has been a long process to get to where we are, and we offer in our view the best products in the prepayment sector, and we are offering our customers brilliant prices.

“We are cheaper than the big six, as evidenced only two weeks ago when we again reduced our prices. Our customers are now paying an average of £52 less than they were at the turn of the year.  

“We are doing everything we can, and that’s what drives our company to give our customers as good as deal as possible, and we will continue to do that and always be cheaper than the big six.”

Utilita has more than doubled its pre-pay customer base to 255,000 customers from 100,000 in 2014, driving up pre-tax profit by almost 600 per cent to £11,947,630 from £1,832,776 in 2014. 

Maidment said: “We have just gone from 100,000 customers just last April and we are now on 255,000 as of this week, our growth has been extraordinary and people are responding to what we are doing. People want the best deal possible and that is what we feel we are providing.

“We are delighted with the results, but the reality is the margins are unbelievably low across the sector,” he added.  

Last month Utilita trimmed 2.1 per cent from its tariffs in a move to undercut the big six, the second time it has cut its prices since the start of the year.

Utilita’s managing director Bill Bullen said: “As we approach the autumn – a time when gas consumption rises – we will do all we can to ensure Britain’s hard-pressed families, and especially the elderly, have as much peace of mind as they can in the coming months – and not pay unnecessarily high prices for their energy.”

Pre-pay customers are required to pay for their energy in advance and are more likely to be vulnerable to self-disconnection and fuel poverty.