LONDON (Reuters) - Swedish state-owned utility Vattenfall has bought British home energy supplier iSupplyEnergy, the second foreign company in weeks to seek a foothold in the country’s highly competitive domestic energy market.
The move by the Nordic region’s biggest utility adds to the pressure on the “Big Six” UK suppliers, which are trying to fend off dozens of small competitors and face popular discontent over rising bills and the threat of state intervention in the market.
Prime Minister Theresa May’s government looks to have backed away from a promised cap on energy prices, but is still looking at ways to protect energy customers facing the poorest value tariffs, according to plans laid out in the Queen’s Speech on Wednesday.
Like France’s Engie (ENGIE.PA), which launched a UK home energy business last month, Vattenfall sees the British market as a useful testbed for services enabled by digital technology.
Vattenfall already offers so-called connected home products such as remote heating devices in its Nordic markets and expects to roll out similar energy saving products in Britain.
Many utilities hope these innovations, once rooted in the home, will help them build customer loyalty.
“Some energy companies want to move away from selling energy, purely as a commodity which presents a risk of a race to the bottom in terms of price,” said Steve Jennings, who leads consultancy PwC’s Power and Utilities Sector Practice in the UK.
PWC estimates the UK connected home market could be worth around 3 billion pounds up to 2020, while British Gas owner Centrica (CNA.L) on Wednesday said revenue from its connected home unit could reach 1 billion pounds by 2022.
It gave the forecast as it announced the sale of its two biggest gas-fired power plants to Czech peer EPH for 318 million pounds, pushing forward with its own plan to become a nimbler energy supplier.
Vattenfall said it made the decision some two years ago to expand internationally, and that it was not concerned by the prospect of a UK price cap since iSupplyEnergy has well below the market average number of customers on more expensive standard tariffs.
“We sympathise with the intention (behind a price cap),” said Martijn Hagens, Vattenfall Senior Vice president of customer solutions.
Shares in Britain’s two largest energy suppliers, Centrica and SSE (SSE.L) are down 11 and 7 percent respectively since May first suggested possible market intervention last October.
Engie is also targeting Britain’s connected home and services market.
“The UK is a place where there is a lot of innovation,” Judith Hartmann, Engie Chief Financial Officer, told Reuters.
To entice customers, Engie is offering a rollover promise, which commits it to switch households to the cheapest tariff available once fixed-term contracts run out.
Additional reporting by Karolin Schaps; editing by Jason Neely and David Evans