Another energy price hike “The last thing people need”

Scottish & Southern Energy’s decision to increase the price of gas and electricity by on average 9% has been described by SNP MP Angus MacNeil as “the last thing people need”, as he expressed concern for islanders who are already suffering one of the highest levels of fuel poverty in the UK.

The price hike, which is to take effect from October 15th this year, will see customers of the energy giant, which includes Scottish Hydro among its portfolio, fork out on average £100 a year more on bills.

An SSE statement released said: “SSE is very sorry about the impact that rising energy costs, along with the rising costs of other essentials, is having on many households”, but insist the rises are necessary.

The last financial year the company made an operating profit of £271.7million in its Energy Supply business, down 22% from the previous year. Following the price increase a 5% profit margin is expected.

Ian Marchant, SSE Chief Executive, said: “In a time of economic difficulty we have endeavoured to keep energy bills as low as possible.”

He continued: “Unfortunately, the increase in cost that we have seen since making this pledge can no longer be absorbed and mean that we are unable to keep prices at their current levels beyond this autumn. An increase in our prices has therefore, regrettably, become unavoidable.

“We remain committed to offering a fair price for the energy we supply and providing a range of practical and financial support measures for those struggling to pay bills.”

The company had cut the price of gas by 4.5% in March 2012. Before that gas bills had increased both in September 2011 and December 2010. The last time SSE increased electricity prices was in September 2011 and before that August 2008.

The company say there are three reasons for this most recent increase; the average price in the wholesale energy markets being higher; the cost of using the energy networks to distribute electricity and gas, and the cost of mandatory environmental and social initiatives that suppliers are required to fund and pass onto customers. These include the the Electricity Emissions Reduction Target and the Warm Homes Discount and account for £120 of a typical yearly bill. The Warm Homes Discount is worth just £130.

Mr MacNeil said: “The last thing people need is another round of price hikes from the big six companies, just before the worst of the winter weather kicks in. There is a limit to how much people can keep absorbing massive energy price rises like this.

“It’s time for the UK Government to step in and take serious action. Rising fuel bills means increased VAT payments for the Treasury. This extra cash must be used to tackle fuel poverty.

“It’s unacceptable that fuel poverty is on the rise in an energy plenty nation like Scotland. The energy market clearly is not working for the consumer and there is now an overwhelming case for an investigation into how the major energy market is operating.”

But while SSE get ready to rise their prices an energy firm in Northern Ireland, NI Power, announced they will be cutting their electricity prices by 14.1% - something they have put down to lower fuel prices, particularly coal and gas and a reduction in the cost of carbon, along with increased efficiencies.

And Consumer Focus Scotland are now calling on greater transparency to tackle consumer “distrust”.

Andrew Faulk, Energy expert at Consumer Focus Scotland, said: “People will be worried about a run of price rises, but we see little evidence in the trends in wholesale prices or in the performance of companies, that would justify all suppliers following suit.

“It is vital that the regulator continues to scrutinise the market to make sure consumers are paying a fair price and profits are at acceptable levels.

“There is also still a need for much greater transparency across the wider supply chain. Without that the considerable consumer distrust over pricing will continue. This must ring bells with energy policy makers so that affordability remains a critical goal in the development of secure and sustainable energy market.”

Meanwhile the Scottish Affairs Committee have been hugely critical of SSE’s distribution network and the compensation paid to island residents.

SSE own and operate the electricity distribution network in the North of Scotland, although that electricity can be bought through different suppliers.

Talking ahead of the report launch this week Alan Reid MP, the Committee Member who lead the inquiry, said: “Many communities had to endure over three days without power last January. While SSE and Scottish Power assured us they are continually investing in the grid and that there has been a general improvement in performance, we are very concerned that this is not the experience of all communities.”

He continued: “We recommend that Ofgem should monitor performance at a more detailed geographic level. This would help ensure that problems disproportionally affecting smaller communities are exposed and addressed at an early stage help close the gap between reported performance and the actual experience of many local communities.”

Adding: “One of the key protections for electricity customers is the Guaranteed Standards. However a big gap in the compensation rules is that consumers in the Highland and Islands have no rights to compensation for power cuts caused by extreme weather events. This is unacceptable in the 21st Century.”