10th Oct 2013 12:44
LONDON (Alliance News) - SSE PLC Thursday announced an 8.2% average increase in its household electricity and gas prices from November 15, just a fortnight after it had warned that its retail unit had made a loss in the six months to September 30 due to higher wholesale gas prices and fixed costs.
The increase comes after the Labour opposition leader Ed Milliband said he would freeze prices for gas and electricity for two years if he gets elected in 2015, and politicians from all sides were out using the price rise as a political issue in growing debate about rising consumer living costs.
Business and Energy Minister Michael Fallon said he was "disappointed" by the increase and urged householders to see if they could switch to a cheaper tariff. Caroline Flint, shadow energy secretary, said: "When times are tough energy companies should be helping their customers not hitting them with more price rises to boost their profits."
Milliband took to Twitter, tweeting "New electricity and gas prices announced today show the need to freeze bills" and following up with "We need an energy market which works for ordinary families and businesses."
The Labour leader has criticised the big energy companies for being quick to raise prices when wholesale gas prices rise, but not bringing them down as wholesale prices decline. He has dismissed what he called "scaremongering" by the energy firms that a freeze would limit the investments they could make and potentially cause a shortage of power in the system leading to blackouts.
SSE, which like its main rivals produces and sells power, said that the increased charges reflect the increasing costs associated with buying and delivering wholesale energy to customers' homes, as well as government-imposed levies collected automatically through energy bills.
The company said the costs across the business have increased: buying energy in global markets is up 4% for a typical dual fuel customer, paying networks to deliver energy to customers is up 10% and government-imposed levies on energy bills have added 13%.
"We're sorry we have to do this. We've done as much as we could to keep prices down, but the reality is that buying wholesale energy in global markets, delivering it to customers' homes, and government-imposed levies collected through bills - endorsed by all the major parties - all cost more than they did last year," Will Morris, group managing director for retail at SSE, said in a statement.
"Eighty five per cent of a typical energy bill is made up of costs outside our direct control and these costs have increased. So far this year we have made a loss from supplying energy as a result of the higher costs we have been facing and continue to face," he added.
SSE last increased prices in October 2012, promising at that time not to raise prices again until July this year, and has now promised not to increase prices until August 2014 at the earliest.
It estimates that the price rises equates to approximately GBP2 per week for a typical dual fuel customer. However, the increases will depend on where customers live, with prices going up 7% in Scotland and the north of England and 9.7% in the southeast.
SSE set out a lengthy defense of the increase in its statement. In particular, it set out what it considers to be a fair and reasonable profit margin for its energy supply business of about 5% over a three- to five-year period. It said it had achieved 4.2% in its last financial year and will again be below 5% in the current year.
"SSE believes that 5% is a fair amount and similar to organisations that provide other everyday essentials such as the major food retailers," it said.
It also urged all politicians to take the costs of funding expensive renewable and green energy initiatives out of energy bills and fund the projects through general taxation instead.
"We will work with any political party on initiatives to keep bills as low as possible for customers and, in turn, we urge them to work together to achieve consensus in energy policy. And if politicians want to do something to make bills cheaper and fairer, they should take the cost of government policies out of bills and fund them through general taxation instead. Why wait until 2015? This would be far more progressive as those who can afford it would pay more while those most at risk of fuel poverty would be protected - taking around GBP110 out of their bills immediately," Morris said
Shares in the utilities firm were trading down 0.3% flat at 1,449.59 pence Thursady afternoon, after rising by up to 2.4% in early tradie.
By Tom McIvor; [email protected];
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