Scottish and Southern to fire up energy prices

Another week, and another energy provider says it's having to raise prices to absorb higher wholesale costs. But consumers are distinctly unsympathetic.

by Emma Haslett
Last Updated: 25 Jul 2011
Scottish and Southern Energy has become the latest provider to say it’s planning to raise its prices, blaming (you guessed it) rising wholesale prices. According to the company, the price rise, which is due to come into effect in mid-September, will push electricity prices up by 11% and gas prices by 18% - this will affect 8.8m households and increase the average dual fuel energy bill by £171. Obviously, consumers aren’t happy – particularly since the company’s profits have been rising inexorably since May, when it originally warned it might have to hike its prices.

For its part, SSE says it can’t absorb rising costs of wholesale energy: apparently, wholesale gas is 40% more expensive, while the price of wholesale electricity has gone up by 23%. But it’s craftily placed some of the blame on Ofgem, saying the energy watchdog has also raised the price of distribution costs by 14%. Naturally, the Government doesn’t get off scot-free, either: apparently, the cost of ‘mandatory environmental and social schemes’ suppliers are ‘required’ to fund (such as the Carbon Emissions Reduction Target and the Warm Home Discount) have risen by 11% compared to a year ago.

To be fair to SSE, it’s hardly the only energy supplier to have raised its rates recently: last month, Scottish Power set a precedent, announcing double-digit rises for its customers. That was swiftly followed by British Gas, which said it would be raising gas and electricity prices by 18% and 16% respectively – pushing up the average bill by about £190.

So it’s got a fairly solid justification for price hikes. But consumers aren’t likely to be all that sympathetic. Particularly when you consider figures released a few days ago showing that in 2009, an extra 1m households fell into fuel poverty, pushing the total up to 5.5m. That’s one in every five households, the highest proportion since 1996. And despite the reasons behind these latest rises, it’s also true that less than two months ago, SSE reported a 29% rise in pre-tax profits.

So today’s news will inevitably dredge up the usual criticisms from consumer groups: that energy companies are only too happy to raise tariffs when wholesale prices rise, but are far less enthusiastic about cutting them when prices fall again. After all, while there’s not much the company can do about rising wholesale prices, it would be much easier to justify higher bills if customers felt they got a share of the proceeds when the energy companies’ costs go down. That’s clearly not the perception at the moment.

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