SSE to raise gas and electricity prices by 8.2%

 

"We make about 5% margin... that's not the reason why prices are going up" - SSE Director of Customer Services Tony Keeling

SSE customers will see an average 8.2% rise in gas and electricity prices from 15 November, the company has announced.

The energy firm said the rise reflected higher costs of buying wholesale energy and paying to deliver it to customers' homes, plus government levies.

The price rises will affect about 4.4 million electricity customers and 2.9 million gas customers, not including those on fixed-price tariffs.

SSE's average annual dual-fuel energy bill will rise by £106 to £1,380.

Business and Energy Minister Michael Fallon said he was "disappointed" by SSE's decision to increase energy prices.

Analysis

Energy prices are centre stage in the push to deal with what Labour leader Ed Miliband calls the "cost of living crisis".

He has promised a temporary price freeze if Labour wins the next election. He's blamed the big six energy firms for failing to pass on any fall in the wholesale price of gas.

But the Prime Minister, David Cameron, believes you can't buck the market. He thinks the best way to help prevent more price rises is to increase competition, by encouraging people to switch supplier more.

He's also promised a new law to ensure people are offered the lowest tariff. David Cameron wants to shift the focus of restricting price rises on to green taxes, which make up part of your bill.

It's only a small percentage of what you pay but the government, or at least the Tory side of it, is looking at exempting some smaller firms to encourage them to compete.

While the parties disagree on how to tackle rising bills, the decision by SSE to put their prices up by 8% means the political stakes have just been raised.

He told BBC Radio 5 live: "I would encourage all customers to look again at their tariffs and see whether they can switch to a cheaper tariff."

He added the long-term answer to high energy bills was "more competition and encouraging consumers to shop around".

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."

'We're sorry'

The company said that 8.2% was an average rise. Customers in the North of England and central Scotland would see the smallest increase, of 7%, in their dual fuel price. Customers in the South East of England would see the biggest, up 9.7%.

SSE last increased its prices a year ago. It has now pledged not to raise them again before autumn 2014.

"We're sorry we have to do this," said SSE's Will Morris.

"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."

SSE, made up of Southern Electric, Swalec and Scottish Hydro, said that for a typical dual-fuel customer, wholesale energy prices had gone up 4%, paying to use delivery networks was 10% more expensive, and government levies were 13% higher.

About two-thirds of a household fuel bill goes on the cost of wholesale energy, the cost of running an energy sales business, and on the companies' profits.

Graphic on domestic gas bills and wholesale prices

Up to 11% goes on government programmes to save energy, reduce emissions and tackle climate change, according to regulator Ofgem. SSE said it wanted this to be included in general taxation, rather than added to bills.

However, Energy Secretary Ed Davey said: "Half of an average energy bill is made up of the wholesale cost of energy. This far outweighs the proportion of a bill that goes to help vulnerable households with their bills and to cut energy waste."

The latest calculations from the regulator found that the average profit margin made by an energy supplier on an average £1,315 bill is £65.

However, this figure can be volatile. The snapshot profit margin has risen above £100, but has also fallen to a negative figure at certain points in recent years.

Political row

Profit levels prompted Labour leader Ed Miliband to declare that gas and electricity bills would not go up for 20 months if Labour won the 2015 election.

Start Quote

It is a tricky issue for the prime minister: stand firm on the eco charges and he risks alienating Tory voters; bend and he is vulnerable to the allegation that he is condemning the neediest to being unable to keep themselves warm”

End Quote

Prime Minister David Cameron condemned the pledge as a "gimmick", saying the government was simplifying bills to make it easier for consumers to switch suppliers and encourage competition.

SSE, formerly Scottish and Southern Energy, said it expected its annual profit margin to average about 5% over a three-to-five-year period, which it believed was "a fair amount".

It said its profit margin was 4.2% in the 2012-13 financial year and was expected to fall short of the 5% target again this year.

"We know we will come in for a great deal of criticism for this decision and politicians will no doubt be lining up to condemn us," said SSE's Mr Morris.

"But over many years, policymakers themselves have failed to highlight adequately the cost to consumers of the policies they have pursued in government.

"They can't expect to have power stations replaced with new technologies, the network to be upgraded and nationwide energy efficiency schemes all to be funded for free.

"And as an energy provider, we are in the unenviable position of having to pass this cost on to consumers through energy bills."

The announcement comes about a year after the last set of gas and electricity price rises.

Between August and December 2012, the "big six" energy companies outlined price rises of between 6% and 10.8%.

Chart showing the pattern of energy company price changes over the last three years

At that time, the companies blamed rising wholesale prices, the cost of transporting energy to homes, and the increasing cost of government social schemes for the increases.

Advice line National Debtline said it had received a record 15,502 calls from people seeking help with energy debts in the first six months of this year. This was up 10% on last year.

Adam Scorer, of watchdog Consumer Futures, said: "SSE and others who follow need to demonstrate why this rise is justified."

 

More on This Story

The BBC is not responsible for the content of external Internet sites

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    -8

    Comment number 1195.

    I read my meters monthly and compare useage with earlier years. Oil and gas have become more costly to produce AND import, so it's up to me to keep a lid on things. Closing doors to unused rooms, drawing curtains across windows each evening, wearing suitable clothing, using the microwave whenever possible, using the shower - not the bath, sealing windows I don't need to open - the list goes on !

  • rate this
    +23

    Comment number 1098.

    I'm an SSE customer and would swap supplier but I know from previous experience that I would be ripped off by the new one within a couple on months. Although not strictly a cartel the big six trade between themselves adjusting prices to suit themselves, it's not illegal, just morally indefensible.

  • rate this
    +50

    Comment number 264.

    What isn't common knowledge is the extra green taxes the government has put on carbon fuels over the last few years, I worked at a now closed coal station & the disposal tax on ash was £8 a tonne until 2011 then it went up to £60, it sanctions like this that are having a dramatic effect on a generators profits same goes 4 green green subsides they're being reduced again this feeds onto bills.

  • rate this
    +112

    Comment number 262.

    The wholesale prices may have increased, but are they higher then a couple of years ago?
    Remember that after the last big wholesale increases, the energy companies put their prices up, but never reduced them (or not by much) when wholsale prices came down again

    What we need is total transparency in energy companies accounting, so we can see exactly how much profit they make and their admin costs

  • rate this
    -71

    Comment number 248.

    I don't understand why people are still moaning... I have been on the cheapest tariff for years by regularly switching to the best fixed price contract!
    People should just get their fingers off their backside and switch! If SSE was loosing a big chunk of its customers overnight they would think twice before a price increase. Unfortunately the majority is either too lazy or too ignorant...

 

Comments 5 of 10

 

More Business stories

RSS

BBC Business Live

  1.  
    GREECE SURPLUS 11:49:
    Greece parliament

    Some gain after a lot of pain for Greece. Last year the company achieved a budget surplus, before interest payments, according to figures from the European Commission. The surplus was 1.5bn euros (£1.2bn; $1.4bn) or 0.8% of GDP.

     
  2.  
    PATISSERIE VALERIE 11:37:
    Patisserie Valerie

    The owner of Patisserie Valerie is raising money on the stock market. The chain has come along way since the first store was opened in London's Soho in 1926 by Belgian, Madame Valerie. These days 89 stores are controlled by former Pizza Express chairman Luke Johnson. New stores are usually profitable from the first month and have average weekly sales of £14,000.

     
  3.  
    BARCLAYS JOBS 11:23:
    Barclays logo

    Barclays may cut 7,500 jobs at its investment bank, according to a report by Bloomberg. It quotes research by Sanford C. Bernstein, which says the units that trade bonds, currencies and commodities will be hardest hit. It is due to outline a review of its trading operations next month, the report says. Barclays holds its annual general meeting on Thursday.

     
  4.  
    UK PRODUCTIVITY 11:10: Via Blog Robert Peston Economics editor

    blogs: "Well, well, well. UK productivity - the output of British workers - may be improving at long last. That is the implication of the latest survey of business conditions by the Bank of England's agents, and it is the hope of the Bank's Monetary Policy Committee (MPC)."

     
  5.  
    PAKISTAN GETS 3G & 4G 10:59:
    Pakistan 3G

    Pakistan's government is in the process of auctioning off 3G and 4G spectrum licences to the country's main service providers. Currently, Pakistan only has slower mobile internet connections. The sale is expected to raise more than $1bn (£595m) and create hundreds of thousands of new jobs. For more on the story, watch Nosheen Abbas' report from Islamabad for the BBC's Asia Business Report.

     
  6.  
    EU DEBT 10:43:
    Estonia

    The EU countries with the lowest debt-to-GDP ratio were Estonia (pictured), at 10%, Bulgaria at 18.9% and Luxembourg, with 23.1%. In the UK, it's 90.6%, but we're by no means the worst. That prize goes to Greece, with 175.1%, followed by Italy and Portugal.

     
  7.  
    QUEEN HONOURS KING Via Twitter Peter Hunt, BBC royal correspondent

    tweets: "The Queen has also made the former governor of the Bank of England, Mervyn King, a member of the Order of the Garter."

     
  8.  
    EU DEBT 10:29:

    Eurostat, the EU's number crunchers, has released its report on government debt. Overall, the amount of debt EU countries have accrued, measured as a percentage of gross domestic product, was 87.1% in 2013. That's almost 2% higher than the year before.

     
  9.  
    PRIMARK RESULTS 10:16:
    Primark store

    We have focused on Primark's move into the US, but analysts are raving about the company's latest results. Sales in the first half were up 14% and profit margins have improved. Analyst Louise Cooper describes the results at "stunning". She notes that even in Europe, where many companies are struggling, Primark is seeing strong growth.

     
  10.  
    EUROZONE ECONOMY 10:02:
    Euro sign

    The latest in this morning's flurry of stats are figures for the eurozone as a whole. Business activity is near a three month high, and there's also been a large increase in employment, according to Markit. Outside of France and Germany, the eurozone economy is growing at the fastest rate since early 2011.

     
  11.  
    BANK OF ENGLAND MINUTES 09:50:
    Job centre

    The MPC discussed developments in the labour market. They highlighted a "striking" rise in self-employment during the three months to January and wondered whether slack in the labour market was understated by official employment figures. They also noted evidence pointing to accelerating wages.

     
  12.  
    UK PUBLIC FINANCES 09:37:

    The total net public borrowing for the financial year 2013/14 was £107.7bn. This is £7.5bn lower than the same period in 2012/13. The sale of government-owned Lloyds shares in March helped bring down the deficit, says the Office for National Statistics.

     
  13.  
    BANK OF ENGLAND MINUTES 09:35:
    Bank of England

    The Bank of England has released the minutes of its April interest rate policy meeting. Members of the Monetary Policy Committee voted unanimously in favour of keeping rates on hold at 0.5% and to maintain the level of quantitative easing at £375bn.

     
  14.  
    UK PUBLIC FINANCES 09:33: Breaking News

    The UK's public sector borrowing for March was £6.7bn, lower than expectations, according to the Office for National Statistics. Last year, it was £11.4bn.

     
  15.  
    EUROSTAR BOSS 09:18: BBC News Channel
    Nicolas Petrovic

    Back-to-back chief executives for Ben Thompson on the News Channel. Now it's Nicolas Petrovic from Eurostar. His company reported a 7% rise in revenue for the first quarter. He says there is rising demand for business class tickets and that's for travellers from France as well as London. But he says lots of people are unaware that you can travel on high-speed trains from London to Amsterdam or Lyon.

     
  16.  
    GERMAN MANUFACTURING 09:05:
    German factory

    Germany's economy continues to hum along according to Markit's survey of purchasing managers. The reason? "A combination of increased activity, rising new orders and further employment growth across both the manufacturing and service sectors," says Markit. However the financial information service says there's an "increasing risk of deflationary pressures" in Germany.

     
  17.  
    FLYBE EXPANSION 08:57: BBC News Channel
    Saad Hammad

    Saad Hammad, the chief executive of Flybe, is on the News Channel talking about the new routes offered by his airline. "This is a major statement of intent," he says. Mr Hammad wants the airline to be the UK's "regional airline". Half of the airline's customers are business travellers, usually based in the regions, or near City Airport, he says.

     
  18.  
    FRENCH MANUFACTURING 08:54:

    France's economic output, as measured by Markit's Purchasing Managers' Index (PMI) has fallen to 50.9 during April. That's down from 52.1 in March, and well below analysts' expectations. "The business climate looks set to remain frail," says Jack Kennedy, an economist at Markit.

     
  19.  
    MARKET UPDATE 08:40:

    The FTSE 100 is a touch higher in early trading. Royal Mail and AstraZeneca are among the biggest winners, both up almost 2%. Elsewhere in Frankfurt the Dax is a little lower and in Paris the Cac 40 is 0.3% lower. Jet engine maker Safran is down 2.6% after reporting a 3.3% rise in revenue in the first quarter.

     
  20.  
    PRIMARK US VENTURE 08:31:

    Shares in Primark owner Associated British Foods have jumped more than 9%. That follows the news that Primark is following a well-trodden, but perilous path for British retailers - the one that leads to the US.

     
  21.  
    APPLE BLOCKBUSTERS 08:25:
    Apple

    Ahead of Apple's results, due this evening, Walt Mossberg has this assessment on the company's health since Steve Jobs' death. "There have been no new game-changing products," he says. "But I think the most useful way of thinking about Apple is to see it as a movie studio. Studios release blockbuster franchise movies every few years, and then try to live off a series of sequels."

     
  22.  
    UBER INDIA Via Twitter Simon Atkinson Editor, India Business Report

    tweets: "Just interviewed @Uber_mumbai about launch. Big market but not much they can do about kind of traffic am now stuck in on way back to office"

     
  23.  
    CHINA CURRENCY 08:14:
    Chinese yuan

    China's currency has hit another 16-month low against the dollar. The yuan hit 6.2458 against the dollar and some traders are expecting it to hit 6.26 in the coming weeks. The slowing Chinese economy is among the factors blamed for the fall. There was more evidence of that today from the latest HSBC purchasing managers survey, which showed factory activity slowing for the fourth month in a row in April.

     
  24.  
    FLYBE EXPANSION 08:04:

    We're slightly bemused by a line in Flybe's announcement. "Flybe will deploy five growth aircraft for its LCY operation," it says. If you've ever been on a growth aircraft, get in touch by tweeting @BBCBusiness or emailing bizlivepage@bbc.co.uk

     
  25.  
    AUSTRALIA JETS 07:59:
    Lockheed Martin

    Australia's PM, Tony Abbott, has approved the purchase of an additional 58 new F-35 fighter jets. The deal is reportedly worth 12.4bn Australian dollars (£6.8bn). The company which makes the F-35s, Lockheed Martin, posted first quarter earnings of $933m yesterday, a 23% rise.

     
  26.  
    ARM PROFITS 07:49:
    ARM

    Cambridge-based chip designer ARM has posted first quarter results for 2014. Its pre-tax profits are up 9% on the previous year, to £97.1m. The company says 2.9 billion ARM-based chips shipped during the quarter, up 11%.

     
  27.  
    FLYBE EXPANSION 07:38:
    City airport

    Budget airline Flybe has announced a five-year deal with London's City Airport. New routes to and from Edinburgh, Belfast, Dublin, Inverness and Exeter will start in October.

     
  28.  
    PATISSERIE TO FLOAT 07:31:

    Patisserie Holdings, which owns five brands including the high-street chain Patisserie Valerie, has announced it will float on the London Stock Exchange. The company says it is seeking to raise approximately £33m.

     
  29.  
    HEADLINES
     
  30.  
    FRACKING 07:18: BBC Radio 4

    Ed Davey is also asked about fracking, and whether companies will be allowed to drill under private land without the permission of owners. Mr Davey says the government is "looking at the access rights". "The question is how those land owners are compensated and how those projects can go ahead," he adds.

     
  31.  
    GREEN ENERGY PROJECTS 07:16: BBC Radio 4

    Energy and Climate Change Secretary Ed Davey is on Today. He says the eight projects will add 2% to the average energy bill by 2020. But in return we are getting "secure, clean energy". He says the government has more renewable energy projects than they are prepared to pay for, so if any of the eight companies drop out, there are others who would take their place.

     
  32.  
    PRIMARK US VENTURE 07:12: Breaking News
    Primark

    Budget clothing retailer Primark has announced it is venturing to the US. The company, which is owned by Associated British Foods, says it will open its first American branch in Boston by the end of 2015. It plans to open further stores in the north-east of the country in 2016. Given the experience of Tesco and M&S in the US, you have to admire their optimism.

     
  33.  
    GREEN ENERGY PROJECTS 07:08: Breaking News
    Wind farm, Burbo Bank

    The Department of Energy and Climate Change has announced 8 big green energy projects. The contracts are expected to support 8,500 jobs. They include offshore wind farms and conversions of coal-powered plants to run on biomass. The projects will provide up to £12bn of private sector investment.

     
  34.  
    EXECUTIVE PAY 06:56: Radio 5 live

    Mike Amey is back on Radio 5 Live. He's discussing Vince Cable's warning over bankers' pay. He says the business secretary wants shareholders to be able to vote down pay, and good internal governance. If these measures fail to be implemented, there could be "another round of regulation coming down the tracks".

     
  35.  
    RUSSIAN TECH BOSS 06:45:
    Moscow Times

    This from the Moscow Times. The founder of Russia's biggest social networking site fled the country on Tuesday. Pavel Durov, who founded Vkontakte seven years ago, was forced out of the company on Monday for refusing to share users' personal data, according to the article. It says the social network is now controlled by billionaires Igor Sechin and Alisher Usmanov, who have close links with the Kremlin.

     
  36.  
    NICER NISA? 06:39: Radio 5 live
    NISA

    Amid the furore over the Co-op, here's a mutual that's doing quite well. NISA, which stands for National Independent Supermarkets Association and operates over 4,000 stores, has reported a 10% rise in sales. Chief executive Neil Turton tells Wake Up to Money NISA was founded in 1977 when locals "joined together to combine their buying power". Mickey asks him if NISA convenience stores are more expensive. "Price is not the big thing for consumers - it's availability," says Mr Turton.

     
  37.  
    EXECUTIVE PAY 06:33: BBC Radio 4

    The Today programme picks up on comments by Business Secretary Vince Cable. He has written to all FTSE 100 companies and urged restraint over pay. In a recorded clip on Today, Mr Cable said pay had, in the past, reached "ridiculous and dangerous levels" in the banking industry. But he said companies now have a chance "to make peace with the public". Mr Cable singled out Barclays, which has its annual meeting on Thursday.

     
  38.  
    MARKET TRENDS 06:25: Radio 5 live

    Mike Amey has more interesting markets analysis, after other pharma shares, notably Astrazeneca, also did well yesterday. "The two areas where there's the most activity at the moment are the pharmaceutical sector and things like telecoms and cable - which are both quite stable income streams, whether the economy does well and badly," he explains. When the economy starts to do better, activity starts off in the stable sectors and moves out to others, so what we are seeing is a "pretty decent recovery".

     
  39.  
    PHARMA SWAP 06:15: Radio 5 live
    Pills

    Pharma, which is business speak for pharmaceutical companies, is back in the news, with Swiss firm Novartis and GSK swapping assets yesterday. Mike Amey, managing director at Pimco, tells Wake Up to Money they are sensibly focusing on their areas of expertise and not trying and be "all things to all men". Investors seem to agree - shares in GSK went up 5% yesterday, and Novartis did well too.

     
  40.  
    SECURITISATION IS BACK 06:09: Radio 5 live

    The securitisation of debt - in which bundles of loans are sold on to investors - was one of the factors which led to the 2008 crash. But now both the ECB and Mark Carney are saying it could be a way to get money into the system again. Richard Hopkin, head of securitisation at AFME, tells Wake Up to Money the success of securitisation depends on who's in charge. He uses an analogy: "Cars don't cause accidents, it's the people driving the cars".

     
  41.  
    JAPAN TRADE 06:03: BBC World News
    Linda Yueh

    Barack Obama makes his first state visit to Japan today. He is expected to push the Trans-Pacific Partnership - an important trade deal that would eliminate trade barriers and standardise regulations. But, in a report on World Business Report, chief business correspondent Linda Yueh says Japan's rice farmers are worried it will mean the end of protection - in particular a 778% tax on imported rice.

     
  42.  
    06:02: Joe Miller Business Reporter

    Good morning. You can contact us throughout the morning by tweeting @BBCBusiness or emailing bizlivepage@bbc.co.uk

     
  43.  
    06:01: Ben Morris Business Reporter

    Good morning. We're expecting the government to announce several big green energy projects today. So stay with the Business Live page for that.

     

Features

From BBC Capital

Programmes

  • Papers Please gameClick Watch

    Meet the ‘bedroom programmer’ whose game has sold half a million copies and won a Bafta

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.