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Energy price row reignited after SSE posts record £1.5bn annual profit Energy price row reignited after SSE posts record £1.5bn annual profit
(about 5 hours later)
The row over high energy prices was reignited on Wednesday after the country's second largest supplier reported annual profits of more than £1.5bn. The row over high energy prices was reignited on Wednesday after Britain's second largest supplier reported annual profits of more than £1.5bn.
SSE said it had grown pre-tax earnings by 9.6% but insisted that the real gains had come from its wholesale not its retail arm, which made £300m. SSE said the 9.6% year-on-year increase had largely come from its wholesale not its retail business but critics described the figures as a "kick in the teeth" for consumers.
The company, formerly Scottish & Southern Energy, raised prices for its 9 million retail customers last November by more than 8%. And there was embarrassment for energy regulator with figures showing that SSE's electricity transmission business which is overseen by Ofgem recorded an almost 50% rise in profits to £137m.
But today it said tough competition and a mild winter pushed profits down in retail by 28%. The company, formerly Scottish & Southern Energy, raised prices last November by more than 8% allowing it to record profits of £300m in its retail business, down 28%, as it lost more than 350,000 of its 9.4 million customers.
Labour said the figures showed that energy companies could afford to freeze their prices much longer while consumer group, Which?, also called on SSE to pass on more of its gains on to customers. Alistair Phillips-Davies, SSE chief executive, put the £1.55bn group profits down to significant investment in gas production and electricity networks, and said it was doing all it could to hold retail prices.
But Alistair Phillips-Davies, SSE chief executive, put the £1.55bn group profits down to significant investment in gas production and electricity networks, and said it was doing all it could to hold retail prices.
"We introduced our price freeze right at the end of the last financial year and it has been hugely popular. It remains the only such commitment available to all customers and will mean we take a hit on retail profits over the next couple of years.""We introduced our price freeze right at the end of the last financial year and it has been hugely popular. It remains the only such commitment available to all customers and will mean we take a hit on retail profits over the next couple of years."
The energy company has frozen prices to households until 2016 which, it said, would knock £100m off future earnings. The energy company has frozen prices to households until 2016 which, it said, would knock £100m off future earnings but has continued to reward investors with a 3% rise in the dividend for the year ending 31 March, 2014.
SSE admitted that the five transmission and distribution businesses it owns and which are price controlled by the regulator Ofgem still managed to record a 9.3% increase in profits in the year to 31 March 2014. Operating profits from one of these sectors – electricity transmission – was up by 48% to £136.7m. Critics were quick to attack the company. "SSE's announcement of a £1.55bn profit is a kick in the teeth for consumers when their prices went up by 8.2% last year. So we're stunned that they've announced a massive profits increase of 9.6% after losing 370,000 customers in the past year," said Jonathan Senior, head of research at collective switching and low energy campaign, ThisIsTheBigDeal.com. "When SSE announced a price freeze in March, we said it was cynical to offer a freeze when prices are unaffordable. We stand by that. And in light of today's announcement, we're calling on SSE to put the customer first and turn their profit windfall into a price cut."
Meanwhile the "upstream" business has seen a one-off gain of £90m profit from the purchase of a North Sea gas field.
Without that extra money the wholesale operation would have reported flat earnings, said SSE.
The company said that it had rewarded shareholders by raising the dividend by 3%. The payouts to investors has grown every year since 1999.
Jonathan Reynolds, Labour's shadow energy and climate change minister, said the SSE figures showed the energy companies had increased their profits on the back of spiralling bills and a cost of living crisis for hard-pressed consumers.Jonathan Reynolds, Labour's shadow energy and climate change minister, said the SSE figures showed the energy companies had increased their profits on the back of spiralling bills and a cost of living crisis for hard-pressed consumers.
"SSE has already said it will freeze prices until 2016. Today's profits show it can afford to freeze them until 2017 – and if SSE can do it, so can the other energy companies.""SSE has already said it will freeze prices until 2016. Today's profits show it can afford to freeze them until 2017 – and if SSE can do it, so can the other energy companies."
Which? executive director Richard Lloyd said he welcomed the certainty offered by SSE's energy price freeze at a time when many suppliers were basing bill hikes on rising wholesale prices. The annual figures from SSE show that its "upstream" business has seen a one-off gain of £90m profit from the purchase of a North Sea gas field. Without that extra money the wholesale operation would have reported flat earnings, said the company.
But he added: "Now, with healthy group profits and wholesale gas prices falling, we expect SSE to promise not just to shield people from price increases but to fairly pass on lower costs to their customers." SSE was keen to point out that it invested £1.58bn over the last 12 months on upgrading the country's energy infrastructure, more than it reaped in profits. This week a report commissioned from accountant, PwC, showed that overall SSE had contributed through tax and other benefits more than £9.1bn to the UK economy over the last 12 months.
But these arguments did little to dent the anger from the critics. Richard Lloyd, executive director of consumer group Which?, said he welcomed the certainty offered by SSE's energy price freeze at a time when many suppliers were basing bill increases on rising wholesale prices.
"Now, with healthy group profits and wholesale gas prices falling, we expect SSE to promise not just to shield people from price increases but to fairly pass on lower costs to their customers."
And another group, Fuel Poverty Action, said reporting huge profits at a time when millions were struggling to pay their bills showed expressions of regret about past price rises were nothing but hot air.
"It's time to acknowledge that the big six will always put their lust for profit first and that until we have a not-for-profit, renewable energy system owned by the public and by communities the likes of SSE will continue to make a killing."