SSE announces 27.5% profit increase
No price cuts in sight for customers
Early this morning, big six energy supplier SSE released the company’s financial report, revealing a 27.5% increase in profits year-on-year, making the gas and electricity supplier’s retail operating profits £410.1M.
Similar to British Gas parent company Centrica’s statement early last week, the announcement from SSE admitted that the increased performance was partly due to the unseasonably long winter — but also noted that the extreme weather was highly damaging to the company’s network:
“The last week of March saw extreme snow falls and ice in the west of Scotland which inflicted unprecedented damage on the electricity network on Arran and Kintyre. Over 500 engineers and other employees from the company were deployed to help restore electricity supplies to households, businesses and other premises, working closely with a wide range of authorities and agencies.”
Postponing an ‘unwelcome impact’
SSE gave no indication that it would freeze prices or offer a price cut to its customers after posting its profits increase. And, in fact, eluded to imminent price hikes that the company would stave off for as long as possible:
“Other non-energy costs are also increasing, with the requirement for investment in transmission and distribution resulting in further increases in charges. Taken together, these increases point to additional costs of over £80 per dual fuel customer in 2013/14. Unless there is a sustained reduction in prices in wholesale gas and electricity markets, it is highly likely that these additional costs will eventually have to be reflected in higher prices for household customers. Nevertheless, SSE intends to resist this trend of higher costs for as long as possible to shield customers from the unwelcome impact of higher prices.”
A ‘smoking gun’
Ann Robinson, Director of Consumer Policy at uSwitch, says this promise falls short of consumer needs after a year of unprecedented energy bill averages coupled with a long winter:
“These profits will be seen as a smoking gun, making it difficult for any supplier to justify last winter’s price hikes and the pressure they have placed on consumers. People have been going cold for fear of the cost of turning their heating on – in these circumstances a price cut or a price freeze is the only suitable peace offering and would go some way to helping and reassuring consumers. SSE has gone part of the way by saying that it will be holding-off from a price hike for as long as possible. Whether this will be enough to reassure consumers remains to be seen.”
A bumpy year for SSE customers
SSE last hiked its prices in October 2012, when prices for Atlantic, Scottish Hydro, Southern Electric and SWALEC customers went up more than 9%, or £119/year.
More recently, SSE made the news in April by acquiring a record fine for mis-selling to its customers, which the company also addressed in today’s statement:
“The first week of April saw the Gas and Electricity Markets Authority propose a £10.5m penalty on SSE for breaches of licence conditions in relation to sales of electricity and gas, mainly between 2009 and 2011, which SSE accepted immediately. Like everyone else associated with SSE I have no hesitation in apologising unequivocally for the breaches that occurred; but while the breaches were clearly wrong, the response has been absolutely right.”
Pressure from the competition
SSE’s lack of price freeze promise becomes more prominent after British Gas pledged to use the profits of the long winter to “invest in customer service and price competitiveness”.
“Suppliers have benefitted from the extended and unseasonal cold snap this year. While British Gas has pledged to use this benefit to maintain its price competitiveness, there has been no such pledge from other suppliers. This is very disappointing and we would urge SSE, with its profits announced today, to take the lead in helping consumers by making a firm new commitment on prices.
“Whether suppliers will pass this benefit on to their customers or not remains to be seen. But either way we would urge consumers to get on to the front foot and to start to protect themselves from the impact of the high cost of energy. There is currently over £320 difference between the cheapest and most expensive energy tariffs on the market, while the Government’s Green Deal scheme can help people to make their homes more energy efficient.”