View the article online at http://citywire.co.uk/money/article/a613172
Scottish and Southern Energy hikes prices 9%
The Big Six energy supplier says significantly increased costs mean the rise in its gas and electricity prices is 'unavoidable'.
Scottish and Southern Energy today announced plans to increase both its gas and electricity prices by 9% from 15 October.
The price rise, which will affect some 9 million customers, will see the price of SSE’s average standard dual-fuel bill increase from £1,172 to £1,274 – a rise of more than £100.
Price increase 'unavoidable'
The Big Six supplier, which had previously promised not to increase its prices before October, said the price rise was 'unavoidable' owing to significantly increased costs.
Wholesale prices are around 14% higher than last winter, the energy supplier said. The cost of distributing energy to customers’ home – which is determined by Ofgem – is also up 9% since last year, while mandatory environmental and social initiative costs are up some 30%.
SSE added, however, that following this rise prices will be capped until at least the second half of 2013. And should there be a sustained fall in wholesale energy costs, household bills could come back down.
Ian Merchant, SSE’s chief executive, said: ‘In a time of economic difficulty we have endeavoured to keep energy bills as low as possible. That is why we pledged last summer to cap our energy prices for as long as possible and until at least August 2012, and then in January extended this pledge to October 2012.
‘Unfortunately, the increases in costs that we have seen since making this pledge can no longer be absorbed and mean that we are unable to keep prices at their current levels beyond this autumn. An increase in our prices has therefore, regrettably, become unavoidable,’ he added.
Audrey Gallacher, of Consumer Focus, meanwhile, said: 'People will be worried about a run of price rises, but we see little evidence in the trends in wholesale prices or in the performance of companies, that would justify all suppliers following suit'.
'It is vital that the regulator continues to scrutinise the market to make sure consumers are paying a fair price and profits are at acceptable levels,' Gallacher added.
A change in billing structure
The energy company is also introducing a new ‘simple fixed standing charge’ of £100 per fuel per year to cover administration costs and a single unit rate for energy usage.
This pricing structure replaces the more confusing two tier tariff which saw customers charged a higher rate for each unit of energy used initially – to take into account admin costs such as billing for example – and a lower price thereafter.
SSE said the vast majority of customers should be better off or see very little difference in their bill as a result of the change, while the 60% of SSE customers which pay their bills by direct debit will benefit from a £40 per fuel discount on the standing charge.
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