OREANDA-NEWS. SSE will implement a series of changes to its household energy tariffs on 15 November 2013. This follows increased costs of: buying energy in global markets (up 4% for a typical dual fuel customer*); paying to use the upgraded electricity and gas networks to deliver energy to customers (up 10%*); and government-imposed levies on energy bills (up 13%*).

When SSE last changed its prices in October 2012, it committed not to increase prices until July 2013 at the earliest. Despite external costs continuing to rise in that time, SSE has been able to hold its prices for several months longer than that. On 30 September 2013, however, SSE stated in its Notification of Close Period that it expects to report that its Retail segment was loss-making during the six months to 30 September 2013 and this demonstrates that the rising costs cannot be absorbed beyond 15 November.

SSE therefore regrets that its household energy prices will increase by an average of 8.2% for both gas and electricity from 15 November 2013, equating to approximately ?2 per week for a typical dual fuel customer.*

Raising prices is the last thing the company wants to do and SSE remains committed to protecting its customers as much as possible from increasing costs. It is therefore pledging not to raise prices again before Autumn 2014 at the earliest and is urging any customer worried about how the changes will impact them to get in touch to discuss what help is available to them.

Will Morris, Group Managing Director, Retail, said: “We're sorry we have to do this. 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.

“Eighty five per cent of a typical energy bill is made up of costs outside our direct control and these costs have increased. So far this year we have made a loss from supplying energy as a result of the higher costs we have been facing and continue to face.

“We understand and regret that this will add to the pressures on household budgets, but there's a lot we can do to help. Rising unit prices do not have to mean rising bills and there remains huge potential for customers to save money by improving further their energy efficiency. There's also real financial and practical support available to those who need it most. I would urge any customer worried about their energy bills to contact our team on 08000 727 222 so that we can find ways to help them.”

Rising prices don't have to mean rising bills

Using energy efficiently has a critical role to play in helping to keep bills down. Evidence over the last few years shows that the combined efforts of energy suppliers, governments, Ofgem, consumer organisations and the associated investment have succeeded in helping customers to cut their energy consumption - in the last three years alone, SSE insulated almost 750,000 homes to help customers in England, Scotland and Wales. Correspondingly, Ofgem announced last month its decision to reduce by 18% and 3% respectively its benchmark average domestic customer usage figures for gas and electricity, in line with data published by the Department of Energy and Climate Change showing a sustained fall in consumption in recent years. This follows an earlier reduction in typical annual domestic gas consumption made by Ofgem in 2010.

The underlying energy efficiency improvements make a real difference; SSE estimates that a typical dual fuel energy bill at its new prices would have been around ?400 higher had usage remained at 2005 levels.

Act now to make bills cheaper and fairer

Politicians could protect customers by transferring the costs arising from the environmental and social policies pursued by all main parties in government from the energy bill payer to the tax payer. This would immediately take up to ?4 billion off UK energy bills and ?8 billion a year by 2020 - cutting a typical dual fuel bill by around ?110 this year alone and redistributing the costs to those more able to afford it.

Changes to tariff structures and discounts

SSE is also making some changes to its tariff structure that continue the process started last year under SSE's Building Trust agenda to move all customers onto a new, simpler, uniform standing charge plus unit rate structure with clearly defined discounts. This will ensure that live tariffs comply with certain elements of the Retail Market Review (RMR) reforms being introduced by Ofgem from 23 October, designed to make the market simpler and fairer for customers.

In addition, these changes will see the mandatory removal of non-RMR compliant features such as the prompt payment discounts.

Making a fair and reasonable profit

SSE expects that its annual profit margin in its Energy Supply business should average around 5% over the medium term (ie three to five years). In 2012/13, it was 4.2% and SSE expects to fail to meet this 5% target profit margin again in 2013/14. SSE believes that 5% is a fair amount and similar to organisations that provide other everyday essentials such as the major food retailers. It will publish the financial results for its Energy Supply business for the six months to 30 September 2013 on 13 November 2013.

As SSE is a UK-listed supplier, this profit stays in Great Britain and Ireland, providing thousands of jobs and contributing hundreds of millions in tax revenue every year.

Will Morris, Group Managing Director, Retail, added: “We don't take these decisions lightly. 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. 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 customers through energy bills.

“We will work with any political party on initiatives to keep bills as low as possible for customers and, in turn, we urge them to work together to achieve consensus in energy policy. And if politicians want to do something to make bills cheaper and fairer, they should take the cost of government policies out of bills and fund them through general taxation instead. Why wait until 2015? This would be far more progressive as those who can afford it would pay more while those most at risk of fuel poverty would be protected - taking around ?110 out of their bills immediately.”

Based on a standard dual fuel customer (averaged across Great Britain) using the typical annual household energy consumption levels adopted by Ofgem in January 2011 - 16,500kWh of gas and 3,300kWh of electricity.