Scottish and Southern Energy increase gas prices by 9.4%

SSE (Scottish and Southern Energy plc) has begun notifying customers that it will increase its prices for household gas by 9.4% on 1 December 2010. The increase will affect around 3.6 million customers.

Current forward annual wholesale gas prices (for the period from October 2010) have increased by over 25% since SSE last implemented a package of changes to prices for household gas, in March 2010. Since this price change, SSE has been the cheapest ‘big six’ supplier of household gas, with a price 6% cheaper than the average of this group.  Throughout this time, gas supply has been a loss-making activity for SSE and its gas supply business, Southern Electric Gas Ltd, has traded at a loss for several years.

Following the implementation of the price change announced today an annual SSE gas bill for a standard quarterly customer will increase by:

£4.64 per month, to £650, based on a consumption of16,500kWh, the new typical annual domestic gas consumption proposed by Ofgem in July 2010 following a consistent decline in average domestic gas consumption levels; or

£5.60 per month, to £782, based on the current typical annual domestic gas consumption value used by Ofgem of 20,500kWh.

There is an important distinction to be made between the rising price of units of energy and the amount customers are actually paying to heat their homes, and this is illustrated by the £132 difference between the cost of the above two typical annual domestic gas consumption values (20,500kWh of gas and 16,500,kWh of gas).

SSE recognises that it has a significant role to play in reducing its customers’ energy consumption and also a role in helping those of its customers who struggle to pay for their basic energy needs.  For example:

through its voluntary agreement with the UK Government, SSE’s support for vulnerable customers in 2010/11 will rise to £27m and reach more people than ever before, with around 150,000 customers benefiting from its packages of support;

to help customers who may be having difficulties in paying for the electricity and gas they use, SSE offers tailor-made payment arrangements to over 300,000 customers that suit their needs and their circumstances;

from 1 December, SSE will introduce a no disconnection policy covering all customers over the winter period; and

in the last six months, under the Carbon Emissions Reduction Target, SSE has funded and managed the installation of cavity wall insulation in 181,000 homes and loft insulation in 166,000 homes (excluding DIY) and is committed to maintaining this level of energy efficiency activity for the remainder of 2010/11 and beyond.

In line with SSE’s commitment to offer consistently competitive prices over the medium term, since January 2005 SSE’s typical ‘dual fuel’ household customers have paid on average around £450 less for their energy than the equivalent customers of British Gas.

Alistair Phillips-Davies, Energy Supply Director of SSE, said: "The last few months have been marked by rising wholesale gas prices and, having absorbed losses in our gas supply business for some time, we can not delay an increase in retail prices any longer.  I am sorry it will take effect during the winter period.

“The last few years have, however, shown the value of work on energy efficiency and of help for vulnerable customers and we will continue to give priority to both of these things.  SSE’s support for vulnerable customers will rise to £27m this year and reach more people than ever before, with around 150,000 customers benefiting from SSE’s packages of support.

“At the same time, we have to sustain investment in modernising Britain’s energy infrastructure.  In the last two years, SSE’s group capital investment has exceeded its profit after tax and it will be the same again this year.  Amongst other things, this investment will deliver secure, lower carbon sources of energy.  It will reduce our dependence on gas and make households less exposed to wholesale prices in the future.”