Energy supplier SSE angered consumer groups yesterday by revealing a near 40 per cent surge in profits, weeks after slapping an extra £100 on fuel bills. Half-year profits at the firm, whose Southern Electric, Swalec and Scottish Hydro brands have five million customers, jumped by 38 per cent to £397m – up £110m.
SSE raised its prices by 9 per cent in October, taking its average dual- fuel bill to £1,354, £260 more than in January 2011. Then, it blamed higher wholesale, distribution and environmental costs. Yesterday it sought to win over the public by saying that only 8 per cent of profits came from its residential supply business.
Consumer groups, who have long complained of profiteering by the energy giants, said customers would not understand how SSE had delivered such bumper profits.
Which? executive director Richard Lloyd called for the Government to set up an independent review into recent price increases. He said: "Without greater scrutiny of energy prices, consumers simply will not believe that they're getting a good deal." SSE, the UK's second-largest generator of electricity, made its announcement days after the City regulator, the Financial Services Authority and its energy counterpart, Ofgem, launched an investigation into allegations energy traders fiddled wholesale prices.
Households have been hit by sharp rises in gas and electricity, with the average annual dual-fuel bill doubling from £650 in 2005 to £1,334.
SSE said its margin on energy supply was 1.5 per cent. Its chairman, Lord Smith of Kelvin, said: "Profit and dividend allow SSE to employ people, pay tax, provide services that customers need, make investments that keep the lights on and create jobs, while providing an income return that shareholders like pension funds need."
Caroline Flint, Labour's energy spokeswoman, said: "People will not understand how the energy giants can get away with inflation-busting price rises this winter when their profits are already increasing."
SSE's results strengthen suspicions among consumer groups that the 'Big Six' are enjoying fat profits at public expense.
Together, the six supply energy to 99 per cent of homes, more than in other comparable consumer industries, such as food, banking, or car-making.
Consumer groups worry this lack of competition allows over-charging. One suspicion is – just as multi-nationals shift profits around between states to avoid tax – energy firms shift profits between different divisions to avoid public opprobrium.
Unfortunately, it's hard to tell, and whatever the case, consumers are in for a tougher future. The global scramble for fossil fuels will raise prices sharply over the coming decade. Households can soften those rises by insulating their homes and scouring comparison sites for cheaper tariffs.
But we should squeeze out any excess profit.