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SSE warns of rising household electricity bills

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Energy giant SSE has hinted at possible price rises for household electricity customers, warning that cost pressures are increasing due to higher wholesale prices, green levies and the smart meter roll-out.

The company, formerly known as Scottish and Southern, reported a small loss in its household supply business in the six months to September, while group adjusted pre-tax profits fell by 13.3pc to £475.8m over the period.

It also announced it would launch a £500m share buyback using the majority of the proceeds from its sale of a stake in Scotia Gas Networks.

 

SSE said it had continued to lose customers, although the net loss rate had slowed as it had also gained 350,000 new accounts.

It had also faced “the costs of delivering the smart meter roll-out and rising non-energy costs for electricity customers”.

Alistair Phillips-Davies, chief executive, said: “We are clearly seeing increases in costs there. Commodity costs are up 30pc or 40pc on their lows and that is going to provide pressure to everybody.

“You’ve also got non-energy costs as well going up into next year probably of the order of £40 per annum. Those are all going to provide pressure for all of us.”

It is understood the £40 relates both to the costs of installing smart meters and also of increased charges for renewable energy subsidies.

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Mr Phillips-Davies said SSE had not raised its prices for three years and insisted it would continue that for “as long as we possibly can”.

While several small energy suppliers have raised their prices already in response to higher costs, the Big Six suppliers are thought likely to wait until at least the new year amid speculation the Government could be preparing to intervene in the sector.

Despite the first-half loss in the household supply business, Mr Philips-Davies said SSE hoped to make “reasonable profits” for the full-year with a margin at a similar level to last year, when it made 6.2pc pre-tax.

Gregor Alexander, SSE finance director, said retail businesses were suffering from volatile peak electricity prices that increased the risk to the business and that its profit margin needed “to reflect those risks”. He saw no reason why it could not achieve margins of 5pc to 7pc, he said.

Ahmed Farman, analyst at Jefferies, said the outlook for the retail business remained “challenging”.

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