SSE's profits are down - and gas bills up
The UK's second biggest energy supplier has announced plunging profits - on the heels of news it plans a massive hike in customers' gas bills.
Gas bills up: SSE is hiking prices to plug hole in its profits
Scottish & Southern Energy admitted the past six months had 'not been easy' as it revealed a 6% fall in adjusted profits to £385.5m.
It blamed a 'challenging business environment' that has seen rises in wholesale gas prices and weather-related falls in its energy output.
Last month the company announced a 9.4% gas price increase from 1 December that means the average annual household gas bill for an SSE customer will increase by £5.60 a month to £782. A dual fuel customer's annual bill will rise to £1,226 from £1,159 a year ago.
The increase in prices to the company's 3.6m gas customers should boost margins in the second half of the year and this is expected to keep SSE on course to meet analysts' forecasts for full-year profits of around £1.3bn.
The firm saw its shares rise 51p to 1,169p after its results were released today.
SSE's gas supply business, Southern Electric Gas, again incurred a loss. Meanwhile, a 5% year-on-year fall in electricity consumption by household customers and an increase in generation and supply costs also impacted on the company's performance in the six months to September 30.
Chairman Lord Smith of Kelvin said: 'The past six months have not been easy, with low renewable energy output and higher wholesale gas costs contributing to a challenging business environment.'
Ann Robi
'Its profits on generation and supply are almost 11% lower than last year. This may help customers to understand why they will be facing price increases starting 1st December.
'It now seems that SSE's decision is linked to the way it as a company has bought on the wholesale market, which seems to have left it exposed to recent increases in the wholesale gas market – other companies may not be in the same position.
'In fact EDF Energy has already committed to freezing its standard household energy prices until March 2011 and we can now hope that other companies will give their customers a similar guarantee.'
But Mark Todd, director of Energyhelpline.com, said: 'These results could be the shape of things to come for other suppliers because they are all being squeezed due to the rise in wholesale gas prices.
'The fall in profits puts the recent 9.4% gas price rise into perspective because SSE is clearly trying to safeguard its margins. They will be hoping that the increase in prices plus the higher usage levels that winter brings will mean that they still deliver their projected £1.3bn of profits for the year.
'The company has still posted £385m in profits and is raising its dividend and hard-pressed customers will be wondering why their bills have to go up. As a commercial organisation shareholders' needs must be taken into account however, at this moment, their customers may feel that they are getting a raw deal.'
SSE employs more than 20,000 people and supplies electricity and gas as Southern Electric, SWALEC, Scottish Hydro Electric and Atlantic. During the past six months it achieved a net gain of 100,000 energy supply customer accounts. The company has a total of 9.3m accounts.
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