On Friday, Scottish & Southern Energy (SSE) caused an uproar after posting a 50-per-cent increase in profits before announcing that it may be necessary to increase domestic prices in the near future.
The energy provider further upset customers by agreeing to a £700 million dividend for investors.
Chief Executive of SSE, Ian Marchant, said: “I hope we don’t have to put them up but we may be forced to. We don’t enjoy doing that but you can only defy the market for so long”.
What Mr Marchant meant by using the words “defy the market” is certainly unclear, as healthy profit margins evidence significant room for improvement so far as energy bills are concerned; indeed, it has been noted that SSE could still enjoy strong profits if wholesale costs increased and domestic prices fell.
Audrey Gallacher, the Head of Energy at Consumer Focus, argued that domestic central heating customers are likely to be “grinding their teeth in frustration” at the news.
Ms Gallacher said: “Customers simply don’t have faith that they are being asked to pay a fair price and Ofgem has shown this lack of trust has firm foundations. As suppliers move to put up prices, the regulator faces its first major test since its market review. If it isn’t satisfied that price rises are fair and that suppliers are making the changes on transparency and service needed, the threat of a Competition Commission inquiry must become a reality”.
SSE claims to have some 10 million customers in the UK and Ireland, where fuel poverty is an increasingly serious concern. As the cost of domestic fuel increases in proportion to declining rates of pay and employment, many households are finding it difficult to afford gas and electricity. Believing that major utilities are inflating costs to protect profit margins is likely to anger and frustrate most if not all consumers.
Homeowners and residents can reduce the cost of domestic energy by conserving power and using gas and oil more efficiently. Tried and tested methods such as turning thermostats down, installing draught excluders, cavity wall insulation and energy-efficient boilers can help to save on fuel bills. More adventurous customers can try installing renewable technologies such air source heat pumps, solar thermal and ground source heat pumps, all of which are eligible for the Renewable Heat Incentive due to be launched in 2012.