Changes to standard GB domestic energy prices

RNS Number : 2149Z

SSE PLC

13 March 2017

 

SSE plc

Changes to standard GB domestic energy prices; dual fuel bill to increase by 6.9%

·     SSE to increase standard GB domestic electricity prices but will hold gas prices at their current level

·     Price change equates to a £73 or an average 6.9% rise for a typical dual fuel customer1, as a result of an average 14.9%2 electricity price increase

·     Electricity prices will increase from 28 April 2017

·     Dual fuel customers will still pay less than they did at the end of 2013 due to three reductions in gas prices and one electricity price cut since then

·     Rise reflects  the increasing cost of supplying electricity

·     SSE will establish a £5m fund, providing targeted financial assistance to minimise the impact on vulnerable customers

Three and a half years since its last price rise, energy supplier SSE has taken the difficult decision to increase standard domestic electricity prices from 28 April 2017, but confirmed it will hold gas prices at their current levels.

The 6.9%1 dual fuel increase will mean a typical domestic customer will pay on average £731 a year more, which equates to around £1.40 per week, as a result of an average 14.9%2 increase in electricity prices. The new typical dual fuel bill of £1,142 per year remains cheaper than in November 2013 and gas prices remain the cheapest they've been since October 2012, thanks to three price cuts in the intervening period. This change to electricity prices will affect around 2.8 million SSE customers3 in Great Britain.

The price change reflects the increasing cost of supplying electricity, and specifically higher costs associated with delivering vital government programmes designed to upgrade Britain's ageing energy infrastructure and help the country move towards a low carbon future. These costs are levied predominantly against electricity customers.

SSE has sought to protect customers as much as possible and was the first major supplier to commit to holding prices until at least April 2017; it has resisted pressure on gas prices, and continues to bear down on its own controllable costs in order to minimise the impact of increasing costs on customers.

For those customers looking for security over their longer-term energy costs, SSE is now offering a fixed-price tariff for three years, providing peace of mind all the way to 2020.

SSE takes its responsibility as an essential services provider seriously and recognises the impact higher energy costs can have on customers, particularly the most vulnerable. With that in mind it has today launched a £5million fund to provide additional financial support for those who need it most, particularly those who rely on electricity for their heating.

Will Morris, Managing Director for Retail said: "We deeply regret having to raise electricity prices. This is the first increase since 2013 and we've worked hard to keep them down for as long as possible by cutting our own costs, putting in place a winter price freeze and holding gas prices, but we have seen significant increases in electricity costs which are outside our control. Without an increase we would have been supplying electricity to domestic customers at a loss.

"We know that any increase can add extra pressure on customers' bills so we're launching a £5million fund to provide assistance to those who are struggling with their bills, in addition to the existing £46m that SSE already spends helping customers through the Warm Home Discount. Anyone worried should contact our advisors so we can ensure they benefit from any support available to them."

Ends. 

Enquiries

Investors and Analysts	[e-mail]	+ 44 (0)345 0760 530
Media	[e-mail]	+ 44 (0)345 0760 530

Notes to Editors:

Extra financial support for vulnerable customers

SSE already provides rebates of £140 to eligible customers through the Warm Home Discount. However, many people who are struggling don't reach out for help and are therefore particularly vulnerable to rising energy prices. So, today SSE has launched a new £5m fund to provide additional financial assistance to those in need. A little over half of the fund will provide automatic payments to customers who SSE knows use electric heating or are more dependent on electricity use because of their personal circumstances.

The rest of the fund will be reserved to enable customer service advisers to identify and help vulnerable customers on a discretionary basis. These customers will be primarily those with electric heating - who meet one of the following criteria: have children in the household, a disability, chronic illness, are elderly, or pay for their energy using a prepayment meter.

Help for customers

SSE understands today's news may concern customers and its advisors are available online and on the phone to give advice on ways customers can reduce their bills including; access to financial help, flexible payment plans, energy efficiency advice and guidance on the various government support programmes open to them. SSE knows that no two customers are the same and works hard to make sure all customers get access to the help that is on offer. That's why SSE has launched programmes such as SignVideo, helping British Sign Language customers talk to our customer service advisors, dementia training for customer service staff, and Language Line which helps advisors talk to customers for whom English isn't their first language.

Doing more for customers

SSE values its customers and seeks to engage with them and reward their loyalty in a variety of ways.

·     Over 2017/18 SSE will send out around 25 million communications to customers telling them about the range of offers and services that SSE customers are eligible for.

·     A new Fixed 2020 tariff from SSE offers domestic customers a fixed-price for three years, providing peace of mind all the way to 2020.

·     SSE customers are being offered a smart meter which can help them take control of their usage and help them cut bills.

·     SSE is working towards achieving the British Standard for Inclusive Service Provision, the gold standard in recognising and catering for vulnerability in all its forms.

·     SSE energy customers will be the first to benefit from the new services available through SSE's exclusive partnership with Dixons Carphone Warehouse, which will help customers manage and maintain their homes. This is in addition to a range of market-leading offers in phone, broadband and home services, including a free boiler rescue and SSE's 'Reward' programme for customers.

More details about the steps SSE is taking to engage and reward customers can be found here.

Additional information:

1.    What impact will this have on bills?

The typical GB domestic Direct Debit dual fuel customer will see an average increase of 6.9%1 in their annual energy costs which equates to around £1.40 per week4, following the decision to increase electricity prices and hold gas prices at their current level. Standard variable electricity prices will increase by 14.9%5. This does not include prepayment customers.

2.    How many customers will be affected?

Around 2.8 million3 of SSE's domestic electricity customers in Great Britain will be affected by the increase to electricity prices.  

3.    How will customers know they are affected?

SSE is writing to all affected customers to let them know what's happening and to explain the options available to them.

4.    Will M&S Energy customers be impacted by this price change?

Yes. Typical M&S Energy Standard Energy Direct Debit dual fuel customers will see on average a 6.9%1 price increase.

5.    When will the increase in SSE GB domestic electricity tariffs it come into effect?

The increase will come into effect on 28 April 2017.

6.    When did SSE last increase GB domestic energy prices?

SSE last increased standard GB domestic energy prices on 15 November 2013. Since then SSE has cut standard GB domestic gas prices three times and standard GB domestic electricity prices once. SSE has also given customers increased certainty over bills during this time with two price guarantees so they knew their energy charges would not rise for an extended period.   

7.    What has caused this?

The cost of supplying electricity has increased over recent months. In particular, vital government mandated programmes to upgrade Great Britain's energy infrastructure, which are paid for via energy bills, have increased. These programmes include the roll out of smart meters, the Renewables Obligation, Feed in Tariffs, and Contracts for Difference.

8.    What benefits do these government mandated programmes bring to customers?

These programmes are vital in order to upgrade Great Britain's energy infrastructure, increase the proportion of the electricity supplied from low-carbon sources and provide a range of specific benefits to customers, including: measures to ensure energy supplies are secure and reliable, support for low-carbon energy to reduce emissions and Britain's reliance on energy imports; and energy efficiency, opening up innovative services that give customers' even greater control of their home and energy use.

9.    Why are you just increasing electricity and not gas?

The increase in the cost to supply electricity has been more severe than the cost to supply gas. There are more government programmes levied against electricity bills than gas bills meaning the increasing costs have a greater impact on electricity customers.

10.  Is there a need for energy suppliers to increase prices given their hedging strategies?

While SSE's approach to hedging has helped cushion its customers from recent wholesale prices movements, looking ahead, Ofgem's Supplier Cost Index showed there are significant cost increases coming through and the cost of delivering vital government programmes designed to upgrade Britain's ageing energy infrastructure and help the country move towards a low carbon future are beyond energy suppliers' control.  SSE has looked at its costs and has set prices at levels it thinks are competitive and fair to customers while making sure it can run a sustainable business. 

11.  How can SSE justify this increase to customers?

SSE deeply regrets having to raise GB domestic electricity prices for the first time since 2013 and has held off as long as possible, but has seen significant increases in costs which are outside its control and would have been supplying electricity at a loss without an increase to this tariff. SSE is very aware of the extra pressure this will put on households and is launching a £5million fund to provide debt relief primarily to vulnerable customers with electric heating who are struggling to pay their bills and have fallen into arrears.  This is in addition to the £46million that SSE spends through the Warm Home Discount.

12.  Why can't SSE just absorb the cost increases yourself? 

SSE needs to run a sustainable business that is able to meet customers' needs well into the long term. The profit margin in its Domestic Supply business was 6.2% last year, before SSE paid tax. This profit has allowed SSE to make vital investments in systems, as well as customer service operations. Without this price change SSE would have been selling electricity at a loss. It has tried to minimise the price change by reducing its own controllable costs, but unfortunately this increase is necessary so it can continue to meet the needs of its customers sustainably.

13.  What protection has been put in place for vulnerable SSE customers?

In addition to the new £5m fund outlined above, SSE spends £46m each year to help customers through the Warm Home Discount and SSE promises not to disconnect a vulnerable customer. Anyone concerned about their bills should get in contact with SSE. There is a lot of help available to customers who need it, including flexible payment plans, energy efficiency advice, access to discounts and rebates, and guidance to the various government programmes open to customers.

14.  Will customers on GB domestic fixed tariffs be affected?

Customers on fixed tariffs will not initially see their prices change. Once these fixed term deals come to an end SSE will, as ever, be contacting customers to let them know about the deals available to them at that time.

15.  Can customers switch away from SSE or switch to a fixed deal before the increase comes into effect?

SSE standard variable tariff customers can switch supplier and tariff at any time. SSE always writes to customers at least thirty days before a price change comes into effect to let them know about the options available to them. More information about the tariffs SSE has on offer can be found on SSE.co.uk/energy

About SSE

SSE plc is one of the UK's leading energy companies, involved in the generation, distribution and supply of electricity and in the extraction, storage, distribution and supply of gas. Its core purpose is to provide the energy people need in a reliable and sustainable way. It supplies energy to over 8 million energy and home services customers throughout Great Britain and Ireland, is frequently ranked number one for customer service and is the UK's leading generator of electricity from renewable sources. It is a Living Wage employer and has been accredited with the Fair Tax Mark for the last three years.

Footnotes

1.     Calculated based on a national average across all regions for customers on the Standard Variable Tariff paying by Direct Debit, using Ofgem's medium annual Typical Domestic Consumption Values of 3,100 kWh for electricity and 12,500 KWh for gas. All prices are inclusive of VAT at 5%

2.     Calculated based on a national average across all regions for customers on the Standard Variable Tariff paying by Direct Debit or Receipt of Bill and weighted by region and across metering types, using Ofgem's Typical Domestic Consumption Values where appropriate of 3,100 kWh on unrestricted electricity and 4,300 kWh for Economy 7 (or domestic Economy). All prices are inclusive of VAT at 5%

3.     Based on the number of credit customers on the Standard Variable Tariffs of SSE plc and its white label partners, across all payment methods and all regions excluding customers using prepayment meters.

4.     Based on a typical annual increase of £73.25, divided by 52 (number of weeks in a year) 

5.     Calculated as a customer weighted average across all regions for customers on the Standard Variable Tariff paying by Direct Debit or Receipt of Bill, using Ofgem's medium annual Typical Domestic Consumption Values of 3,100 kWh for electricity and 12,500 KWh for gas. All prices are inclusive of VAT at 5%.

 

END

 

 

MSCOKBDPDBKBQND