MPs and consumer groups attack energy firm SSE's profit
MPs and consumer groups have reacted with outrage to the £410.1 million annual profit announced by big six energy firm Scottish and Southern Energy (SSE).
One consumer group described the figure – an increase of 27.5% on the 2012 profit from its retail division – as "a slap in the face" for customers, who were hit with an above inflation price hike of 9% last October.
SSE – which also announced it could not rule out further energy bill rises for its 9.6 million customers – was only last month fined £10.5 million for misleading customers by energy watchdog Ofgem.
Caroline Flint, Labour's shadow energy and climate change secretary, said: "Like all the other big energy firms, when SSE imposed inflation-busting price hikes last winter, they claimed they had no choice. But these figures show they have increased their profits on the back of spiralling bills for hard-pressed people.
"The time has come for a complete overhaul of Britain's energy market. For too long the energy companies have been able to do whatever they want, while households have been left struggling to pay their bills. The energy market must be made to work in the interests of ordinary consumers not the energy giants."
Slap in the face for customers
Consumer groups also expressed their displeasure at the news. Richard Lloyd, executive director of consumer group Which, said: "Such a large profit announcement will be a slap in the face for SSE's customers who have been hit with an inflation-busting price rise and seen this company given a record-breaking fine for mis-selling."
Consumer Futures, formerly Consumer Focus, called for the profits to fund an energy debt write off programme. Spokesman Adam Scorer said: "If suppliers' expectation of increased costs means that they will not use these profits to reduce their prices, then Consumer Futures is calling on them to commit to a one-off and very targeted energy debt write off programme in addition to any existing initiatives.
"Some of this windfall profit must find its way back to the most hard-pressed households."
The profit announcement comes after figures show that, last winter, around seven in ten (69%) households went without heating to reduce their energy costs, according to comparison site Uswitch.
But SSE refused to rule out further price increases. In a statement, it said: "Unless there is a sustained reduction in prices in wholesale gas and electricity markets, it is highly likely that these additional costs will eventually have to be reflected in higher prices for household customers."
In April, energy watchdog Ofgem fined SSE £10.5 million for mis-selling between October 2009 and September 2012, after it promised customers they would save money by switching when, in fact, they were put on more expensive tariffs.
SSE apologised and is refunding misled customers the money they lost by switching to its tariffs – since 3 April 2013 it has refunded around 5,000 customers.
An unexpected one-off financial gain in cash or shares, generally when mutual building societies convert to stock market-quoted banks. Also windfall tax, a one-off tax imposed by government. The UK government applied such a measure in the Budget of July 1997 on the profits of privatised utilities companies.
The practice of a dishonest salesperson misrepresenting or misleading an investor about the characteristics of a product or service. For example, selling a person with no dependants a whole-of-life policy. There have been notable mis-selling scandals in the past, including endowment policies tied to mortgages, employees persuaded to leave final salary pensions in favour of money purchase pensions (which paid large commissions to salespeople) and payment protection insurance. There is no legal definition of mis-selling; rather the Financial Services Authority (FSA) issues clarifying guidelines and hopes companies comply with them.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
A type of derivative often lumped together with options, but slightly different. The original derivative was a future used by farmers to set the price of their produce in advance before they sowed the seeds so that after the harvest, crops would be sold at the pre-agreed price no matter what the movements of the market. So a future is a contract to buy or sell a fixed quantity of a particular commodity, currency or security (share, bond) for delivery at a fixed date in the future for a fixed price. At the end of a futures contract, the holder is obliged to pay or receive the difference between the price set in the contract and the market price on the expiry date, which can generate massive profits or vast losses.