energy news

ScottishPower accused of failing to pass on savings


25th February, 2010

ScottishPower accused of failing to pass on savings

ScottishPower provoked a furious backlash from consumer groups yesterday when it announced an 8 per cent rise in profits to £1.3 billion last year.

The energy company's announcement, which came as bitter winter weather continued to affect much of the UK, was branded "indefensible" by one energy consultancy.

Consumer Focus accused the Spanish-owned utility of failing to pass on to consumers the benefits of plummeting wholesale gas and electricity prices last year.

Philip Cullum, deputy chief executive of Consumer Focus, said: "Wholesale prices have decreased dramatically but have not been passed on to consumers. If energy firms persist in not doing the right thing by their customers, it is time for the industry to be investigated by competition experts in order to identify what needs to be done to deliver fairness."
 
David Hunter, an analyst at McKinnon & Clarke, said: "Despite wholesale prices going into freefall, ScottishPower hasn't cut standard energy tariffs in almost a year. The failure of the ‘big six' suppliers to pass on to customers the massive reductions in wholesale business electricity prices, which they have been enjoying since 2008, is scandalous."

Iberdrola, Spain's largest utility company, which bought ScottishPower in 2006 for nearly £12 billion, said that profits from its UK business had improved because of an 8 per cent reduction in costs after a shake-up of its groupwide IT operations.

But John Hall, an independent energy analyst, argued that lower wholesale prices were the main reason for the rise. "They could have cut prices by 20 per cent a year ago, but instead they held them all year. They were under no pressure to do anything from the Government."

The announcement came as ScottishPower revealed that it had shed more than 100,000 customers in the UK last year, bringing the total to 5.24 million by the end of 2009. Many of these customers are likely to have gone to British Gas, which is expected to announce today that it gained about 150,000 customers last year.

This month British Gas became the first of the big six to trim prices this year, with a 7 per cent cut in its gas tariffs. ScottishPower has not cut prices since February 2009, when it lowered its average gas bills by 7.5 per cent and electricity by 3 per cent.

A ScottishPower spokesman said: "We constantly evaluate our costs and our retail prices and compare our position against the competitive market. We are committed to offering our customers value for money and are the only supplier to actively encourage existing customers to make sure they are on our most suitable tariff."

The profit announcement follows figures from Ofgem this week, which showed that profits per household earned by the big six had soared by 40 per cent this winter to £105 — the highest level since 2004.

Annual results from Centrica today are expected to show that operating profits for its British Gas business rose by nearly 50 per cent last year to £554 million, up from £379 million in 2008.

As a whole, Iberdrola, which is striving to reduce a €29 billion debt pile, said that 2009 profits had hit €2.8 billion, down 1.3 per cent on 2008.

Earnings before interest, tax, depreciation and amortisation rose 6.3 per cent to €6.8 billion. José Ignacio Sánchez Galán, its chairman, did not give a new target for cutting debt but said that overall levels would remain stable until 2012.

Wind assisted

Britain's embattled renewable energy industry received a boost when it was revealed that two European companies are in talks about the construction of a new factory to manufacture offshore wind turbines in the UK.

Ignacio Galán, chairman of Iberdrola, the Spanish utility that owns ScottishPower, said it had signed an agreement to take a minority stake in Bard, a German wind turbine maker. He said they were considering investing in a new UK plant to feed the growing market for offshore wind turbines.

The Government wants to raise the share of generation from offshore wind energy to 33 gigawatts by 2020 from less than 1 gigawatt today. Gordon Brown claimed last month that this would make Britain the No 1 market for offshore wind development and create about 70,000 jobs by 2020.



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