The Changing Face Of Energy: SSE Increase Their Prices By 9%

An electricity company’s annual increase in their prices might be good news for their share-holders, but for millions of others, it’s becoming a familiar (and growing) drain on the bank balance.

So here’s the familiar scene: After their annual review the company, in this case SSE, break the news; from October 2012 their rates will increase by 9%. In other words, the average customer will have to find an extra £102 more than in 2011.

But here’s where things get interesting: SSE’s CEO, Iain Merchant doesn’t just announce the stats and then leave. He stays to enlighten us on the factors behind the decision. He explains the reasons for this increase, dragging the regulator and government into the mix, too.

The Breakdown
The standard dual fuel bill (electricity and gas) looks like this.

• 51% pays for the energy you actually use.

• 25% pays for grid connections (getting the power to you).

• 8% pays for social and environmental measures (more on this to come)

• The remaining 16% pays for the company’s other outgoings and profits.

Keeping to the same divisions; the overall cost of providing energy to the customer has gone up by 14% since last October. There’s no way round this. Using the same amount of energy you used last year will cost more in 2012.

The cost attributed to the gird connections has seen the steepest rise in cost, over the last year. Changes in power sources are part of the reason – delivering power from areas of the UK where marine and wind power are at their strongest (generally around the coast) – as are the plans for huge new connections – such as the Denny to Beauly pylons and underwater links along the West and East coast.

The social and environmental costs are the hardest to explain. The government has two aims. Their first is to provide energy-saving measures for those sections of society who can’t afford to pay their bills (a sort of energy benefit system). The second is to expand the UK’s capabilities of renewable energy. Then there’s the risky political bit. The government has ambitious policies for expanding renewable energy, and it also wants to ensure that vulnerable people, pitched into fuel poverty, are protected or provided with energy-saving measures.

These changes are paid for by 8% of user’s bills and are delivered by the electric companies. SSE claim that the costs of the social and environmental measures have increased by a third over the last year. This means the average customer can expect to pay 10% of their bill towards them.

Iain Merchant believes this rise is not cost-effective, but you could also add that it simply isn’t fair. Why should the average energy-user see a tenth of their bill being used to pay for measures that will not directly benefit them (at least in the short term)?

Over to you in Parliament for the reply.

Francis Jenkins works for www.businessenergy.com specialists in finding the best deal on commercial and bsuiness rates. He likes a good bacon sandwich and breaths of fresh air.

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