Profits up as SSE customers feel heat

SSE’s retail operation made £410.1m in the 12 months to March, compared with £321.6m in the previous 12 months as gas consumption increased by a fifth.

Overall pre-tax profits rose by six per cent from £1.34bn to £1.41bn.

But executive bonuses were slashed by 40 per cent in the wake of a mis-selling scandal which last month saw the company fined £10.5m for misleading customers about prices and savings that could be made by switching over.

Lord Smith of Kelvin, the chairman of SSE, apologised yesterday over the practice. The firm said: “Companies don’t just have to earn profits; they have to earn profits in the right way.”

But the words will come as cold comfort to families after a year when SSE hit them with a nine per cent bill rise.

The energy giant said household consumption of gas over 2012/13 – which included a prolonged cold spell at the start of this year – went up 21 per cent, with electricity use rising five per cent. However, its customer numbers in Britain and Ireland fell by 80,000 to 9.47 million.

SSE warned that more price rises were in the pipeline because it was facing additional costs of more than £80 per dual fuel customer in 2013/14.

It added: “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.”

SSE said it intended to “resist this trend of higher costs for as long as possible to shield customers from the unwelcome impact of higher prices”.

The company said the rise in profits from households was due to the weather being colder than the previous year.

It said it was disappointed to have had to implement a price rise in October given that “energy affordability is a major societal issue”. It blamed costs including wholesale energy price rises.

The company defended its profit margin as “reasonable and sustainable”, saying it “stands comparison to organisations that provide other every day essentials such as food retailers, telecoms companies and high street retailers”.

In March, snow and ice caused “unprecedented” damage to its electricity network in parts of western Scotland, with hundreds of staff drafted in to restore supplies.

The following month, it was fined by Ofgem for mis-selling. It has launched a compensation fund for customers who lost out by joining SSE.

Lord Smith said: “Like everyone else associated with SSE, I have no hesitation in apologising unequivocally for the breaches that occurred. But while the breaches were wrong, the response has clearly been right.”

He added that the overall performance of the company in the year allowed it to extend an unbroken record of annual increases in adjusted profit before tax.

In yesterday’s announcement, SSE said its remuneration committee decided that “substantive criticism” over mis-selling had to be reflected in its annual bonus scheme.

“As a result, it concluded that the executive directors’ earned award should be reduced by 40 per cent in total. This represents a fair response to the issues in one part of SSE’s retail division.”

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