An energy company whose customers were hit with bill increases of 9 per cent last month reported a 38 per cent jump in half-year profits to nearly £400m.
SSE, which trades as Southern Electric, Swalec and Scottish Hydro and is the UK’s second-largest generator of electricity, also increased its dividend for shareholders by 5 per cent to 25.2p a share.
But the company defended the increases and pointed out that its household energy supply business, which returned to the black over the period with profits of £48.7m, accounted for 8 per cent of total operating profits.
SSE chairman Lord Smith of Kelvin said: “I believe that profit and dividend allow SSE to employ people, pay tax, provide services that customers need, make investments that keep the lights on and create jobs, while providing an income return that shareholders like pension funds need.”
He said energy market conditions remained challenging, with the prices achieved by SSE for its power generation still weak and higher costs forcing the latest rise in energy bills from all but one of the “big six” firms. SSE supplies electricity and gas to 9.6 million household and business accounts.
Caroline Flint, Labour’s energy spokeswoman, said: “People will not understand how the energy giants can get away with inflation-busting price rises this winter when their profits are already increasing.”
SSE, which has committed to cap household energy prices until the second half of next year, said its margin on energy supply was 1.5 per cent in the half year.
The division recovered from operating losses of £101.4m in the previous year after a jump in average gas consumption of 28 per cent due to lower average temperatures.
But the underlying demand is lower and SSE said its average annual dual fuel bill of £1,274 is about £400 lower than it would have been if the rate of increase in energy consumption seen in 2005/06 had been maintained.
It blamed rising bills on higher prices in the wholesale market, the regulated cost of using the energy networks to distribute electricity and gas, and the impact of environmental and social initiatives.
Which? executive director Richard Lloyd said the latest profits announcement showed why the Government should set up an independent review to look at whether recent price increases are justified.
He said: “Without greater scrutiny of energy prices, consumers simply will not believe that they’re getting a good deal.”
Profits from power generation were down by 44.5 per cent to £123.2m, while the figure for its regulated operations covering SSE’s electricity and gas transmission and distribution networks was 19 per cent higher at £399.5m.
SSE said its focus remained on delivering its stated promise to grow its dividend by inflation plus 2 per cent over the full financial year.
It is one of just five companies to have delivered better-than-inflation dividend growth every year since 1999, while remaining part of the FTSE 100 Index for at least 50 per cent per cent of that time.