SSE squeezed by rising energy costs

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ENERGY firm SSE said profits from its domestic supply operation fell 21 per cent over the last year as it battled higher costs and falling consumption.

The division, which is the UK’s second biggest supplier with 9.5 million household and business accounts under brands including Southern Electric, Swalec and Scottish Hydro, still made £271.7m in the year to March 31.

SSE said this amounted to an average of £30 per household and that its operating margin of 3.5 per cent was below its medium-term target of five per cent.

It has been squeezed by rising wholesale costs, which make up around 50 per cent of a typical dual fuel bill, and a delay in increasing bills until September.

There was also a slump in the consumption of gas due to the economic downturn and warmer conditions over the autumn, with average consumption of gas by SSE’s customers down by 21.5 per cent since 2007 and by 16.7 per cent in electricity.

It raised household gas prices by an average of 18 per cent in September but a subsequent cut of 4.5% due to falls in wholesale prices did not come into force until March 26 - five days before the end of its financial year. The company has pledged to freeze prices until at least October.

Less than a fifth of its profits came from retail energy supply and SSE said the performance of its power networks and wholesale arms helped group-wide profits rise two per cent to £1.33bn. Its full-year dividend rose 6.8 per cent to 80.1p.

It said it was now 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 of that time.

Chairman Lord Smith of Kelvin said: “For some people, profit and dividend are contentious words when it comes to energy, but profit and dividend allow SSE to employ people, pay tax, make investments that keep the lights on and provide an income return that shareholders like pension funds need.”