SSE's justification for the 9% hike in electricity charges

[MM]

"Thank you for your recent email about our price increase. I am sorry you have had cause to contact us in these circumstances and I hope that my explanation will go some way to restoring your faith in SSE.

It may help if I explain the background behind our price increase. There are 3 reasons why prices are changing.

Firstly, the cost of using the networks to get gas and electricity to customers' homes is 9% more expensive than it was this time last year. There are a number of mandatory environmental and social initiatives that suppliers are required to fund. These include subsidising energy efficiency measures and payment of the Warm Home Discount Rebate. Unfortunately, these are 30% higher than they were a year ago.

We also buy some of our energy up to several years in advance. This balanced and sensible approach has allowed us to protect our customers from the sharp peaks in wholesale prices over the last few years. The price we've paid is 14% higher than this time last year.

Whilst I note your comments about other suppliers' prices, I must advise that it is not our normal policy to comment on the charges of our competitors. We pride ourselves on the principles of our Building Trust campaign; fairness, transparency and simplicity.

We buy some of our energy requirement far in advance, some a few months ahead of delivery and the remainder is traded at the latest possible time. This technique ensures that we buy just the right amount of energy.

This balanced approach allows us to avoid sharp spikes in the cost of energy but still allows us to take advantage of any sustained drops in the forward price. It also allowed us to reduce our gas price in March

2012 and if the market conditions allow we will offer a reduction in our prices.

Although the short term price of energy may fluctuate over the coming months, our existing contracts enable us to promise no more increases until the second half of 2013 at the earliest.

Naturally we are disappointed to announce this increase. Raising prices is never an easy decision, particularly when the group has posted a strong set of trading results.

Nevertheless, we must be aware that our retail business saw a significant drop in profit last year and with rising costs set to impact our business we simply could not maintain our current prices. We have a responsibility to make a modest profit from energy supply."

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Note their normal policy to not comment on other suppliers' prices, yet the fact remains that Power NI are proposing a 14% *reduction* in electricity due to easement of gas and coal prices.

[The Natural Philosopher]

Well tats what happens when you buy electricity from a company that depends on gas and wind and probably piss, to make electricity.

25% less buying from EDF.

EON and RWE are depsreatly gouging te UK market to pay for te disater rthat is te Geman electriciy market. Scottish and centrica are gas/wind..

EDF is stable and cheap. The nukes are all bought and the costs are totally predictable.

[Dave Liquorice]

Just done a price compare:

EON Track and Save 14 is =A388/year more expensive. RWE aren't in the top 20.

Scottish top and would only cost me another =A310/year... There are currently no other cheaper suppliers than my NPower Go Fix 11 tarrif (single fuel).

EDF would cost me =A370/year more on their Blue + Price Promise Apr 2014= tarrif. They are only stable provided HMG doesn't do a Merkel... I don't= think that will happen even cameroon isn't *that* daft.

[Graham Murray]

Yet surely all the (end-user) supplies come from the same generation and distribution network? So whether you purchase your electricity from SSE, EDF, EON or whomsoever it is the same electricity generated by the same mix of coal, gas, nuclear, wind turbine and hydro-electric and distributed via the National Grid.

[newshound]

Not from the same mix at all. EDF own their nuclear power stations, also have one coal and a few CCGT, IIRC. They are vertically integrated. They need to cover the costs of their generation from their sales.

Also, there is a futures market. Some companies hedge a lot, some don't hedge so much. In the long run the "efficient markets" theory should even out the costs. But over shorter periods the income they need depends on the spot price plus whatever hedging decisions they made in the past.

[charles]

are their electrons marked as such, so that they only go to EDF customers?

[Woodworm]

Do they have separate cable runs from their power stations to their end users then? And that's one of the reasons there is no REAL competition between tha various energy companies - and why they use a vast array of pricing schemes to confuse the public into thinking there is competition. A bit like this idiotic government is trying to do, rather than forcing the energy companies to lower the prices (or re-nationalise them) - ah I nearly forgot, I their coffers are receiving 5% VAT on every unit/therm used and shareholders skimming millions off as well -- thanks to Thatcher's government of 1979 to 1990 who actually put 17.5% on gas and electricity prices to add insult to injury (Gordon Brown reduced that to the minimum of

5% under EEC rules in his first budget when Labour came to power).

From one who has never fallen for the con - and never subscribed to a dual-fuel tariff.

[The Other Mike]

Yes, they used to have red yellow and blue ones but the EU changed all that.

[charles]

but theya re still differnt colour - just

[The Natural Philosopher]

On the vague assumption you really dont know how it works, EDF customer division will buy electricity wholeseale from its own generators and possibly others to supply its customers.

They match eventually how much they have sold with how much they have bought.

[charles]

We all know that - the question is how do you know what you are using only electricity generated by wind (for instance).

[Ste]

The rich and powerful are completely unable to sustain themselves or succeed without making a claim on those who actually produce. Bankers and such elect politicians to "liberalise" and unfetter markets in which they operate, and then reward themselves handsomely with goods and services confiscated from those who actually produce them.

[John Williamson]

nPower's fudge on their Juice tariff is to say that they guarantee to buy enough renewable power during the year (Currently mostly wind) to cover your total requirements.

What they don't say is that all your power will always come from renewables, because it can't.

[The Other Mike]

How do you know? - all the lights have gone out :)

If you are electrically 'close' to wind generation and it is generating then the chances are higher but it is not certain by any means.

Measurement of supply and demand for settlement purposes is over a 30 minute period. Instantaneous supply and demand may vary within that period such that the source of supply will not be known. Don't forget that the vast majority of consumers (of all types) meter nothing other than a total cumulative demand for energy.

If demand for wind exceeds contracted supply at point in time x, then some will come from other sources, even from 'nasty' coal and gas and nukes.

[charles]

How shocking.

[The Other Mike]

Only if you have access to a nice bright 150W incandescent lamp.

[The Natural Philosopher]

well in the case of electrons you don't. You pay a company that is selling windpower TO the grid for your electricity FROM the grid as it were,. Same with gas.

[The Natural Philosopher]

RWE has a 'renewable' power station burning imported wood pellets from Canada IIRC.

Scottish power will sell you hydro when it can.

[The Other Mike]

Yes I told you about that many months ago :)

Did you know about the new interconnector to Eire?

[The Natural Philosopher]

really? is it up and running?