Scottish Power raises energy tariffs from August

Published 08th Jun 2011

Scottish Power will increase domestic gas tariffs by nearly a fifth at the start of August in a move that could push consumer price inflation to a three-year high above 5 percent.

The utility company said Tuesday gas bills will increase by an average of 19 percent from August 1, while power bills will be 10 percent more expensive, a rise that will affect 2.4 million British households.

"Prices for gas and electricity have increased significantly since the end of last year and continuing unrest in global energy markets means future prices are volatile," said Scottish Power's UK Retail Director Raymond Jack.

Philip Rush, a UK economist at Nomura, estimated that Scottish Power's increases on their own would add 0.06 percentage points to British inflation, which is currently more than double the Bank's 2 percent target at 4.5 percent.

Rush said Scottish Power had been under pressure to raise prices sooner than its competitors, as it had increased prices by less than its peers last winter.

However, if other utilities followed suit and raised electricity prices by 10 percent and gas prices by 15 percent, then this would add 0.6 percentage points to inflation.

"It certainly increases the chances of inflation reaching or going above 5 percent," Rush said.

The price increases were in line with those forecast in the Bank's May Inflation Report, but wholesale energy prices have fallen since then and some economists had forecast smaller increases in utility bills as a result, Rush added.



REASONS FOR TARIFF RISES

Scottish Power's Jack said costly government programs for meeting environmental and social targets and high transmission expenses were also reasons for the tariff rises.

The utility's 70,000 most vulnerable customers can receive a discount on energy bills through a dedicated scheme, the company added. The company also said it was investing 4 billion pounds between 2010 and 2012 into renewable energy projects, smart grid technology and modernising power networks.

Secretary of State for Energy and Climate Change, Chris Huhne, called the tariff increase "disappointing."

"But it underlines why the government is building an escape route from a high fossil fuel future. We need to get off the oil price hook and on to clean, green growth," he said.

Parliamentarians have accused the country's six largest utilities of passing on wholesale price gains to customers more quickly than falling prices.

Source: ' Reuters '

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