Perth-based energy giant SSE yesterday revealed how earnings from domestic customers shot up during last year’s cold weather and warned that prices would continue to rise in the months to come.
It said average temperatures were lower in 11 of the 12 months to the end of March compared to the previous year, driving gas consumption up by more than a fifth and causing electricity usage to rise by 5%.
Full-year results showed underlying, pre-tax profits from SSE’s retail division, which supplies energy to UK households, were up to £410.1 million in the year, from £321.6m in the previous period.
The statement also revealed that earnings from energy supply were up by 34%, from £271.7m to £364.2m, when falls in areas such as boiler installation and meter supply were stripped out.
Overall year-end, underlying pre-tax profits at SSE, which trades as Southern Electric, Swalec and Scottish Hydro, were up 6% from £1.34 billion to £1.41bn, with operating profits in the group’s wholesale arm slipping back 16.2% to £509.5m in a “challenging market”.
SSE said it was disappointed that it had to hike tariffs in October, blaming costs including wholesale energy price rises.
But it warned there were more rises in the pipeline, because it was facing additional costs of more than £80 per dual fuel customer this year.
“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,” it said.
The company added that it intended to “resist this trend of higher costs for as long as possible to shield customers from the unwelcome impact of higher prices”.
After derivative movements, tax on joint ventures and exceptional costs of more than half a billion pounds which included write-downs for the mothballing of power stations, a lower-than-expected insurance settlement over interruptions in supply from the Medway power plant, and a restructuring of its carbon emission allowances SSE reported pre-tax profits were some 58% lower at £600.9m.
Impairments also included a write-down in the value of what the firm called “economically uncertain new technology and renewable generation development assets”, as well as the value of old meters.
SSE, which has been hit by a £10.4m fine from regulators in the wake of a mis-selling scandal, said customer numbers had fallen by 80,000 to 9.47 million in the year.
It also announced that annual bonuses for executive directors were being slashed by 40%.
Outgoing chief executive Ian Marchant, due to leavenext month, has waived his entire £329,000 bonus, as well as a share payment from last year. He missed out on this bonus for 2013.
But he will still benefit from a 2011 share award and a £10.4m pension pot which stands to pay him £420,000 a year from the age of 60.
Lord Smith of Kelvin, SSE’s chairman, apologised over the scandal.
“Companies don’t just have to earn profits; they have to earn profits in the right way,” he said.
The firm also repeated its warnings over a forthcoming energy “crunch” in the years to come, and called for more detail on electricity market reform.
It said there remained “significant uncertainty” over the operation of the market in the latter half of this decade.