Wrong to blame green policy costs for SSE's tariff increase

Published Thu 10 Oct 2013
New analysis shows green policies account for only a sixth of the rise.

New analysis of today's announcement by SSE that they will raise tariffs, by think tank IPPR, shows that network charges (the cost of delivering energy to the door) and wholesale gas costs are the main reason for the tariff increase, not the cost of green policies, which account for only a sixth of the rise.

SSE claim their tariff increase will lead to the annual dual fuel bill rising from £1131 to £1224, an increase of £93. IPPR's analysis shows that network charges have added around £28 to the average annual dual fuel energy bill, wholesale energy costs around £23, government schemes around £15, and VAT around £5. This leaves £23 of the rise unaccounted for, presumably in internal operating costs and profits.

Reg Platt, IPPR Senior Research Fellow, said:

"Consumers will be reeling from today's announcement by SSE that they are to raise their energy tariffs by an inflation busting 8 per cent. Hard pressed bill payers have a right to accurate information on why their bills are going up.

"Some people will try to claim that the cost of green policies is the main reason bills are going up but this is not the case. Breaking down SSE's announcement it is clear that network charges and wholesale gas costs are the main reasons, with government policies making up a smaller proportion of the rise.

"This still leaves a substantial amount of the rise unaccounted for by SSE but presumably for internal operating costs and profits. If consumers are to be confident they are not getting a raw deal, we need urgent action from the government to radically improve transparency on suppliers costs and profits, and greater competition in the market to drive down these costs and profits."

Notes to Editors

SSE say in their press release that wholesale gas costs make up around 50% of the bill, network charges around 25%, government schemes around 10%, and VAT around 5%.

They also say that over the past year the average price of wholesale gas has risen by 4%, network charges by 10% and government schemes by 13%.

SSE's average dual fuel (gas and electricity) tariff before the increase was £1131 a year. This means that rises in wholesale costs are responsible for the tariff increasing by around £23, rises in network charges around £28, increases in the cost of government schemes by around £15, and VAT around £5.

SSE say their tariff increase will lead to the annual dual fuel bill rising from £1131 to £1224, an increase of £93. This leaves £23 of the rise unaccounted for. IPPR's 'True Cost of Energy' report showed that these additional costs were accounted for by operating costs and profits. For more see: http://www.ippr.org/publication/55/9040/the-true-cost-of-energy-how-competition-and-efficiency-in-the-energy-supply-market-impact-on-consumers-bills

Contacts

Richard Darlington, 07525 481 602, r.darlington@ippr.org

Natalie Cox, 07983 550 337, n.cox@ippr.org

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