Scottish & Southern announces price cutBut customers will have to wait for lower rates

06 February 2009

Gas hob

Gas is the most widely used heating fuel in the UK

Almost two weeks after British Gas’ said it would be lowering gas bills by 10%, rival Scottish & Southern Energy (SSE) has become the second gas and electricity supplier to announce price cuts for customers.

The company’s nine million customers will benefit from an average 9% reduction on the cost of gas and 4% on electricity. Like British Gas, the company has said the move was prompted by lower wholesale energy prices.

Small comfort

However, the reductions will be small comfort for SSE customers who saw their electricity bills rise by 19% and gas costs by 29% when the firm announced price hikes last August.

Customers will also have to wait until 30 March to see the benefit of the new lower prices. When SSE raised prices in the summer the increases took effect the following week.

Wholesale costs still high

SSE said that although wholesale energy prices had eased recently, wholesale electricity and gas costs still remained at ‘relatively high levels’ - 46% and 51% more in January 2007 respectively.

Alistair Phillips-Davies, SSE's energy supply director, said: ‘We know our customers want to understand what their energy is likely to cost in the future and that's what lies behind today's announcement.

‘The UK now relies on energy imports and wholesale prices for electricity and gas are still at historically high levels.’

Relief for consumers

Energy minister Mike O'Brien said: ‘Any price cuts will be a relief for consumers. We've been pressing all the energy companies to pass on wholesale price cuts to their customers as far and as fast as they can. We will continue to do so. There is still some way to go.’

Shareholder payout

SSE’s announcement was accompanied by a trading update that said the company was on course to deliver a ‘modest’ increase in adjusted pre-tax profits on the £1.23bn it made in the 12 months to last March.

Chief executive Ian Marchant said that SSE shareholders can expect a rise of at least 9.1% in their annual dividend payout.

Which? principal economist John Holmes said: ‘While SSE looks after the interests of its shareholders, its hard-pressed customers get a small price cut that won’t take effect until spring with the cold snap likely behind us and consumers thinking about turning down their central heating.

‘At least SSE, unlike British Gas, has cut its electricity prices, which are primarily determined by the wholesale price of gas.’

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