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24/10/2013
ScottishPower To Increase Domestic Dual Fuel Prices By An Average Of 8.6% To Recover Rising Costs

ScottishPower is to increase its domestic gas and electricity prices from 6th December 2013 following rises in forward wholesale energy costs, increased energy delivery charges and increased costs to support compulsory social and environmental schemes.  Dual fuel prices will increase by an average of 8.6%[1] . Gas prices will increase by an average of 8.5% and electricity prices by an average of 9.0%[1].

The average annual dual fuel bill for a customer will increase by £113[1].  This is primarily driven by:

  • 7%[2]  increase in the costs of the gas and electricity purchased on wholesale markets


  • 11%[3] increase in the costs of delivering gas and electricity to our customers’ homes


  • 16%[4] increase in the costs of compulsory environmental and social schemes

All these costs have had a significant financial impact as shown in the Group’s financial results for the first nine months of 2013 presented yesterday, which detailed an operating loss of £23 million for ScottishPower’s combined Retail and Generation activities in the UK. At the same time, ScottishPower has more than doubled its annual investment programme from £600million in 2006 to £1.3billion this year while continuing to be a strong payer of taxes with £2billion paid since 2007[5].

Neil Clitheroe, ScottishPower’s CEO of Energy Retail and Generation, said “The cost of purchasing and delivering energy to homes across Britain has risen significantly this year. With an increase in costs for delivering compulsory schemes to reduce carbon emissions and improving energy efficiency in homes, we unfortunately have no other option than to pass these on by increasing our prices for customers.

“We understand that these are difficult times for many families, and we have done what we can to hold our prices for as long as possible. Recently we announced a range of measures to help our most vulnerable customers this winter. We will now write to every customer who will be impacted by the price increase, and we would encourage anyone who is concerned to contact us so we can discuss their options.”

ScottishPower is also simplifying its pricing structure and reducing the number of different tariffs it offers in line with Ofgem’s Retail Market Review reforms, including:

  • “No Standing Charge” standard prices will be moved to “Standing Charge” standard prices


  • Discounts will be simplified with the prompt payment discount removed

From next year, social tariffs will soon no longer be supported by the Government’s Warm Home Discount scheme.  ScottishPower is the last of the major energy companies to remove this type of tariff.  However, we are taking steps to assist these customers by delaying any price increase for our Fresh Start social tariff until 1st March 2014 – helping these customers through the winter period.  From 1st March these customers will be moved to standard prices for their payment method.

ScottishPower will shortly commence writing to 2.2 million affected customers, with personalised information explaining their prices.  More than 1 million customers on capped or fixed products will not be affected.


See video below from Neil Clitheroe explaining today’s price increases:

 

Media Information: Simon McMillan: 0141 614 4582 & Paul Ferguson: 0141 614 4535


ScottishPower Price Change Explained:

1. What are the increases to customer bills?

We will write to every customer affected with a personalised quote for the change in their estimated annual energy bill.  For the average domestic GB customer using the existing Ofgem typical annual consumption values of 3,300kWh electricity and 16,500kWh gas, which will be in place until 31st December 2013, the changes are:

Ofgem recently announced[7] that from January 2014, it will reduce its benchmark typical annual consumption values for electricity to 3,200kWh (3% reduction) and for gas to 13,500kWh (18% reduction).  This reflects the significant increase in energy efficiency investment in GB over the last few years.  At these new benchmarks, the revised bill values are:

2. Why are you announcing a price increase?

Since last winter there have been many factors that have contributed to putting upward pressure on prices.  Using the new Ofgem typical annual consumption values (above) which will become effective on 1st January 2014, the average annual bill increase is £98, inclusive of VAT.  This is driven by:

3. What are the main costs that make up a typical ‘dual fuel’ bill?

Breakdown of costs for a typical £100 monthly energy bill in 2013, inclusive of VAT[9]

4. Regional Variations

For the average domestic GB customer using the existing Ofgem typical annual consumption values of 3,300kWh electricity and 16,500kWh gas, which will be in place until 31st December 2013, the changes are:

5. How do energy prices in GB compare with the rest of Europe?

Figures from ‘Household Energy Price Index for Europe’ Report, October 2013 suggest that GB prices compare favourably with the rest of Europe.
http://www.energy-uk.org.uk/publication/finish/6/958.html

GB has the seventh cheapest electricity prices in Europe, and the second cheapest gas prices (including taxes).

6. Why are you removing the Fresh Start Tariff, and what impact will be experienced by customers on this tariff?

The Government has introduced the Warm Home Discount scheme to provide direct financial assistance for vulnerable customers. This scheme replaces the voluntary social and discounted tariffs offered by energy suppliers. As a result, ScottishPower’s Fresh Start tariff will ultimately be removed.  However we are taking steps to protect these customers by delaying any price increase for our Fresh Start social tariff until 1st March 2014 – helping these customers through the Winter period. From 1st March these customers will be moved to standard prices for their payment method.

7. Why is the ‘No Standing Charge’ option being removed?

Whilst we have historically offered this option, this is no longer allowed under Ofgem’s Retail Market Review.

Ofgem’s Retail Market Review (https://www.ofgem.gov.uk/retail-market-review/retail-market-review-publications) aims to increase transparency and simplicity of prices, and as part of this review all tariffs must now be structured as a standing charge and unit rate.

8. Why has my Standing Charge and Unit rate changed?

ScottishPower will be reducing the level of Standing Charge for Prepayment customers and those who pay monthly by cash or cheque. From 6th December we will therefore have national standing charges consistent across fuel type and payment method. This is in line with Ofgem’s Retail Market Review principles to simplify our pricing structure.

9. What is covered by the standing charge and how does it work?

We have set our standing charges to cover our fixed costs of supplying a customer that do not vary with their consumption. We review our standing charges on an annual basis and recover these from customers using a daily charge.

10. What changes have been made to customer discounts?

We are introducing a Dual Fuel discount for Prepayment customers who take both gas and electricity from ScottishPower at the same premises. In addition our Prompt Payment Discount for those who pay quarterly, or who pay monthly by cash or cheque is being removed in line with Ofgem’s Retail Market Review reforms as these types of discounts are no longer allowed.

11. What is ScottishPower doing to help customers who may have difficulty in paying their energy bills?

We know that for many reasons customers sometimes struggle to pay their bills and if a customer gets into difficulty, we want to help. We encourage our customers to make sure they are on our best available deal for them by visiting our website www.scottishpower.co.uk or calling 0800 027 0072 (lines open Mon to Fri 8am to 7pm and Sat 8.30am to 1pm) where our UK Call Centre advisors will take them through an account review.

During winter bills go up so each year we commit to a number of measures designed to help our customers through this period.  Our Winter Commitments for 2013/14 are:

  • A Targeted Tariff Check – If you pay quarterly, we’ll get in touch to see if we can help you save on energy costs by making changes to your energy account.


  • Warm Home Discount of £135 – Is your household living in fuel poverty, or at risk of it? You might automatically get a rebate on your energy bills. If you don’t, you can apply directly to us to see if you are eligible[10] – we won’t put a limit on the number of households who could receive this discount.


  • Free Insulation and Heating Support – Certain qualifying households could benefit from our free boiler replacement or repair offer[11] – this could reduce your energy bills by up to £300[12]. Plus, qualifying households could also receive free cavity wall and loft insulation[11] which could save an extra £310[12] each year on your energy bills.


  • No Winter Disconnections – We will not disconnect any customers between 1 November 2013 and 28 February 2014.


  • Debt Repayment Break – We will be writing to some of our most vulnerable customers who repay their debt through their prepayment meter. From 1 December 2013 until 28 February 2014, we won’t collect any debt repayments from this group of customers.


  • Fixed Prices Until 31 December 2016[13] – Our current Help Beat Cancer Fixed Price Energy offer guarantees your prices until 31 December 2016. And there’s no cancellation charge if you switch to our other tariffs at any time[14].


Notes

[1] Based on a weighted average of impacted ScottishPower customers across all payment types, averaged across Great Britain, based on the current Ofgem typical annual consumption values (gas usage of 16,500kWh and standard rate electricity usage of 3,300kWh) and standard prices.  Excludes impact of removal of prompt payment discounts. Includes VAT at the current applicable rate of 5%.

[2] Average percentage based on the expected energy cost as purchased for the 12 months of 2013 compared to the 12 months of 2012 - based on the new 1st January 2014 Ofgem typical annual consumption values (gas usage of 13,500kWh and standard rate electricity usage of 3,200kWh).

[3] Average percentage based on the increased charges published by the electricity and gas network operators for the year commencing April 2013 compared to the year commencing April 2012 - based on the new 1st January 2014 Ofgem typical annual consumption values (gas usage of 13,500kWh and standard rate electricity usage of 3,200kWh).

[4] Average percentage based on our estimated cost of environmental and social obligations for the 12 months of 2013 compared to 12 months of 2012 - based on the new 1st January 2014 Ofgem typical annual consumption values (gas usage of 13,500kWh and standard rate electricity usage of 3,200kWh).

[5] Since 2007,  ScottishPower has paid £2billion in taxes – over £1billion in Corporation tax and a further £1billion in business rates, national insurance contributions and collected employment and environmental taxes.

[6] Excludes Prompt Payment discounts.

[7] On 13th September 2013, Ofgem published its new typical domestic consumption values to be implemented 1st January 2014.

[8] Based on a weighted average of impacted ScottishPower customers across all payment types, averaged across Great Britain, based on the new 1st January 2014 Ofgem typical annual consumption values (gas usage of 13,500kWh and standard rate electricity usage of 3,200kWh) and standard prices. Excludes impact of removal of prompt payment discounts. Includes VAT at the current applicable rate of 5%.

[9] This breakdown is an estimate of costs for 2013 based on an average of all ScottishPower's domestic dual fuel customers across Britain covering all payment methods using Ofgem's current typical annual consumption values (gas usage of 16,500kWh and standard rate electricity usage of 3,300kWh).

[10] Full Eligibility Criteria, rebate details and terms and conditions are available from www.scottishpower.co.uk/warmhomediscount. Applicants must apply by 31 January 2014.

[11] Full eligibility criteria (including in respect of receipt of certain specific benefits) and terms and conditions apply and are available from www.scottishpower.co.uk/insulationandboiler

[12] www.energysavingtrust.org.uk (September 2013)

[13] Help Beat Cancer Fixed Price Energy January 2017 Offer – your Direct Debit amount may vary depending on your gas and/or electricity usage. Limited Offer subject to availability and may be withdrawn from sale at any time. Full Offer Product Terms and Conditions apply (including as to eligibility).

[14] If you switch to another supplier before 31 December 2016, we will apply cancellation charges (currently these are £25 for electricity and £25 for gas, each inclusive of VAT at the current rate of 20%).


For more information on this price change, please visit our customer website using the button below:

 

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