Scottish Power profits surge, but group warns of inevitable price rises

Scottish Power profits surge, but group warns of inevitable price rises

	Published : Wed, 24 May 2006 13:55 By : Paula Demarzio Print this Story

GLASGOW - Scottish Power today announced a 47 percent increase in annual profits before tax, but warned that customers could face further increases in energy bills. The nation's fifth largest energy supplier said that price rises were "unavoidable in the short term" because of soaring prices in the wholesale market worldwide.

Scottish Power has already raised the price of gas by 15 percent and of electricity by 8 percent this year. However the group said that despite reporting profits of £525 million, its energy costs had risen 70 percent over the last year. Higher "regulatory" revenues and better handling of cost controls were responsible for the profits rather than any price rises, the group said.

"This is an excellent set of results for Scottish Power. All of our businesses have delivered very good growth through improved operational performance and attractive returns on our investment programme," said Chief Executive Philip Bowman. But the group said, "Further tariff rises will be unavoidable in the short-term given continuing high wholesale prices."

However customers are not going to understand price rises even when the company is rolling out huge profits, according to Karen Darby, the chief executive of price comparison website SimplySwitch.com. "Scottish Power is blaming the rise in wholesale costs for the need to increase prices. I am skeptical about this link and believe that suppliers are being overly cautious, as the cost of supply is less than 50 per cent of the cost to the retailer," Darby said.

"Scottish Power is not particularly competitive and has been slipping down the league tables. Their customers will realize that there is no prize for loyalty, and vote with their feet, as we have seen with British Gas. At the height of the price increases earlier in the year, we were switching customers to new suppliers every 44 seconds."

Scottish Power said that it would be concentrating on consolidating its customer base over the next year. It would only try to get new customers if the deals were profitable. The group also announced a 11 percent increase to the full-year dividend, which is now at 25 pence.