UK energy firm stokes growing political row with price hike

Reuters

* SSE to raise prices by 8.2 pct next month

* Fuels political row over rising cost of living

* Other suppliers likely to follow

By Paul Sandle and Kate Holton

LONDON, Oct 10 (Reuters) - British energy supplier SSE inflamed a growing political row over the rising cost ofliving on Thursday when it hiked prices by more than three timesthe rate of inflation.

The leader of the opposition Labour Party put increasingenergy bills at the heart of his campaign for the 2015 electionlast month when he said he would freeze prices for 20 months ifhis party wins power.

Energy prices have risen 24 percent over the last fouryears, according to regulator Ofgem, ramping up the pressure onhousehold finances at a time of wage stagnation.

An 8.2 percent price rise on Nov. 15 will add more than 100pounds to average annual bills for SSE's customers taking bothgas and electricity, pushing charges up to 1,380 pounds ($2,200)a year.

"This is a crippling blow for consumers," Ann Robinson atcomparison site uSwitch.com said. "Adding a further 111 poundsto an already sky-high energy bill will leave consumers bucklingunder the pressure."

SSE, the first of the "big six" suppliers to raise pricesahead of the winter, said it needed to counter the increasingcost of buying wholesale energy, paying to deliver it tocustomers' homes and government-imposed levies.

Labour leader Ed Miliband's pledge to freeze prices beforelaunching a full restructuring of the market helped expand hislead over Prime Minister David Cameron in opinion polls. One puthis advantage at 11 points shortly after the announcement.

The government dismissed the idea as a socialist gimmickthat would hurt the industry and send out a signal that Britainwas anti-business.

The impact on the utility firms of Miliband's promise wasdramatic. Shares in the London-listed utilities SSE and Centrica lost a combined 2.7 billion pounds in market value intwo days after the announcement.

RISING COSTS

Labour said on Thursday that hard-pressed consumers werepaying the price for Cameron's failure to stand up to the energycompanies.

"We need an energy market which works for ordinary familiesand businesses," Miliband said on Twitter, as he pushed hisargument that Labour had the policies to rein in the rising costof living.

Energy minister Michael Fallon told Sky News he wasdisappointed with SSE's price hike and urged customers toexamine whether they could switch to a cheaper tariff.

SSE was also the first to raise prices last year, althoughit was followed within days by the market-leading gas supplierBritish Gas, part of Centrica and RWE npower, owned by Germany'sRWE AD. Rival Eon said on Thursday ithad no current plans to raise its prices.

Iberdrola's Scottish Power and EDF Energy make up the remaining members of the big six firms.

SSE, formerly known as Scottish and Southern Energy, saidraising prices for its 2.9 million gas and 4.4 millionelectricity customers not on fixed tariffs was "the last thingthe company wanted to do", and it pledged not to raise pricesagain before Autumn 2014 at the earliest.

"We're sorry we have to do this," said Will Morris, groupmanaging director retail.

"We've done as much as we could to keep prices down, but thereality is that buying wholesale energy in global markets,delivering it to customers' homes, and government-imposed leviescollected through bills - endorsed by all the major parties -all cost more than they did last year."

The company, which said it had a profit margin of 4.2percent in its energy supply business in 2012/13, shifted theblame for the price rises onto the costs of environmental andsocial policies pursued by both the Conservatives and theirLiberal Democrat coalition partners.

It said politicians could help consumers by transferring thecosts from the energy bill payer to the taxpayer, which wouldimmediately take 4 billion pounds off UK energy bills.

"We know we will come in for a great deal of criticism forthis decision and politicians will no doubt be lining up tocondemn us," Morris said.

"But over many years policymakers themselves have failed tohighlight adequately the cost to consumers of the policies theyhave pursued in government," he said, in reference to upgradednetworks and power stations.

The move by SSE lifted sentiment around the whole sector,with shares in Centrica up 1.4 percent and shares in SSE up 1.3percent.

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