ScottishPower customers face higher energy bills after parent company Iberdrola admitted in a stock exchange announcement that it had “no option” but to increase tariffs in the UK.
The firm, which has not so far commented on its pricing position, told The Scotsman that it would be forced to up its prices before the end of the year, following in the footsteps of its major competitors.
The admission comes as the coalition government suffered a major rift yesterday over its economic policy when Lib Dem Chief Secretary to the Treasury, Danny Alexander, rejected Prime Minister David Cameron’s announcement that the government will cut energy bills by “rolling back the green taxes”.
In an announcement of its third-quarter results to the Spanish stock exchange, Bilbao-based Iberdrola said the UK business had been affected by “tight margins aggravated by energy efficiency and environmental measures imposed by the regulator”. “As a consequence, generation and supply is now loss-making and leaves the company no option but to increase tariffs,” it wrote.
Moves to decarbonise the energy sector have resulted in hefty penalties on utility companies. But the firms have come under fire for passing the burden on to the consumer.
Earlier this week, npower became the third of the “Big Six” energy companies to hike prices amid claims of spiralling wholesale costs and stringent green energy taxes. Only ScottishPower, E.ON and EDF have not yet raised their tariffs.
But Keith Anderson, chief corporate officer at ScottishPower, admitted that prices would “inevitably” go up over the next two months, pointing to a £23 million loss in its UK retail and generation arm.
“A number of our competitors have put prices up,” he said. “We have the same cost pressures as they do and prices are going to go up, undoubtedly.”
He said the conundrum of de-carbonising the energy industry by encouraging customers to use less gas and electricity – and therefore reduce their bills – had had an effect on the business.
At Prime Minister’s Questions yesterday, Mr Cameron was put under pressure by Labour leader Ed Miliband on the rising cost of energy bills.
It is the first major split on economic policy since the Tory/Lib Dem coalition came together in May 2010 and has led to Labour claiming it was the day Mr Cameron “lost control of his government”.
The announcement followed calls by former Tory Prime Minister Sir John Major for the government to impose a windfall tax on the back of bill hikes.
But the pledge by Mr Cameron to “roll back on green taxes” was met with visible shock by Lib Dem Deputy Prime Minister Nick Clegg and provoked a furious response from Lib Dem coalition partners, with Mr Alexander saying that the agreed plan was to actually increase them instead.
He said: “We have made commitments on environmental levies as a coalition – the Conservatives haven’t put forward any alternative proposals. But we as Liberal Democrats will support our commitment to the environment and don’t want jobs in Scotland and the rest of the UK which are supported by these levies to be undermined.”
He added: “There is no commitment to roll back environmental levies. Quite the contrary, it is a very important part of our long-term strategy to tackle climate change and the security of our energy supply.”
Mr Cameron made his remark following heavy criticism of environmental levies from the energy sector led by Scottish and Southern Energy (SSE) chief executive Alistair Phillips-Davies, whose company has put bills up by 8.4 per cent.
Mr Cameron said: “I want more companies, I want better regulation, I want better deals for consumers. But, yes, we also need to roll back the green charges that he put in place as energy secretary.”
As well as angering Mr Alexander, the Prime Minister’s comments put him on collision course with Lib Dem Energy Secretary Ed Davey, who earlier this month said it would be “silly” to cut green levies which help low-income households install energy-efficiency measures.