ScottishPower says price hikes needed to fuel £15bn investment

ENERGY giant ScottishPower has mounted another defence of its steep price rises, saying it will have to spend £15 billion over the next nine years to help the UK government meet its "ambitious" carbon reduction targets.

The firm, which came under attack after hiking bills by as much as 19 per cent, said it would be investing heavily in a number of clean energy projects between now and 2020.

Power companies argue that the UK will need to find hundreds of billions of pounds over the next ten years to upgrade infrastructure if the UK and Scottish governments both want to meet goals of sourcing a greater proportion of energy from renewable sources.

ScottishPower claims it was forced into inflation-busting increases due to sharp spikes in wholesale gas and electricity prices, combined with investment in government environmental and social programmes.

Ignacio Galn, chairman of ScottishPower and its Spanish parent company Iberdrola, yesterday waded into the increasingly bitter battle between the firm and politicians, who claim it is profiting at the expense of hard-hit households. It was the first time Galn revealed such a long-term investment figure. He said: "It is clear that the UK needs major investments to upgrade its energy generation and infrastructure in the next few years in order to guarantee supplies and meet the government's ambitious clean energy targets.

"We believe that these targets are achievable, and we are ready to spend 15bn up to 2020 on a number of major energy projects that will go a long way towards meeting them. We look forward to working with the authorities on progressing quickly to achieve a workable regulatory framework that will support those investments, giving us the stability and predictability we need."

His comments came a day after two senior ScottishPower executives were summoned to Holyrood to explain its price jumps. The average household bill for gas will surge by 19 per cent while average electricity bills will go up by 10 per cent.

Following the meeting, Scottish finance secretary John Swinney said the increases remain "deeply concerning" although the two parties agreed to work together on a 10 million campaign to improve household energy efficiency.

However, the 10m did not represent additional funding and will be taken from a 20m pot already earmarked for such projects across the UK as a whole.

Despite the public outrage, there are those in the industry who believe politicians are powerless to curb household energy rises as the government is so dependent on utility companies to bridge a glaring funding gap.

A spokesman for the Department of Energy and Climate Change (DECC) confirmed that "gigantic investment" is going to be needed over the next ten years to keep the lights on in the UK - up to 200bn. He urged households to shop around for a better deal if they were unhappy with rising costs.

"Fewer than one in five people switch energy company in a year," the DECC spokesman said. "The government is (also] backing moves by Ofgem to make energy tariffs easier to understand and tackle poor practices to help consumers assess whether they are getting the best energy deal for them and to take steps to switch supplier and/or tariff if not."