Families stunned as power bills soar to £1,391

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SCOTTISH households are facing another wave of steep energy price rises, after a leading provider revealed looming increases which will see the average annual gas and electricity bill rocket by £180.

ScottishPower said it would hike gas bills by 19 per cent and electricity by 10 per cent to increase its average customer bill to 1,391 a year - the highest price ever charged by a utility company.

Experts fear other providers are likely to follow suit in the coming weeks - leaving thousands more Scottish households struggling to pay their bills.

Many are already feeling the squeeze of rising inflation and pay freezes, forcing consumers to tighten their belts to be able to afford basic living costs.

In a further blow to household budgets, figures published today by the British Retail Consortium show food bills increased at the fastest pace in nearly two years last month as volatile commodity prices continued to push the cost of living higher.

ScottishPower said it had been forced to pass on the cost of wholesale price increases to its customers.

"Wholesale prices for gas and electricity have increased significantly since the end of last year and continuing unrest in global energy markets means future prices are volatile," said Raymond Jack, ScottishPower's UK retail director.

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"We understand times are difficult for many people, and we have done what we can to absorb these additional costs for as long as possible."

But Richard Lloyd, executive director of Which? said: "These price hikes from Scottish Power will be a shock for its millions of customers already struggling with the rising cost of living, and warnings from other suppliers suggest more bad news is to come."

The increase takes the average utility bill industry-wide to 1,162 - 9 more than when prices were at a peak in January 2009.

Watchdog Ofgem, which is conducting a major overhaul of the energy market, has come under fire from consumer groups and the Scottish Government, who believe the regulator should step in to put a stop to the spiralling cost of gas and electricity.The rise comes just a few months after all but one of the "big six" energy companies increased their bills by an average of 5.6 per cent, citing increasing wholesale costs and adding 630 million onto the total household energy bills of almost 28 million customers.

Bank of England governor Mervyn King last month warned consumers that he believed bills could rise by as much as 15 per cent to "record levels" over the coming year, following incidents such as the nuclear power plant disaster in Japan and the political crisis in Libya.

But ScottishPower's decision to increase both gas and electricity bills by double digits from 1 August already far exceeds Mr King's forecasts, and experts believe it could mark just the beginning of a string of price hikes over the coming year.

"We fear other firms will follow ScottishPower's lead," said Marieke Dwarshuis, director at Consumer Focus Scotland.

"Companies have been softening customers up for price rises for months, but customers will shocked at the scale of this rise. We know suppliers like the comfort of the pack and that price rises come in waves.

"Every household in the country will now be bracing themselves for the impact."

Joe Malinowski, founder of energy price comparison website TheEnergyShop.com, added: "Consumers need to take this warning seriously. The waiting game is over and all hell is set to break loose."

Already about 800,000 - one in three - Scottish households are in fuel poverty, defined as needing to pay 10 per cent or more of income on fuel bills.

But Scottish Government calculations show that for every 5 per cent increase in fuel prices, up to 46,000 extra households are pushed into fuel poverty.

"Fuel price increases of this magnitude will hit many people hard, but those who already have great difficulty in making budgets stretch will suffer most," said Norman Kerr, director of Energy Action Scotland.

Ann Robinson, director of consumer policy at uSwitch.com, warned that consumers were in "real danger" of a repeat of 2008 when energy bills rocketed by 334 or 41 per cent as a result of consecutive rounds of price hikes.ScottishPower's latest rise takes the average bill across the industry to 1,162 - 9 more than when prices were at a peak in January 2009.

"Suppliers may think this is justified because of the increase in wholesale costs, but Ofgem will need to consider whether these increases are justified or not and act swiftly to protect consumers," she said.

Parent company Iberdrola revealed last month that ScottishPower's profits fell almost 28 per cent during the quarter of the year, hit by the soaring wholesale price of natural gas.

Ofgem, which launched its investigation into the energy retail market in March, called for ScottishPower - and its rivals - to make their price structures transparent to customers.

"It is up to energy companies to explain their profits and prices to their customers and investors," said a spokesman. "The conclusion of our retail market review shows this is not the case. Suppliers are failing customers, which is why we want to radically overhaul the market."

The watchdog's proposals include cutting the number of standard tariffs so customers can compare deals more easily, as well as forcing the "big six" power companies, which includes ScottishPower and Scottish & Southern Energy, to auction off up to 20 per cent of their power generation. It is now reviewing the market's responses.

But Ofgem was accused of failing to take swift action over the issue. "It's time Ofgem woke up to this significant issue and looked at why the energy companies are not doing more to manage and mitigate more of the effects of price volatility," said a spokesman for the Scottish Government.

Consumer groups warned the rises left customers without any choice but to fork out for higher tariffs - leaving them financially strapped in other areas.

Lucy McTiernan, chief executive of Consumer Advice Scotland, said: "Customers can still switch suppliers to get the best prices, but with all the companies increasing their prices, it's getting to the stage where there's no such thing as a good deal."

Scottish politicians called for government intervention to protect consumers.

"People just cannot keep absorbing colossal energy price increases like this, and the UK government must step in," said SNP energy spokesman Mike Weir.

Liberal Democrat energy spokesman Liam McArthur added: "This news will be of particular concern to more vulnerable households. Ensuring measures are put in place to help meet their needs must be the priority of Scottish ministers."

UK Energy Secretary Chris Huhne insisted the price rises underlined the need for more renewable energy in the UK.

Last month, experts raised fears that SSE could raise its prices after the Perth-based firm reported a 29 per cent drop in profits - while Centrica, the energy giant that owns Scottish Gas, warned that its customers might have to pay more.