Energy and Climate Change Contents


Memorandum submitted by Scottish and Southern Energy

DOMESTIC ENERGY PRICES FROM 30 MARCH 2009

  I am writing to let you know that we have this morning announced a reduction in our prices for domestic electricity and gas customers which will be implemented on 30 March 2009. In summary, average prices for electricity customers will fall by 9% and for gas customers they will fall by 4%.

  Inevitably this reduction in domestic prices will be compared with the falls in wholesale prices that started between July and October last year. In reality, a meaningful comparison between the percentage falls in retail prices and the percentage falls in wholesale prices is not possible, because we did not pass on to customers anything like the full impact of the wholesale price rises experienced during 2008. Moreover, wholesale energy prices remain at high levels, being 46% and 51% respectively higher in January 2009, compared with January 2007.

  It is perceived that price reductions in energy supply occur much more slowly than price increases. Ofgem spent much of 2008 looking at this and concluded that there is a lag between changes in wholesale and retail prices—but they found no evidence that the lag is greater when prices are falling than when they are rising.

  I know that you will wish to explore these and other issues when the Committee meets on 11 February. As you know, Scottish and Southern Energy Group is one of only two of the six energy suppliers listed on the London Stock Exchange. It is the view of the Board that the importance of the issues which the Committee wishes to look into during the session is such that the company should be represented at Group Chief Executive level on this occasion. I therefore look forward to meeting you then.

February 2009





 
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