ScottishPower has reignited the row over who is to blame for rising energy bills after reporting the costs of government energy efficiency schemes had more than doubled since last year.
Keith Anderson, the energy giant’s boss, said the government had got its sums wrong over the costs of implementing its new “Energy Company Obligation” (ECO) programme – and refused to rule out raising prices as a result.
Analysts warned that suppliers were likely to increase prices by a “high single digits” percentage before winter, due to rising costs from the schemes as well as wind farm subsidies, the new carbon tax and network upgrade costs.
ScottishPower said yesterday the costs of implementing energy efficiency schemes had risen by 137.7pc, to €155.8m (£134.3m) for the first half of the year.
This led to a 7.3pc drop in profits from its UK power generation and energy supply business, to €224.7m – despite revenue and gross margin both rising as usage increased in the cold weather and the company gained new customers.
The ECO scheme requires suppliers to fit measures such as solid wall insulation in customer homes and to help vulnerable customers. They face fines of up to 10pc of turnover if they fail to hit the targets.
Officials insist ECO should cost no more than previous schemes, at £1.3bn or about £50 per household per year, and so should have “no impact on consumer bills”.
But the industry has repeatedly warned the scheme is poorly designed and will be far more expensive at around £2.4bn, or £94 per household – and potentially as much as £3.1bn or £125 on bills.
Mr Anderson said: “We are seeing a big increase in our costs associated with the new ECO scheme. What we are seeing coming through is, this is in line with what we predicted – not what the government predicted.”
Part of the 137.7pc spike was due to costs being unevenly distributed over the year, but ScottishPower is understood to be budgeting about £210m for ECO and fuel poverty schemes this year, a rise from £160m for similar schemes last year.
ScottishPower also highlighted the impact of the carbon tax, which has already cost it £10m since coming into effect on April 1.
Mr Anderson said the company would “see how long we can hold those costs and protect customers” but that doing so was a “big challenge”.
“We will continue to work incredibly hard to make sure our businesses are as effective and efficient as possible and try to manage these costs as best we can. We don’t predict when price rises will happen or rule price rises out,” he said.
John Musk, analyst at RBC Capital Markets said: “I think we are looking at high single digit price increases pre-winter.”
Mr Anderson said it was proving difficult and therefore expensive to identify the correct types of properties and customers to meet the ECO scheme.
Previous schemes had focused on installing cavity wall and loft insulation, whereas “trying to sell solid wall and hard wall insulation is a much more difficult, costly, time-consuming process”.
The installation is much more “intrusive” and therefore “much more difficult process to get people to sign up to”.
Costs had also been exacerbated by the low take-up of the Green Deal programme, which was supposed to help support the financing of the ECO scheme but had been “a lot slower than the original government predictions”.
Ministers want millions of households to take out loans to pay for energy efficiency measures but so far just 36 have done so.
The government has accused the industry of “scaremongering”, with ministers insisting costs are coming in as they predicted.
DECC said it had seen “no evidence that would lead us to question our assumptions of ECO costs”.