SSE's price peg will cost £1.2bn:
Scottish & Southern Energy, one of Britain's leading gas and electricity suppliers, will have lost up to £1.2bn by next April by holding back increases in household bills. The news came as Npower, one of SSE's main rivals, announced its third increase of 2006, with bills set to rise by 17.2pc and 9.9pc for gas and electricity customers from October 1. Analysts at Citigroup, which calculated the SSE figure, said it was a "staggeringly high number" in a research note published this week. The figure is "made up of £1.04bn of revenue that it would have generated had it matched British Gas' price increases and an underlying loss of £159m on the customers gained". SSE's lower prices meant that it had increased customer numbers by 2million to 7million. However the analysts said it would take 16 years for the company to recover these lost revenues assuming that none of the 2million left. Yet Citigroup said that strategy had left the company in a "unique position, which can benefit from a rising or falling wholesale gas price". This is because SSE would have enough customers to make better margins in its retail businesses if the currently high generation prices fell. SSE declined to comment. However sources close to the company said: "The thesis that they have given up short-term profits for long-term value is right." SimplySwitch.com data shows that since January 2004 SSE has pushed through the lowest price rises among the six major suppliers - 57.4pc for gas and 30.9pc for electricity. In contrast, British Gas – the most expensive market – has increased gas and electricity bills by 86.6pc and 76.8pc, while Powergen had boosted bills by 86.2pc and 51.6pc for gas and electricity. 8.9.06