Scottish & Southern Energy PLC is to cut its average annual gas bills by 12 pct to 534 stg, the company said this morning. The cut, which will start from tomorrow (1 March), will be joined one month later on 1 April by a 5 pct cut in the average yearly electricity bill to 355 stg. The dual fuel rate will therefore be on average 873 stg, a 9 pct cut. SSE says that the price cut makes them the UK’s cheapest supplier of energy, citing the 873 stg dual fuel bill as 4.6 pct cheaper than E.ON AG’s Powergen and 9.1 pct cheaper than Centrica PLC’s British Gas brand. It says it will waive any termination fees which may apply to any of its customers who are on its fixed price tariffs to enable them to take advantage of the new tariff without any penalty. SSE supplies energy as Southern Electric, SWALEC, Scottish Hydro Electric and Atlantic and is the UK’s third largest supplier of energy, and has 7.5 mln customers. Alistair Phillips-Davies, Energy Supply Director of SSE, said: ‘While wholesale energy prices were rising in recent years, we protected our customers from the worst impacts of the increases, with the result that we have been the UK’s cheapest supplier of energy for most of that period.”Since last September, we have made clear our intention to cut gas and electricity prices if there was a sustained fall in wholesale prices which would allow us to do so, and so I am very pleased that we have now been able to make this announcement. It means we are able to start cutting prices immediately.’

UK gas prices are unlikely to slide further in coming months, as some analysts forecast, because importers will probably reduce supplies over the summer, Lehman Brothers said on Wednesday. A week after analysts at Merrill Lynch slashed their UK gas price forecast for this year from 42 pence per therm to 25 pence, citing low demand and oversupply, rival U.S. investment bank Lehman is less bearish. “Although there is clearly some downside risk to our UK natural gas price forecast of 40p/therm for 2007, we do not forecast a complete collapse in prices in the coming months as we believe current and planned import capacity is flexible enough to partly mitigate severe oversupply,” it said in a research note. Merrill Lynch said last week that large amounts of gas still in storage, after one of the warmest winters on record, should keep downward pressure on UK gas prices throughout spring and into summer. Summer demand is usually supported by shippers buying on the spot market to stash away cheap gas for the next winter. So some traders and analysts expect UK gas prices to continue to fall through summer as low demand for storage, combined with continuing large imports, floods the market. But Lehman expects Norwegian producers, which have been largely responsible for the huge flows of gas into the UK since last autumn, could delay production until next winter when they can reasonably expect to get more for their gas. Meanwhile, forward gas contracts will remain linked to oil, where prices are likely to be supported by falling production, Lehman said. “A takeaway from the outlook statements accompanying the oil company year-end results we have seen so far has been the managing down of company production targets and accelerating decline rates,” the research note reads. “We continue to believe that the oil market remains tight and these factors should be supportive to the oil price going forward.”

UK gas prices at the National Balancing Point drifted lower Wednesday as a well-supplied system put some pressure on the prompt, although curve prices were still offering some support to the near-term contracts, traders said. Within-day was down to 17.75 p/therm by midday GMT, down from 18.5 p/th Tuesday, while day-ahead was at 17.95 p/th, down from 18.6 p/th. National Grid data showed demand bang on seasonal norms at 1100 GMT, at 335 million cubic meters/day, and system length at 7.9 million cu m. “We’re well-supplied but the curve is still holding the prompt up a little,” said one trader. “It’s not going to drop massively.” March was trading at 18.35 p/th at lunchtime, down from 18.8 p/th on the previous day, and still below the summer months. April was at 18.5 p/th and
May at 18.7 p/th. Several traders have said they are suprised at the summer premium over the front month. “Everything happening on the prompt is persuading me that the summer should be coming off, but obviously someone else thinks differently,” said one trader. On the far curve, trading was sparse and contracts drifted without any solid direction. “It’s deathly quiet,” said one trader. “The movement’s all pretty irrational at the moment. I think people would like it to come off again, but are too scared to get involved.” Winter 07 did trade down, reaching 40.75 p/th during the morning before firming to 41.2 p/th by lunchtime, compared with Tuesday’s close of 41.95 p/th. Winter 08 was also off, to 41.25 p/th from 42.1 p/th Tuesday, while summer 08 moved sideways to 29.4 p/th.

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Today, the Energy Saving Trust announced the first independent UK wide assessment of household wind turbines. The Energy Saving Trust helps consumers save money, reduce their energy consumption and reduce carbon dioxide emissions. The assessment will help consumers to make informed choices when considering a wind turbine for their home. The target is to monitor one hundred household wind turbines. The assessment will take into account a number of factors including the local wind resource, where they are installed on the house and the impact of nearby buildings and trees on the performance of the turbine. The trials will also take into account the impact the wind turbine has had on the householder’s energy bill, as well as other factors such as their experience when buying it and what impact it’s had on their daily life. There is the potential that household wind turbines could supply 4 per cent of the UK’s electricity and reduce carbon emissions by 6 per cent. To achieve this, the consumer needs to know what will work most effectively for them. Large scale wind turbines are a proven technology, and although household wind turbines are now available on the high street, they are still very much a developing technology. Philip Sellwood, Chief Executive of the Energy Saving Trust, said: “To date there is no independent, real life assessment of wind turbines installed on homes. Consumers need to know how much electricity they can expect to generate from a wind turbine, how much money it will save them, and how much it can reduce their carbon footprint.” “The experience of other wind turbine owners will also be of tremendous benefit in helping potential new owners to decide whether a wind turbine is right for them.” The project is joint funded by the Energy Saving Trust’s partners: B&Q, British Gas, EDF Energy, E.ON UK (Powergen), Northern Ireland Electricity, RWE (npower), Scottish & Southern Energy, and ScottishPower. Installation of the monitoring equipment is scheduled to take place between now and June 2007. The trial is scheduled to run for 12 months, with results in Autumn 2008.

Scottish & Southern Energy (SSE) has cut the price of its gas and electricity for 7.5 million customers. From the 1st March gas prices will fall by 12%, cutting the average annual bill by £72 to £534. In addition, from the 1st April electricity prices will fall by 5%, cutting the average annual bill by £18 to £335. SSE is the latest energy firm to lower prices. The cuts come after an increase in the supply of gas, thanks to imports from the Netherlands and Norway. Wholesale gas prices have fallen by about 50% over the past six months. On Tuesday, Powergen said its gas bills would fall by 16% and its electricity bills by 5% from the end of April. British Gas and Npower have also said they are cutting prices. Only two of the big six UK energy suppliers EDF Energy and ScottishPower have yet to announce a price cut.

British Gas, Npower and now Powergen have already announced lower tariffs in response to falling wholesale gas prices. As wholesale gas prices have fallen by about 50% over the past six months. Three of the Big Six have now announced price reductions and the others must follow. Scottish & Southern Energy, with about seven million customers, has also said it will cut its tariffs soon to keep its prices lower than those of British Gas. We widely expect with this recent announcement that Scottish & Southern Energy the UK’s third largest energy supplier and the UK’s number one renewable supplier, will announce its reductions within days. But this is likely to prompt swift retaliation from British Gas who are keen to remain the cheapest UK energy supplier in order to regain the one million customers lost last year.

Powergen has become the third big energy supplier to announce price cuts for its gas and electricity customers since the beginning of February. From 30 April, its gas bills will fall by 16% and its electricity bills by 5%. Powergen’s announcement will benefit six million domestic customers, with those on “dual fuel” contracts saving on average £92 a year. British Gas and Npower have already announced lower tariffs in response to falling wholesale gas prices. Wholesale gas prices have fallen by about 50% over the past six months. Powergen’s managing director Nick Horler said: “We’ve been very aware of the concerns of our customers over rising energy costs in recent years and now the wholesale market appears more stable, we’re pleased to be able to reduce our prices.” Adam Scorer of the watchdog Energywatch gave this latest price cut only a lukewarm welcome. “Three of the Big Six have now announced price reductions and the others must follow,” he said. “As prices come down we are concerned that consumers looking to switch for a better deal may be in for a confusing time with new products and complex terms and conditions emerging as companies jockey for position.” Scottish & Southern Energy, with about seven million customers, has also said it will cut its tariffs soon to keep its prices lower than those of British Gas. But so far it has not yet said by how much, or when the price cuts will come into effect. British Gas, which still has half the UK’s domestic customers, will cut its tariffs next month. Its gas prices will fall by 17% and electricity prices by 11%, cutting its average dual fuel bill by £167 to £953. But Mark Todd of Energyhelpline.com predicted that the company may cut its prices further. “This is likely to prompt swift retaliation from British Gas who are keen to remain the cheapest UK energy supplier in order to regain the one million customers lost last year,” he said.

E.ON UK said Tuesday it was cutting its retail gas prices for its UK Powergen customers by 16% and its retail electricity prices by 5%, effective from April 30th, 2007. The move is a response to recently announced price cuts by Centrica’s British Gas subsidiary and RWE-Npower. E.ON UK said that Powergen would be cheaper than British Gas when the new prices become effective. In an early response to British Gas’s price cuts, E.ON UK had earlier launched some new tariffs available on demand offering reduced prices for its customers. But E.ON UK did not initially cut its standard tariffs. The level of British Gas’s price cuts is believed to have taken some of that company’s rivals by surprise, so it has taken them time to catch up. EDF Energy, Scottish Power and Scottish and Southern Energy, the other three of the big six retailers have not yet announced price cuts, although SSE has said it will “blow British Gas out of the water” when it does. Customers on Powergen’s Age Concern tariff and StayWarm scheme for the over-60s will also see the impact of this decrease.

High taxes and falling prices will force the UK’s £9bn gas industry to cancel projects and scale back its operations in the North Sea, an industry leader has warned. Mike Simpson, the UK business manager of Tullow Oil, said gas companies dealing with low prices were suffering because they had to pay the same 50% corporation tax rate as oil producers. Simpson revealed that Tullow planned to cancel a production programme in one of its North Sea fields because it had become uneconomic. He said: “There is going to be a crunch in the gas business soon. The door will shut quite dramatically. It has already started – companies are pulling rigs out of the market.” He also warned that failure to ease the tax burden on gas could lead to hundreds of millions of pounds worth of the fuel being left below the North Sea.

Higher U.S. natural gas prices should help attract LNG cargos that would otherwise land this summer in the United Kingdom, which has seen its prices decrease almost 70% since November, according to some analysts.

RWE, the German energy group, today ruled out making a bid for Scottish & Southern Energy and set out plans to build several new plants in Britain under a €25bn (£16.73bn) five-year investment programme. Harry Roels, outgoing chief executive, when asked to comment on market rumours RWE was eyeing a takeover of SSE, said in Essen: “No, there’s absolutely nothing in it.” SSE is, with Centrica, one of the last two surviving independent British players in the UK’s liberalised energy market. Announcing a 14% jump in operating profits to €6.1bn last year, helped by the sale of Thames Water, Mr Roels said RWE npower, the group’s British arm, could now build two new gas-fired plants in Pembroke and Staythorpe. It has previously said it would opt for one. He also said npower would invest £100m in three new wind farms in the UK with a capacity of around 100MW and held out the prospect of building new-generation nuclear plants in Britain – if the government gave the go-ahead and there was “social acceptance” for a rebirth of atomic power. He made plain nuclear energy and clean coal were essential to reduce Europe’s dependence on imported power-fuels. Mr Roels, who has helped increase RWE’s market value to €70bn in the last few years, quadrupling its capitalisation, is to make way early next year for Jürgen Grossmann, a private steel company chairman. The RWE supervisory board surprisingly refused to prolong his contract earlier this week. The Dutchman, who said he would simply retire, disclosed that he earned €15.3m last year, making him one of Germany’s highest-paid executives largely thanks to a long-term incentive plan and bonuses. He indicated that his remuneration would be a third lower this year.

Scottish & Southern Energy’s stock market worth jumped by about £250m to £12.8bn yesterday as the Perth-based electricity and gas company was touted as a likely target for the new-broom chief executive of German utility RWE. The change of guard announced this week at npower parent RWE is being viewed by industry analysts as a move which will make the Essen-based electricity company far more acquisitive, perhaps motivated by fear of being left behind and becoming prey rather than predator in a fast-consolidating European energy sector. RWE’s compatriot, E.ON, is close to wrapping up a giant takeover of Spanish group Endesa. Iberdrola of Spain is meanwhile close to completing a takeover of SSE’s southern rival, ScottishPower. While there were no immediate signs yesterday that RWE was working seriously on any move on SSE at this stage, the Perth-based utility is, in the wake of the ScottishPower deal, being viewed ever more as a bid target, and the German suitor mooted yesterday would be high on any list of potential purchasers. Received wisdom, ahead of the ScottishPower purchase, was that the soundly-performing SSE was better protected from a takeover because its shares had outperformed significantly those of its southern rival since the companies were floated on the stock market at 240p-a-share in 1991. This view has altered as bid action and attendant speculation in the European energy sector has reached fever pitch, with the perception now that SSE would be a chunky but manageable deal for one of the big Continental players.

In terms of capitalisation, RWE is more than twice the scale of SSE with a stock market worth of more than 40bn (£27bn). SSE employs about 13,000 people, all in the UK, with about 3500 of them in Scotland. SSE is considered to be in particular danger, mainly because of the UK’s openness to overseas takeovers, which contrasts starkly with the numerous hurdles the Spanish government put in the way of E.ON’s bid for Endesa, and because there are few power companies quoted on the London Stock Exchange. However, any takeover of SSE would be a bitter blow for Scotland, particularly given ScottishPower’s impending loss of independence, because it would take out another key corporate headquarters. RWE said on Wednesday that its supervisory board would not extend the contract of chief executive Harry Roels, which runs out early next year. He will be succeeded by Juergen Grossmann, who owns steel firm Georgsmarienhuette Holding and will join RWE on November 1st. Grossmann’s group owns about 43 companies.

Referring to the jump in Scottish Hydro-Electric parent SSE’s shares yesterday, one electricity sector analyst said: “It is fairly likely that RWE is going to pursue a more acquisitive strategy following the change of chief executive. In that sense, it is not surprising the UK companies have come under the spotlight as usual. SSE, having just seen ScottishPower being taken out, is usually top of people’s list. “The fact they (SSE) are being linked with RWE is more to do with that chain of thought, rather than any bankers working on the deal. That would have to be pretty quick work from the (incoming) chief executive.”

SSE shares were up about 2.6% shortly before 11am, with news agency Reuters citing talk of bid interest from RWE. One trader said: “It is up on rumours of RWE for Scottish & Southern Energy.” SSE shares hit an intra-day high of 1507p, before finishing up 29p, or 2%, at 1490p. Alan Young, director of corporate communications at SSE, declined to comment on the RWE talk. RWE spokeswoman Annett Urbaczka said: “It is not our principle to comment on this market speculation.”

This was in contrast to RWE’s denial that it was behind the bid approach announced to the stock market by ScottishPower on November 8 which, it emerged later that day, had come from Iberdrola. Asked about this difference in response, Urbaczka replied: “In general, we don’t comment on this market speculation.” There is also a difference between the two events, with yesterday’s share price rise based on market talk rather than any regulatory statement from any company.

Analysts did not view the lack of comment from RWE as necessarily indicative of behind-the-scenes action. Another electricity analyst, who also declined to be named, said: “It is different in the sense this is a response to speculation rather than a fact. An offer had been made for ScottishPower whereas, in this other scenario, we are talking about a trader citing a bit of rumour.” On the RWE-SSE rumour, the analyst said: “I think it is a little early. The new management of RWE don’t come in for a little while yet. I think it is a little bit the thought, The old management have said this, but maybe the new management would be up for it’.” Citing hurdles to a bid, given RWE’s significant UK interests through its ownership of npower, the analyst added: “There would be regulatory issues and competition issues in a deal of that sort.”

In contrast, ScottishPower represents Iberdrola’s first significant move into the UK, which should be good news for most of the Glasgow-based utility’s employees in that opportunities for rationalisation aside from head office functions would be limited. Yesterday was not the first time the bid spotlight has shone brightly on SSE. On January 16, its shares rose 2.2% on market rumours that an unnamed suitor had placed a 1750p-per-share bid which SSE has rejected.

The government is delaying publication of its energy White Paper, including whether or not to build a new generation of nuclear power stations, until Easter at the earliest as it considers a court ruling against it, said Trade and Industry Secretary Alistair Darling. In a written statement, Darling said the government would not contest the ruling, handed down in a case brought by Greenpeace, that said there had been insufficient consultation on plans to go nuclear. “We shall therefore conduct a new consultation endeavouring to meet the court’s requirements,” Darling said. “It is now likely that the White Paper and the new consultation will be published in early May. However, if it can be published before Easter, I will do so.” Darling said the government still believed that there was a case for nuclear power “as one of the options companies should consider because of their potentially significant contribution to security of supply and reducing carbon emissions”. “Last week’s court judgement does not undermine this view.” Liberal Democrat Trade and Industry spokesman Susan Kramer said the move by Darling was proof it had been “caught out attempting to railroad through their nuclear U-turn whilst giving the public only a husk of information”. “Today we have seen the government grudgingly climb down and accept the need to undertake a proper consultation exercise,” she said. “The full economic and environmental costs, as well as the security risk, must be taken into account. Without that this new consultation will be a total waste of time and money.”

British Gas group Centrica today reported profits of £1.44bn, despite losing more than 1 million customers last year. The group, Britain’s biggest domestic energy supplier, said its residential energy business made a return to the black over the second half, with full-year profits of £95m. Earlier this month British Gas announced the first reduction in its domestic energy bills in six years, kicking off a price war as rival suppliers step up the battle to win customers. The reductions, which take effect next month, will see gas prices cut by 17% and electricity prices by 11%, although the cuts have been criticised by consumer groups as too little and too late. Centrica’s £1.44bn operating profit is a 5% reduction on the previous year, although turnover for 2006 jumped by 22% to £16.5bn. The group described the results as a “solid group performance in a volatile market place”. New chief executive Sam Laidlaw, who took over last July, admitted today that British Gas had delivered “less than satisfactory customer service” and promised to “sharpen up” the organisation as well as reducing costs. Mr Laidlaw said he had spent much of the past six months assessing the strengths and weaknesses of the business: “My initial observations are that the core businesses remain strong and we are in an enviable position in most of our chosen markets, with good growth being achieved internationally, particularly in North America.” But, he added: “It is clear that the returns in our residential business in the UK have been low and that we have proven to be overly exposed to the rapidly rising wholesale cost of the commodities which we supply to our customers.” He said customers had suffered as the group moved to a new billing system, “the efficacy and robustness of which is still in the proving stage”. Attention is now “firmly focussed” on improving service levels in the residential business, he said. Customer numbers at British Gas fell from 17 million to 16 million 10.2 million gas and 5.8 million electricity. Its share of the residential gas market slipped from 54% to 49% last year and from 23% to 22% in electricity as customers switched to cheaper suppliers.

Today’s figures include exceptional restructuring costs of £87m, including some 1,550 job losses, and a £196m exceptional write-down on IT systems.

Natural-gas prices in the U.K. fell for the ninth time in 10 days as milder weather and ample stockpiles increased confidence about supplies for the rest of the heating season. Natural gas for day-ahead delivery at the National Balancing Point dropped 0.5 pence to 15.35 pence a therm at 12:36 p.m., according to broker Spectron Group. Temperatures in London may reach 10 degrees Celsius (50 Fahrenheit) today and 11 degrees tomorrow, the British Broadcasting Corp. said on its Web site. The normal daily high at this time of year is 8 degrees, according to data on Bloomberg.