‘Extraordinary numbers’ ScottishPower’s ‘obscene’ £7bn
The Herald on Sunday can reveal dividend levels at the company have soared from £300m in the first full year of the Iberdrola takeover in 2018 to £860.4m in 2020 – which is the third-highest payout in 15 years
SCOTTISHPOWER, which has been pushing for a taxpayer-backed £100 billion fund to help energy firms freeze bills, has handed over nearly £7bn in dividends to its foreign owners since being taken over, it can be revealed.
The payout bonanza to its Spanish owner Iberdrola over its 14 years of control of the Glasgow-based company has been revealed as its high-profile chief executive Keith Anderson has seen his pay soar by £200,000 to £1.35 million in a year.
Six years ago, Scottish Power Limited’s highest-paid director was getting almost half that at £687,000.
ScottishPower’s dividend payments to Iberdrola have amounted to nearly £1bn in the past two years alone as customers face energy bills soaring by three-and-ahalf times in a year.
The amounts paid out over nearly 15 years is £2bn more than Mr Anderson said Iberdrola was putting into a major five-year global investment plan in the UK when he was appointed chief executive in February, 2018.
Campaigners have described the amounts that have been paid out as “obscene” as Mr Anderson tabled the energy prices safety net plan to Scottish and UK ministers that would be underwritten by taxpayers funds and have to be paid back through bills.
Armed Forces Minister James Heappey dismissed the “eyewatering” loan scheme proposal as not the best way to get through a winter of price hikes, saying that taxpayers’ money should be targeted to the “people who need it the most”.
‘Stark contrast’
SIMON Francis, co-ordinator of the End Fuel Poverty Coalition said: “The profits, dividends and bonuses enjoyed by the firm are in stark contrast to the misery felt by millions of people in Scotland and beyond as energy prices soar.”
On Friday, Ofgem raised the annual energy price cap bill for the average UK household by an unprecedented 80 per cent from October, from £1,971 to £3,549 – hitting 1.5 million Scots households with the biggest increase yet. That means the typical UK home will pay nearly £300 a month.
Prepayment meter customers, often among the most vulnerable consumers, will pay an extra £59. Since the Ofgem price cap was introduced in January 2019, to protect consumers from soaring bills, nearly £1.25bn in dividends has been paid by ScottishPower to Iberdrola.
The introduction of the price cap for customers was an attempt by Ofgem to put an end to suppliers exploiting loyal customers and allow consumers to pay a fairer price for their energy. It was seen as a safety net for customers who do not regularly switch and who are on standard or default tariffs – typically a supplier’s most costly charges.
Dividend levels have soared from £300m in the first full year of the Iberdrola takeover in 2018 to £860.4m in 2020, the third-highest payout in 15 years. The highest dividends were in 2013 when £917m was paid out and 2014 when it was £900m. In 2021, the dividend was £45m.
ScottishPower says that £500m of the 2020 dividend was an “exceptional payment” following the £702m deal to sell a number of its generation projects to UK power company Drax. Under the deal agreed, Drax bought sites including the Cruachan pumped storage hydro station, run-of-river hydro locations at Galloway and Lanark, and a biomass-from-waste facility at Daldowie. The portfolio also includes four gas turbine sites.
Mr Anderson presented his plan as he attended a special summit held by First Minister Nicola Sturgeon on Tuesday to discuss what can be done to mitigate the impact of soaring energy bills.
Freeze proposals
THE Scottish Government said the summit involving energy companies and advice organisations reached a consensus that the energy price rises should be scrapped so that a plan is put in place to fund a bills freeze.
The proposal, which had the backing of fellow “big six” energy supplier EDF, involved setting up a fund that would be made up of the difference between what people pay now and how much it actually costs to supply homes with gas and electricity to “help people in the here and now”.
He has said the scheme would allow the Government to buy time over the
The profits, dividends and bonuses enjoyed by the firm are in stark contrast to the misery felt by millions of people in Scotland and beyond as energy prices soar
next two years and speed up investment in cheap green energy. Mr Anderson had indicated the fund could be paid off by the customers who can afford their bills over a 10 to 20 year-period, or the Government could partially fund it.
Once bills had returned to more affordable levels, the price cap would be replaced with a social tariff, ensuring the most vulnerable in society are paying less.
Mr Anderson said action was needed as predictions for future price cap rises were “off the charts”.
US bank Citi predicted that the energy bills price cap would be raised to £4,567 in January and then £5,816 in April, compared with the current level of £1,971 a year.
End Fuel Poverty Coalition’s MR Francis said the group was nervous about ScottishPower’s plan. “It seems like a Government underwritten blank cheque to carry on business as usual. Instead, we would have hoped that the energy bills crisis is a wake-up call that Britain’s energy system is broken and in need of fundamental reform,” he said.
“In addition to the reform of the energy market, we need to look at long-term solutions to fuel poverty. This means additional UK Government funding to drive better energy efficiency of homes and support the switch to cheap renewables, rather than look at bailouts.”
He added: “There have been calls to scrap the energy price cap entirely. In
February, Keith Anderson blamed it for dozens of corporate insolvencies in the sector.”
“The price cap may have its many, many flaws, but it does at least protect consumers by limiting the profits suppliers can make on our bills to 1.9%. It doesn’t stop the producers – which may be linked to the suppliers – from making excess profits, but it does help somewhat. Remove it – without some other form of protection – and we’re left to the whims of profiteering of the suppliers as we were pre-2018.
“What many of our members support is a beefed-up price cap and a social tariff to help the households most in need.”
£223 million rise
FINANCIAL reports made to Ofgem, which include domestic electricity and gas supply, show that ScottishPower took £477.7m in 2020 from energy generation and supply – an annual rise of 87% (£223m).
It had accumulated earnings of £1.53bn over five years, having seen profits more than double over five years from £205.7m in 2016.
One of the organisers of a series of Power to the People protests at the ScottishPower headquarters in Glasgow and Ofgem’s offices in the city, calling for action to tackle “astronomical” rises in household bills, said the dividends and pay rises were “obscene” and added that public utilities should be nationalised.
“Those are extraordinary numbers,” he said. “Of course, this £100bn bailout suggestion helps the energy firms. It is self-interest.
!The taxpayer is being asked to bail out companies out that have been the cause of the problem.
“The numbers are unsustainable. Nationalisation is in the interests of the people, as it would stabilise pricing and be for the benefit of the people and not profitability and not for shareholders.”
Labour says its plan to ease the costof-living crisis with a six-month freeze on energy bills at the current £1,971 price cap would cost £29bn.
Funded in part by expanding a windfall tax on oil and gas profits, it was estimated that it would save the average household £1,000. But the price cap rise was widely expected to go up an average of around £1,600.
Findings from economists at the Institute for Fiscal Studies (IFS) think tank suggested that the total cost of the plans could be even higher, at roughly £8bn more than Labour’s projected price tag.
Levy ‘loophole’
SETTING out the costings for its plan at the time it was announced, Labour said it would close a “loophole” in the levy on the profits of the energy companies announced in May, and backdate the start to January, which together with rising global prices would bring in £8bn. The party said £14bn would come from other measures such as dropping the £400 energy rebate, and abandoning pledges made by the Tory leadership contenders.
And by keeping inflation down, it said it would reduce the Government’s debt interest payments by another £7bn. When Mr Anderson was appointed chief executive of ScottishPower in Feburary 2018, he spoke about the Iberdrola investment plan, adding: “We will be delivering this investment in renewables, networks and customer service at a time when the political and regulatory environment in the UK is as challenging as it has ever been.
“In the role of CEO, I will be working hard to ensure that all of our business areas can continue to deliver for our customers, while our major investments help to develop a smarter and cleaner energy system for the UK.” Analyst Cornwall Insight has revised its forecast upwards for January’s energy price cap to an eye-watering £5,386 a year – or £450-a-month. It has urged ministers to review the price cap and to consider ways to protect the most vulnerable, such as social tariffs. A ScottishPower spokesman said: “We invest more every year on green energy and new grid infrastructure than we make in profit.”