Energy prices remained the single biggest issue for our customers during 2010. Following a slight drop in wholesale prices, we reduced our standard gas prices in March 2010, and provided with a new rebate for vulnerable customers who use electricity to heat their homes.

However, following upward pressure on wholesale prices, we announced increases to our standard gas and electricity prices in November 2010, of 2% and 8.9% respectively. This was our first price increase for two years and affected 2.5 million households.

Around 600,000 customers on capped price deals were not affected by the price increases. In addition, we protected 60,000 of our most vulnerable customers through the winter period by holding prices on the Fresh Start package until at least 31st March 2011. Fresh Start supports existing customers who are over 60 years old and on qualifying state benefits with a discount of up to £395 per annum on standard rates.*

The November prices increases followed sustained increases in the wholesale energy market, with the wholesale costs for an average Dual Fuel customer up 26% between March and November 2010. In addition, suppliers face an increasing burden of non-energy costs, including the cost of meeting government environmental and social programmes and the cost of distributing electricity on the national grid.

At the time of announcing the price increases we encouraged customers to contact us for information on how to reduce their energy bills by up to £358 per year by making simple changes to the way they pay for their energy, switching to paper-free online billing and selecting one of our fixed term energy products.

During the year we continued to offer discounted home insulation and energy efficiency products to help customers save money on future energy bills.

In early 2011 Ofgem announced that going forward, energy supply companies would have to give 30 days’ notice of impending price increases.

The cost of energy looks set to rise further in future years as the electricity sector invests £200 billion in upgrades to ensure we have a modern and reliable, low carbon electricity network.

* Savings are based on an average ScottishPower Gas & Electricity Offer (Dual Fuel) with annual mains gas usage of 20,500kWh and annual Standard Rate electricity usage of 3,300kWh. They include VAT at 5% and were correct as of 25^th November 2010.

Products

We introduced several new products in 2010, including:

• Capped Price Energy, June 2013: This offer provides customers with a guarantee that the price they pay for their units of gas and electricity will not rise above a capped level before June 2013. In addition, if standard prices fall, prices for customers on this product will fall also. Discounts apply for dual fuel (gas and electricity combined) accounts and online account management

• Unifi Capped Energy: This combines a capped price deal until April 2013 with a new home electricity monitoring system, Unifi, which displays household energy use in kilowatt hours and pounds and pence. It also enables customers to track how much energy up to six individual appliances are using and to switch them on and off remotely, using an i-Phone

• Platinum Fixed Energy: This combines a fixed price energy deal until January 2014 with boiler care as part of the package, including an annual service, safety check and free repairs. We are the first energy supplier in the UK to offer a combined deal of this kind. The product was launched in August 2010, following customer feedback, which indicated that people wanted a product that covered all of their home energy needs and offered protection against price increases. The package saves customers up to £50 on purchasing a guaranteed price deal and boiler care separately.

• Simply Green: We launched a new green energy product for domestic customers in February 2010. Simply Green is an independently certified product that meets Ofgem’s green energy supply guidelines. It matches the amount of energy a customer uses with a supply of renewable energy into the grid, but it also supports small-scale renewable energy projects at community level by automatically paying a Simply Green customer’s annual dual fuel discount to the ScottishPower Green Energy Trust. The product is available online only for paper-free billing.

We also continued to offer our Pay in Advance discount product, which was launched in 2009. By paying a minimum of one year’s energy consumption in advance, customers receive a discount of 5% below standard direct debit prices, provided their account remains in credit. An additional discount applies to dual fuel (gas and electricity combined) accounts.

Since 2009 we have offered small “interest” payments to Direct Debit customers whose accounts have a credit balance at the time of their annual assessment, along with discounts for dual fuel customers, who take both gas and electricity, and online customers.

Our Prepayment prices have been set at levels significantly below standard quarterly cash rates for several years now.

Prepayment has seen a technology revolution in the last two years with the use of key meters. This enabled the launch of a new service in autumn 2009 that enables prepayment customers to top up credit in their meters via a secure internet page, using a PowerPod plug-in device.