A DECISION by Scottish and Southern Energy (SSE) to hold out against industry-wide price increases this winter has cost the company £400 million in lost potential revenues, the Sunday Herald has learned.

But even as energy suppliers anticipate punitive Budget measures next week in response to consumer outcry over perceived excessive profits, Scotland's last remaining energy utility is expected to raise its prices later this month.

Pressure on the Treasury to deliver a windfall tax has mounted after average rises of 15% by ScottishPower, British Gas, npower, E.ON and EDF Energy were followed by stellar full-year profits from British Gas owner Centrica. Its residential arm saw a fivefold increase in pre-tax profits to £570m.

"Scottish and Southern promised not to raise its prices until the end of March when British Summer Time begins, but everybody expects it to increase its prices after that," said Angelos Anastasiou, an analyst at Pali Capital.

He predicted that the Perth-based company would raise its prices by just below the 15% average, while emphasising its decision to protect customers over the winter. At a time when price rises have seen an extra 500,000 households sliding into fuel poverty, SSE is expected to continue with a price-led marketing strategy.

When the company, whose brands include Scottish Hydro Electric and Southern Electric, unveils its full-year results at the end of May, analysts will be looking closely at how the estimated £40-to-£50 per customer saving is offset by a growth in new business. The firm's strategy of undercutting rivals on price has seen it almost double its customer base to 8.2 million in the past six years, at the cost of huge potential revenues.

This week, however, all eyes will be on chancellor Alistair Darling to see how he reacts in Wednesday's Budget to the consumer outrage sparked from the industry's strong profits and fuel price rises.

Darling was already being encouraged by energy regulator Ofgem to take a stand against the £9 billion windfall coming to the industry in the form of carbon credits from the forthcoming European Union Emission Trading Scheme. He has let it be known that he has been "angered" that the industry raised prices in spite of Treasury warnings that such increases would stoke inflation.

The industry insists its rises have been forced by wholesale rises in the cost of gas, coal and electricity. Last Friday, E.ON chief executive Paul Golby became the latest industry figure to reject the criticisms by pointing out that its domestic arm lost money last year and would do so again this year.

The rises have nevertheless seen the number of households in fuel poverty, defined as the point where the cost of fuel exceeds 10% of household income, now standing at 4.5 million people in the UK, or around a fifth of all households.

The subsequent furore has seen the "big six" main providers summoned for meetings at the Treasury and threatened that they might face a windfall tax if no alleviating measures are taken. Although all UK utilities have schemes to lower the cost of electricity and gas for the poorest customers, Gordon Brown said last week that their efforts were "a small amount" compared to the government's annual winter allowances of £200 to over-60s and £300 to over-80s.

Derrick Parkes, a utilities expert at KPMG, said: "I think a windfall tax is a strong possibility, unless Darling cooks up some other kind of scheme with the industry beforehand."

He said that such a scheme might take the form of a one-off charge, which he said would be a "mistake".

"It doesn't do much for the country's tax reputation if the system is unstable and open to change retrospectively imposed. It's not good for UK plc," he said.

Many analysts believe that another initiative short of a windfall tax will be announced instead. Press reports last week suggested that this might take the form of vouchers for the poorest customers, at least partly funded by the industry. Another suggestion is that the industry will be encouraged to take voluntary steps to improve its so-called "social tariffs", backed by the threat of a windfall tax if the improvements are insufficiently ambitious.

Anastasiou said: "Whether the moves will be new or funded out of existing industry funds is a moot point. There is a feeling that Darling would like to announce something, but there is unlikely to be a windfall tax".

He added that consumer price rises are either in line with or less than rises in wholesale prices. This is also the view of Ofgem, although the regulator has announced a review into the relationship between wholesale and consumer prices.

Denis Kerby, a spokesman for SSE, confirmed that its price freezing strategy had cost the company £400m: "that is the potential gain if we had charged what others have charged, but we have our own pricing policy which reflects fair pricing to customers."

Asked about the prospect of price rises after March 30, he said: "It has yet to be decided, but we are pleased to have kept our prices down for the winter and we will continue our responsible approach to pricing."

He declined to say what effect the freeze had had on the expanding's SSE customer base.