SCOTTISHPOWER owner Iberdrola has said its UK generation and retail business is losing money and has to raise prices.

As the political temperature on energy bills rose yesterday with former prime minister Sir John Major's call for a windfall tax on energy companies, the Spanish utility giant said regulation at home and in the UK had squeezed its nine-month profits, including a 67% rise in generation and retail levies.

"In the UK, this business was affected by tight margins, aggravated by energy efficiency and environmental measures imposed by the regulator," Iberdrola said.

"As a consequence, generation and supply is now loss-making, and leaves the company no option but to increase tariff."

Iberdrola said net earnings from generation and supply were nearly 9% down at €1,531million, with a 6% rise in gross margin outweighed by a 67% rise in taxation.

Levies in Spain had doubled to €626m while taxes on generation in Spain came to €381m.

Its renewables business recorded a 2.5% increase in net earnings to €1,211m, of which 53% was from "outside Spain where taxation increased by 3.5 times".

Iberdrola, based in Bilbao, said "positive business activity, including efficiency gains" had reduced the impact on net earnings to a negative €240m or a 3% decline.

It said that in its networks business, gross margin was up 3% in the UK due to increased revenues resulting from a larger asset base following investments.

The company has cut its debt by €3.3 billion over the past 12 months, meeting 50% of its objective of a €6bn cut in the period 2012-2014.