SCOTTISHPOWER is having to take account of political risk for the first time when making investment decisions for the UK, amid the recent furore over energy prices, its retail chief executive Neil Clitheroe has warned.

He defended profit margins of up to 4.6% at the Glasgow-headquartered utility firm, as a reflection of the risks taken by the business.

Mr Clitheroe told the Energy UK annual conference in London: "You cannot hide from the fact that political risk in the UK has grown.

Citing the international reach of ScottishPower's Spanish parent Iberdrola, he said: "When we look at the UK we compare it to other investment areas in Europe and South America.

"We have to look at it in that context and this is about deciding if we put our money into the UK."

With the additional hurdle of political uncertainty, "we may have to cut programmes that really do not get over that threshold," he said.

"That is quite a new thing for the UK," he added. "We would never have spoken about political risk in the UK two years ago."

Mr Clitheroe said the UK energy market had long been notable for "real certainty of investment across the value chain".

This year, he said, ScottishPower was investing £1.3 billion in its networks and renewable energy business.

"That is built on the back of a very strong regulatory framework that has been in place in the UK for years," he said.

The energy industry has come under strong political pressure with the Government announcing an annual competition review and the Labour Party pledging a temporary price freeze if it was voted into office.

A succession of price rises by five of the big six suppliers, including an 8.6% hike announced by ScottishPower last month, have further increased attention on the industry. The sixth, E.ON, is expected to announce a 6.6% increase later this month.

Affordability is becoming an increasing worry, with a survey published by investment house Legal & General yesterday concluding that 442,000 Scottish households, more than one in four, were in fuel poverty in that they spent 10% of their income on gas and electricity. This is up 52.9% on last year.

Mr Clitheroe said ScottishPower had seen its margins swing between 0.1% and 4.6% in recent years. He said these profits were "appropriate" as a reflection of risks such as cash flow, because the company buys electricity and gas before collecting money from its customers.

He also called for publication of wholesale energy market prices as a way of building awareness about the market cost of power.