SSE has caved in on energy price freezes

The energy giant has announced it's freezing energy prices until 2016. The ball is in the rest of the 'Big Six's' court.

by Rachel Savage
Last Updated: 17 Jul 2014

Energy companies have been doing their level best to weather the popular storm that has been raging since last September, when Ed Miliband promised to freeze energy prices for 20 months if Labour is elected next year and they started hiking household bills. However, even the biggest businesses can only stand so much pressure and SSE has become the first of the ‘Big Six’ finally to crack.

The UK’s second-largest energy supplier announced it is freezing household gas and electricity prices until 2016, partly funded by a £100m cost-cutting programme that includes 500 job losses. However, the company said the move will still cut its profits, the ‘adjusted’ version of which has risen every year since it was formed in 1998.

It’s a veritable volte-face for chief exec Alistair Philips-Davies who said, ‘price freezes… will lead to unsustainable loss-making retail businesses,’ when Ed Miliband first set out his headline-grabbing policy.

Today Philips-Davies was in a rather humbler mood, stating, ‘We’re responding to the questions that have been asked of us with a positive agenda for customers, including the longest ever unconditional energy price freeze.’

The energy giant also dealt a blow to renewable energy, announcing it was shelving three offshore wind farm projects and scaling back its investment in another three as part of £1bn of asset sales. Bad news for Siemens, which just yesterday unveiled plans for a £310m wind turbine factory in Hull.

SSE, which supplies around 5 million households, didn’t stop there, saying it is going to legally separate its retail and wholesale businesses to ‘improve transparency’. The move comes a day before regulator Ofgem, which has been flexing its muscles of late, announces whether there will be a competition inquiry into the industry.

Small energy companies and Labour have been saying for a while that the ‘Big Six’ - British Gas, SSE, npower, ScottishPower, EDF Energy and E.On - having both supply and generation arms snarls up competition. SSE, then, seems to be anticipating a full-blown competition investigation.

‘I hope that people will start to recognise SSE is not part of the problem but part of the solution,’ Philips-Davies said rather, er, hopefully. Investors seem to think its a good idea anyway - shares were up 2% this morning.

The ball is now back with the rest of the ‘Big Six’ - it’s all fun and games in the energy industry right now.

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