SSE freezes prices as pressure on utilities grow

Reuters/London

Power utility SSE said it would freeze prices and separate its wholesale and retail businesses after an outcry over soaring energy bills prompted a review of competition in the sector. Britain’s ‘Big Six’ energy suppliers, which control around 95% of the retail market, have come under fire for consistently increasing energy tariffs and regulators are deciding this week whether a full anti-trust investigation is needed. The price increases by SSE, Scottish Power, Centrica, RWE npower, E.ON and EDF Energy have put them at the centre of a political row over the cost of living, nearly one year before a general election. “This shows that the Big Six are starting to realise they need to take big action if they want to keep their customers, who have been switching supplier in record numbers,” said Secretary of State for Energy, Ed Davey.SSE, the country’s second-biggest household energy supplier, promised yesterday it would freeze bills for its customers from now until January 2016, a move that would lop £100mn off its profits over the entire period.It said it would raise £1bn through the sale of its street lighting contracts and other assets, and would cut an additional 500 staff in Britain.  It also plans to shelve two planned offshore wind farm developments, adding to a string of project cancellations in the sector in recent months. It forecast capital investments of £1.6bn in 2014-15, above analyst estimates. SSE shares were up 2% at 1012GMT in London.  “The positives of the disposals/cost-cutting and the price freeze will be countered by the warnings on medium-term profitability,” said Angelos Anastasiou, equity analyst at Whitman Howard. SSE’s price freeze will put pressure on its rivals as customers increasingly shop around for the best deals.  It also pre-empts opposition Labour leader Ed Miliband, who last year promised an industry-wide freeze on bills if his party wins the election next year.The Labour party has also vowed to force utilities to separate their retail and generation businesses. “On the price freeze, there may well be similar plans being thought of (among SSE’s rivals), given the Miliband commitment,” said Anastasiou.  Three regulators, including energy watchdog Ofgem, have been carrying out a review of competition in energy and are due to decide whether to refer the sector for an anti-trust investigation this week. Energy Minister Davey called on the regulators last month to consider breaking up energy companies if they were found to be abusing monopoly positions. SSE said yesterday that the legal split of its wholesale and retail arms would improve the transparency of how the two businesses operate. “We think it’s the next step on the journey to improve transparency and improve separation. If that’s what people want, what consumers want, we’re very happy to participate in that agenda,” SSE Chief Executive Alistair Phillips-Davies told BBC radio. Meanwhile Prime Minister David Cameron yesterday said his government’s energy policies had allowed power utility SSE to freeze its prices until January 2016, a decision he said he welcomed.“It is hugely welcome in our country that energy companies are cutting and freezing their bills,” Cameron told parliament, saying SSE had cited his government’s rolling back of green levies as one of the main reasons it was able to freeze prices.Ed Miliband, leader of the opposition Labour party, said SSE’s move vindicated his own party’s policy of forcing energy companies to freeze their prices - if it is elected next year - an idea Cameron has derided.Cameron dismissed Miliband’s assertion that SSE’s decision had “demolished” his opposition to such a freeze.