Pledge by Big Six giant SSE to freeze consumer fuel prices sparks intense political jostling

Scottish and Southern Energy

Scottish and Southern Energy (SSE) yesterday sparked a rush of rival political comments on UK energy policy, regulation, fuel-prices, and constitutional politics after it declared it would freeze its prices until at least 2016 – the longest unconditional price guarantee the UK energy market has ever seen.

The Perth-based utility giant also called for the government to strip additional (‘green’) costs out of UK consumer bills.

And in a market-moving triple-whammy, SSE also declared it will legally separate its Retail and Wholesale businesses ‘to enhance transparency’ over pricing and consumer fuel bills – a move demanded yesterday by Labour shadow energy minister Tom Greatrex at the Power Scotland Conference held in Glasgow by the Industrial and Power Association as part of Labour’s consultation on energy policy ahead of the UK general election next year. (See Scottish Energy News –

http://www.scottishenergynews.com/full-competition-inquiry-into-big-six-almost-inevitable-uk-shadow-energy-minister-tells-power-scotland-conference

The voluntary SSE freeze is the longest unconditional price guarantee ever offered by an energy company in the UK and is aimed at ‘shielding its customers from rising energy costs.”

By January 2016, SSE will not have increased its prices since November 2013, a period of almost 26 months. The price freeze applies to all SSE, Scottish Hydro, Southern Electric, SWALEC and Atlantic domestic customers in Great Britain who are on or who move to the Standard tariff between 26 March 2014 and 1 January 2016 and applies to standard variable prices only.

Alistair Phillips-Davies, SSE Chief Executive, said: “By these announcements, we’re making clear we wish to work with people to find more ways of taking costs out of energy bills.  I hope that people will see a company like SSE not as part of the problem but as part of the solution.” 

“Our price freeze provides peace of mind at a time when more than three quarters of people are expecting prices to go up next year and over 80% of people are worried about energy price rises in the next two years.”

 In order to deliver its price freeze SSE told investors that its profit margin from supplying customers with electricity and gas will be lower than it has been previously.

SSE is also announcing measures to bring down its own business costs as part of its efforts to focus on what matters to customers. Annual operational cost savings of around £100m are expected to be realised.

This will include a voluntary early release programme which, it is anticipated, will lead to a reduction of around 500 jobs across the SSE group.

As a result of these initiatives, SSE also told investors that operating profit in its Retail business is expected to be around 25% lower this year than in 2012/13 – partly as a result of the mild winter in England – where most of its customers live – when it announces its latest annual results on 21 May 2014.

Phillips-Davies added: “Energy policy and politics in the UK and Ireland are dominated by the so-called energy ‘trilemma’ – security of supply; decarbonisation and affordability. Our aim is to reflect all three parts of the ‘trilemma’ and in this way be as consistent as possible with the direction of energy policy and politics in the UK and Ireland. 

“This means, for example, that while we support action to address climate change, we also believe steps should be taken to ensure such action does not make energy unaffordable for the most vulnerable electricity and gas customers.”

In Westminster, the SSE announcement sparked fierce exchanges of party comments by both the Conservatives and Labour, with both parties claiming the political credit for creating the market conditions in which one of the Big Six power giants appeared to respond – at least in part – to a tsunami of consumer concerns over recent inflation-busting hikes in energy bills.

In Holyrood, SNP MSP Mike MacKenzie – who sits on the Economy, Energy and Tourism Committee – said: “In its update to  investors, Scottish and Southern Energy has made clear that it believes that “a single energy market in Great Britain would be the most likely outcome in the event of a Yes vote”. This follows on from its earlier statement confirming that a single energy market is its preferred outcome.

“With Westminster Energy Secretary Ed Davey having last week attempted to raise fears over the future of a shared energy market after a Yes vote in Scotland’s Independence Referendum, this intervention by SSE represents a further blow to the credibility of the No campaign.

“Scotland’s Future makes clear that an independent Scotland will continue to participate in “a single GB-wide market for electricity and gas will continue with the current market trading arrangements”.

“The fact of the matter is that Scotland’s abundant energy resources are absolutely vital to keeping the lights on in the rest of the UK, which is why continuing to work closely with our friends south of the border after a Yes vote is simple common sense.”

  • Meanwhile, SSE has decided not to proceed further with the development of two onshore wind farms (Dalnessie and Fairburn extension) with a total capacity of 117MW because they are no longer financially viable.
  • See also ‘Consumer groups comment on SSE price-freeze surprise’

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