SSE price-freeze: Politicians rush to claim credit

SSE's price freeze is good news for consumers, says Energy Secretary Ed Davey

The government and the Labour party have both claimed credit for a price freeze announced by UK energy supplier SSE.

Prime Minister David Cameron and Labour leader Ed Miliband said the freeze was a result of their policies.

SSE domestic gas and electricity prices will be frozen at their current levels until 2016, it said on Wednesday.

The move comes after many of the "big six" UK energy firms raised their tariffs at the end of last year.

Mr Cameron said a cut in green taxes on energy companies had been passed on to consumers.

"What we have done is reduce the costs of energy charges so companies are able to cut their bills," the prime minister told Parliament. "This part of our long-term economic plan is as successful as all the other parts."

Last year, the government cut the green "Eco scheme" levy which was used to pay to insulate low income households.

Mr Miliband said Labour calls for a price freeze on energy bills had previously been rebuffed by the government.

"Week after week, he [Mr Cameron] denounced Labour's call for an energy price freeze to help families and businesses, said Mr Miliband. "What is clear is that his argument against a freeze has been totally demolished today."

Start Quote

The sacrifice for owners in this apparent price war seems to be zilch: an initiative billed as being great for consumers turns out - in the round - to be benign (or better) for shareholders.”

End Quote

The BBC's industry correspondent, John Moylan, said the freeze had echoes of Labour's flagship energy policy, which promises to keep prices at the same level for 20 months after the next election if Labour are elected.

The proposal has been heavily criticised by many in the industry.

Job losses

SSE, which has 9.5 million customer accounts, said the freeze would lower profits, but it would "streamline" its business to cover the shortfall.

The company, whose companies include Swalec, announced it would cut 500 jobs and shelve four planned offshore wind farm developments.

As a result, SSE hopes to make annual operational cost savings of £100m.

Start Quote

Clearly, it [SSE] is responding to public, regulatory and political pressure to bear down on prices”

End Quote

SSE chief executive Alistair Phillips-Davies said "delivering the lowest possible energy prices" to customers was "central to everything we do".

"One of biggest concerns they [customers] have is that energy prices may well be going up again," Mr Phillips-Davies told the BBC. "The most important thing for our customers over the next couple of years is freezing prices."

Green taxes

The boss of the UK's second biggest supplier also called on the government to take energy taxes out of bills and retrieve them through general taxation instead.

The move would make sure tax "is paid for fairly in a way that is proportionate to people's income and protects the vulnerable", he added.

The company has written to the leaders of UK political parties on the subject of green levies, he said.

"We're looking to do whatever we can to bring down prices for consumers," Mr Phillips-Davies said.

SSE, based in Perth, said it would legally separate its retail and wholesale businesses by March 2015, in order to "improve transparency".

"I hope that people will start to recognise SSE is not part of the problem but part of the solution," Mr Phillips-Davies said.

Energy Secretary Ed Davey said: "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 suppliers in record numbers.

"SSE have shown today that the big energy firms are able to cut their costs and profits, and be confident about their ability to weather potential uncertainty in the wholesale markets, to give bill payers long-term price security.

"Customers of the others will be asking whether their suppliers will do the same."

Regulators are this week expected to give their verdict on whether there should be a full investigation into the competitive practices of energy companies.

Mr Phillips-Davies said that SSE had been working on the price freeze for some time, and that changes to its business were not linked to the upcoming verdict.

Clare Francis, editor-in-chief at Moneysupermarket, said that other energy suppliers have price-freeze tariffs that could help consumers save money.

"The political spotlight is on the energy industry at the moment and it would not surprise me if we see other firms act to try and quash feelings that this is a market that is broken and not working in the customers' interests," she said.

How much have energy bills ended up rising?

Supplier 2013 average bill cost 2014 average bill cost Average price increase

Source: Uswitch based on 3,200kwh of electricity consumption, and 13,500 kwh of gas. Dual fuel standard tariffs. Payment by cash or cheque on quarterly basis.

E.On

£1,226

£1,240

1.1%

EDF

£1,190

£1,237

3.9%

SSE

£1,211

£1,259

4.0%

Scottish Power

£1,230

£1,284

4.4%

British Gas

£1,191

£1,265

6.2%

Npower

£1,220

£1,299

6.5%

Average

£1,212

£1,264

4.3%

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