SSE announces price freeze until 2016
One of the Big Six energy companies, SSE, has announced that it’s freezing domestic gas and electricity prices at their current levels until January 2016.
It's also splitting its retail and wholesale businesses to "improve transparency".
SSE says profits will be lower because of the freeze, but it intends to streamline and simplify its business in order to cover the shortfall.
The firm also said it's having to cut 500 jobs and put off three planned offshore wind farm developments, slashing investment by 19 per cent in 2015-18.
It forecasts 2013-14 pre-tax profit will fall 25 per cent in its retail business, but will be up 10 per cent for networks and up 20 per cent for wholesale.
It’s called the move, which follows the hiking of energy bills at the end of last year by several of the UK’s largest providers, “the longest unconditional energy price commitment ever made”.
It hopes to make annual operational cost savings of £100m.
The announcement is timely: it comes ahead of tomorrow's publishing of the preliminary review by Ofgem and other City regulators into the dominance of the Big Six. The review's expected to recommend a further, full-scale investigation by the Competition and Markets Authority into both the retail and wholesale energy markets.
Speaking on Radio 4's Today Prgramme, SSE chief executive Alistair Phillips-Davies said the firm's prepared to accept the lower profit because it felt it "needed to make a bold statement".
From SSE's statement:
We’re making cost efficiencies within our company, we’ll be making less profit from supplying energy, we’re buying ahead to safeguard against energy price shocks and the Government has listened to our call and is making some welcome changes to make its energy efficiency scheme more cost-effective.
Phillips-Davies added that the company's written to all political party leaders about taking the cost of green levies off customer bills.
Shares in SSE have climbed 1.5 per cent this morning, now trading at 1,520p per share.
Source: Google
But the initial positivity could be shortlived. RBS Capital markets has commented on the announcement this morning, saying: "Our interpretation of the statement is that SSE is fighting extremely hard to deliver flat EPS over the coming years, and we reiterate our Underperform recommendation (price target 1220p)."