PRESSURE is mounting on rival Big Six energy firms following an announcement by SSE that it will freeze prices until at least 2016 and separate out its retail and energy generation arms.
The Perth-based firm said it would halt price increases in the longest unconditional domestic energy price freeze ever seen in the market.
The firm said it would fund the freeze through cutting back windfarm generation projects, which it says are no longer financially viable, and by taking £100 million of costs out of its group operations – including a voluntary redundancy programme to cut 500 jobs. The firm employs 20,000 people UK-wide, with 5,500 in Scotland.
Consumer groups and politicians welcomed the move, but warned that other major providers needed to do the same.
“This is a U-turn to be applauded,” said Ann Robinson, director of consumer policy at uSwitch.com. “SSE was the last supplier to pass on the government’s [green] levy cuts and reduce customer bills this winter – now they are the first to freeze prices until 2016.
“It’s our hope that the remaining big five energy firms follow SSE’s lead and look at ways to offer consumers the same reassurance.”
Which? executive director Richard Lloyd said: “This is a bold move in an energy market badly in need of change and we welcome the certainty this announcement brings to hard-pressed SSE customers.”
However, even with the price freeze, SSE tariffs were still not the cheapest, critics warned.
Glasgow North MP John Robertson, a Labour member of the energy and climate change committee, said: “SSE’s announcement today shows it is possible to freeze prices and all the scare stories were not true. Yes, they have introduced voluntary redundancies, and each of those 500 job losses means a job lost for the next generation but, other than this disappointing news, they are leading the way in beginning a complete overhaul of the market.”
Six months ago SSE, which supplies more than nine million customers in Great Britain and Ireland, criticised a pledge by Labour to force suppliers to freeze prices, saying it would lead to “unsustainable loss-making retail businesses”.
But yesterday Energy Secretary Ed Davey welcomed its apparent U-turn and put pressure on the company’s rivals to do the same. He said: “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.”
Martin Lewis, founder of MoneySavingExpert.com, said: “On price, this is certainly good news for energy customers who never switch, as it automatically means their SSE tariff has turned into a 21-month fixed deal. But it’s neither the cheapest, nor the longest fix on the market.”
SSE said it expects its profit margin from supplying customers with electricity and gas will be lower than in the past.
Regulator Ofgem is today due to announce recommendations, following an assessment of the energy market, which are widely expected to see SSE referred for a full-scale two-year competition investigation.
Clare Francis: Consumers should act now to take advantage of cheaper deals
SSE’s price freeze puts real pressure on the other providers to respond in some way and it is interesting to see the announcement come just a day before Ofgem is due to report back on its inquiry into the energy market.
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.
However, while nine million SSE customers breathe a sigh of relief, those paying the provider’s standard prices could still save money by switching to a cheaper tariff. Paying for energy is a real worry for households. Britons recently admitted their gas and electricity bills are among the most difficult to pay, behind mortgage, rent and council tax. But with suppliers freezing prices and offering long-term fixes, hard-pressed customers are getting a reprieve from the price-rise market they’ve sadly become accustomed to. The numbers speak for themselves and bill-payers that haven’t done so yet need to act now to lock in if they want to fix their outgoings and create a thaw on their wallets and worries.
• Clare Francis is editor-in-chief at MoneySuperMarket.