SSE, one of the Big Six energy companies has announced this morning that they are to freeze household energy prices for 21 months until 2016. As part of the announcement they have said that in order to fund the freeze there will be 500 job cuts and profits are expected to fall by as much as £100 million.
Reuters has also reported that SSE has also announced their intention to split the retail and wholesale arms of their business by March 2015 in an attempt to “enhance transparency”.
Cynics amongst us might argue that this is a rather belated attempt by one of the Big Six to persuade the energy regulator OFGEM that the energy companies are capable of managing themselves and offering improved transparency to customers. Given OFGEM are due to issue a preliminary report tomorrow that could see a recommendation to refer the Big Six to the Competition and Markets authority, this attempt may be too little too late, particularly as SSE appears to be the only one of the Big Six making concessions.
Evan Davis on The Today programme argued this morning when interviewing Alistair Phillips-Davies, Chief Executive of SSE that whilst the 21 month price freeze is inevitably a good thing for customers, SSE is not the cheapest of the Big Six and customers could still find a better deal if they switched suppliers.
Whilst any price freeze has to be seen as a positive step, unless the other large energy companies follow suit, we are unlikely to see any increased competition that will benefit customers. In the meantime, we await the OFGEM report which, if they do recommend referral to the Competition and Markets Authority could mean a further two years before there is any significant change.
More information on the SSE price freeze:
Read the BBC announcement of the price freeze: http://www.bbc.co.uk/news/business-26743048
Read the Reuters report on SSE splitting retail and wholesale: http://uk.reuters.com/article/2014/03/26/uk-sse-restructuring-idUKBREA2P0G220140326