SSE freezes energy prices until 2016 in sector's longest ever unconditional price promise
- SSE will freeze its prices until at least 2016 – the longest unconditional price guarantee the domestic energy market has ever seen
- SSE to drive out group costs of £100m and expects to make less profit in Energy Supply
- SSE is calling for government to take additional costs out of energy bills
- Retail and Wholesale businesses to be legally separated to enhance transparency
- SSE to invest over £4m a day in Great Britain and Ireland in 2014/15
Major UK energy provider SSE today announces a freeze on domestic gas and electricity prices in Great Britain until at least 2016.(1) The freeze is the longest unconditional price guarantee ever offered by an energy company and is intended to shield SSE’s customers from rising energy costs.
By January 2016, SSE will not have increased its prices since November 2013, a period of almost 26 months. This provides peace of mind at a time when more than three quarters of people are expecting prices to go up next year,(2) and over 80% of people are worried about energy price rises in the next two years.(3)
In order to deliver its price freeze SSE recognises and expects 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.
While its price commitment will last until at least 2016, SSE wants to work with politicians and other interested parties on longer term solutions. It has therefore written to the major political party leaders calling for energy taxes to be taken out of bills and paid for through general taxation instead. This would make energy bills cheaper and protect those less able to pay.
In addition, SSE acknowledges that more needs to be done to make the energy sector easier to understand. Today, it outlines plans for the legal separation of its Retail and Wholesale businesses by March 2015, in order to improve transparency and as a further signal of its appetite for reform that is in the clear interests of customers. This legal separation will enhance the transparency of how SSE measures and reports the performance of these businesses.
Alistair Phillips-Davies, Chief Executive of SSE, said: “With today’s announcements we’re recognising that delivering the lowest possible energy prices for our customers has to be central to everything we do.
“We’re responding to the questions that have been asked of us with a positive agenda for customers, including the longest ever unconditional energy price freeze. To help us achieve that, we’re making sure our own house is in order by streamlining and simplifying our business.
“We’re doing our bit but we don’t want to stop at 2016. So today we’re making clear once again that we wish to work with people to find more ways of taking costs out of energy bills and, more specifically, to make sure the cost of energy taxes is paid for fairly in a way that is proportionate to people’s income and protects the vulnerable.
“In all of this, I hope that people will start to recognise SSE is not part of the problem but part of the solution.”
Finally, in line with its wider focus on streamlining and simplifying its business, and following the conclusion of a strategic review of its offshore wind development portfolio, SSE plc has decided to narrow significantly the focus of its near term development plans for its offshore wind development portfolio. During the remainder of 2014 SSE will focus its efforts and resources on progressing the Beatrice project. A full statement on SSE’s offshore wind farm development plans is available on sse.com.
Notwithstanding this announcement, SSE is forecasting capital and investment expenditure of around £1.6bn in 2014/15 – equating to more than £4m every day of the year – all to be invested exclusively in Great Britain and Ireland.
Today SSE has also:
- published its response to the Labour Party’s ‘green paper’, Powering Britain: One Nation Labour’s plans to reset the energy market;
- listed developments since SSE published its IMS on 23 January;
- summarised its expected financial results for the year to 31 March 2014, which are expected to be in line with the financial outlook in the IMS;
- stated that operating profit in its Retail business is expected to be around 25% lower this year than in 2012/13, reflecting among other things customers’ reduced consumption of energy during a mild winter;
- forecast capital and investment expenditure of around £1.6bn in 2014/15, and then an average of around £1.3bn (net of proceeds received) across the three years from 2015 to 2018;
- announced a programme of planned asset and business disposals that will secure proceeds received and debt reduction estimated to total around £1bn and simplify significantly the SSE group;
- stated that adjusted earnings per share(4) for 2014/15 are currently expected to be around or slightly greater than that in 2013/14 but are subject to greater risks in the following two years; and
- confirmed that it is targeting an increase in the full-year dividend for 2014/15 of at least RPI inflation, (5) with annual increases thereafter of at least RPI inflation also being targeted.
Full details of today’s announcements are contained within the RNS announcement, available at www.sse.com.
- 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. It excludes white label partnerships with M&S Energy and Ebico.
- According to the Liberum UK Consumer Survey, Q4 2013.
- Populus interviewed a random sample of 2,055 GB adults aged 18+ from its online panel between 14th - 16th March 2014. Surveys were conducted across the country and the results have been weighted to the profile of all adults. Populus is a founder member of the British Polling Council and abides by its rules. Further information at www.populus.co.uk and http://news.sse.com
- As defined in SSE’s six-month financial report published in November 2013.
- Measured against the average annual rate of RPI inflation across each of the 12 months to March.