Energy giant SSE has announced that it will implement a freeze on its prices for domestic gas and electricity until 2016, marking the first occasion where one of the countryís major providers has indicated such a stance.
The move is set to benefit over 7 million customers across the UK, with SSE arguing that it is part of a ëpositive agenda for customersí that they hope will display that they are concerned with their wellbeing, rather than solely on profit generation.
SSE, who are the second largest supplier of energy in the UK and are the parent company of SWALEC, identified that the intended freeze would decrease the level of profit that they garner in the upcoming year, but highlighted that they would compensate this by ìstreamliningî the way it conducts business.
A reduction in their number of staff by 500 and lower levels of investment into their offshore wind farm programme have been identified as the measures they intend to take in order to subsidise the costs of the price freeze, which would see energy prices frozen at their current value until at least January 2016.
SSE chief executive Alistair Phillips-Davies argued that the company is doing everything that they can to ensure that they are “delivering the lowest possible energy prices” for customers, and compellingly highlighted that this aim is “central to everything we do”.
“One of biggest concerns that energy customers have 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.”
As well as announcing their intention to implement a price freeze, SSE also identified that they would be dividing up their wholesale and retail divisions individually, in a bid to simplify their business and bring yearly operational costs down by £100 million.
Phillips-Davies pointed out that the savings made on these costs would then be passed on to customers, and pledged to continue looking for other ways of lowering the costs of running the companyís business, so that customers could be given further protection from price hikes in the future.
ìWe’re setting out a positive agenda for customers, including our price freeze to 2016; we’re making sure our own house is in order for the future by streamlining and simplifying our business; and we’re making clear we wish to work with people to find more ways of taking costs out of energy bills,” he said.
SSE were the first of the countryís ëbig sixí energy providers to announce last autumn that they would be raising their prices for electricity and gas, in a move that culminated in the remaining five major suppliers in the UK following suit and implementing price hikes during the winter.
The result was widespread criticism of all of the countryís providers, who were attacked for raising prices at a time when household wages were stagnant; the cost of living in the UK was on the rise, and the frequency in which hikes were being applied.
However, SSE have incurred a contrary reaction to their recent announcement about future price freezes, with consumer groups and politicians alike praising the company for attempting to set a new precedent for the conduct of energy providers in the industry.
Energy Secretary Ed Davey said that he hoped that SSEís conduct would encourage the remaining five energy providers in the country to follow suit, and argued that their conduct is a clear sign that energy companies are able to function for the benefit of their users whilst also keeping costs for provisions down as well.
“SSE has 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.
ìCustomers of the others will be asking whether their suppliers will do the same. The government encourages people to shop around for the best deal.”
He also partly attributed the success of SSEís policy to the government and their recent initiatives towards the encouragement of competition within the energy market.
Mr Davey argued that the coalition governmentís calls for people to switch supplier on a regular basis had changed the mentality of the energy industry, so that they are now more consumer orientated so that they retain their customers and prevent them from switching away from their services.
“This will be welcome news for SSE’s customers and shows that the government’s work to reduce energy bills is working by lowering policy costs and driving competition.
ëRenewable generation reduction could cause shortagesí
Despite SSEís announcement being met with widespread acclaim, a number of pro-renewable energy organisations have criticised the move for hindering green fuel generation projects in the future.
Adam Scorer, director at Consumer Futures, said: “The prospect of a price freeze may ramp up prices in the short term and dismantling the structure of the market may put off decisions by energy companies or others to invest in new, cleaner generation capacity”.
This stance was reiterated by John Cridland, CBI director-general, who said: ‘The proposed energy price freeze will deter much-needed investment and is at odds with Labour’s pledge to decarbonise the economy and create a million green jobs
The paradox of lower energy prices for customers and continued renewable programme investment has been raised on a number of occasions in recent times, with energy providers arguing that lowering the quantity of money that they allocate towards renewable development is the best short term approach to take in order to prevent price hikes in the future.
Back in December, the government was forced to ëroll backí the green levies that they were charging on energy companies, after widespread discontent within the industry about the high costs that the levy had been forcing on them.
Suppliers pledged to pass on the savings of a green levy reduction to their customers, and all of the countryís big six suppliers implemented some form of price reduction on their tariffs following the governmentís announcement that they would roll it back.
However, many green energy groups have now taken to the media to vent their fears about the recent reduction in investment within renewable programmes, and argued that in the long term such actions would adversely affect consumers at it would lead to energy shortages, and a subsequent rise in prices later on down the line.
Angela Knight, head of Energy UK: ‘Freezing the bill may be superficially attractive, but it will also freeze the money to build and renew power stations, freeze the jobs and livelihoods of the 600,000 plus people dependent on the energy industry and make the prospect of energy shortages a reality, pushing up the prices for everyone.’
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