Centrica, SSE to Cut U.K. Prices After Levies Cut

9th December, 2013

Centrica Plc (CNA) and SSE (SSE) Plc led four of the U.K.’s “Big Six” energy suppliers in saying they’ll cut consumer bills after the government pledged to reduce green levies to ease the cost of living.

Consumers will get a 12-pound ($19.63) rebate for each of the next two years at a cost to the government of 600 million pounds, Energy Secretary Ed Davey told lawmakers today in Parliament. Additional savings will come from changes making it cheaper for suppliers to fulfill an obligation to insulate low-income homes, he said.

“All of the major energy suppliers have confirmed they will pass the benefits of this package onto their customers,” Davey said. “We must ensure that the changes we make maintain the support provided to the most vulnerable, maintain investment in clean energy and do not have a negative impact on our carbon reduction ambitions.”

Energy bills became a political focal point after Ed Miliband, leader of the opposition Labour Party, vowed to freeze energy prices if elected. Labour says living costs are outweighing the benefits of growth, while Chancellor of the Exchequer George Osborne is preparing to present a statement this week in which he’ll say the Conservative-led government’s austerity policies are paying off.

“I’m a believer in reducing taxes, reducing cost of government, and we can do that through energy bills,” Osborne told the BBC’s Andrew Marr program yesterday. “The economic plan is working and a recovery is under way.”

Bills Cut

Customers of Centrica’s British Gas unit will benefit by 53 pounds on average from the government measures, the company said today in an e-mail. SSE said savings will be about 50 pounds per customer, Iberdrola SA (IBE)’s Scottish Power suggested savings of about 48 pounds would result, and RWE AG (RWE)’s NPower unit said it would reduce bills by an unspecified amount.

The four companies all have put up prices in recent weeks. Electricite de France SA (EDF), which had announced a smaller rise than those four, said its decision has been “validated” by the government’s announcement, and that it does not anticipate raising prices in 2014. The final member of the Big Six, EON SE, was the only one that hadn’t raised prices.

Even taking into account the average impact of a 50-pound cut in bills from today’s announcements, the recent rises still leaves consumers paying 70 pounds more, said Labour’s spokeswoman on energy, Caroline Flint.

Promised Cuts

“They’re going to relieve the energy companies of 600 million pounds, reduce their obligation to support the fuel-poor through energy efficiency, and at the same time our bills are still going to go up,” Flint said today at a conference in London. “What government appears to have forgotten is that those policies serve an important purpose if we’re to keep energy bills affordable in the long run.”

Davey was fleshing out an announcement yesterday by Prime Minister David Cameron and Deputy Prime Minister Nick Clegg. Writing in the Sun newspaper, they promised to cut the average energy bill by about 50 pounds a year by funding some of the costs currently included in energy bills.

The package of measures also includes a tax rebate to homebuyers to spend on energy-efficiency measures and extra funding to local authorities to help plan street-by-street measures under the government’s Green Deal program, the centrepiece of its first energy law that has so far had limited uptake.

From its start in January to the end of October, just 219 households had begun a financing plan under the Green Deal out of almost 102,000 homes assessed. Energy Minister Greg Barker had said he hoped for 10,000 plans by year-end.

Rocket Boosters

“The first few months of the Green Deal are all about building confidence in the supply chain and training up installers,” Barker said today by phone. “Having got that framework in place, with the first 100,000 assessments, now is the time to put rocket boosters.”

Osborne said a crackdown on tax avoidance would partially fund the cut in energy bills. Labour’s finance spokesman, Ed Balls, also speaking on the Marr program, said the plan, shifting from bills to taxes, “is taking with one hand to give with the other.”

“People will still pay more,” Balls said. “Is there a price freeze? No. Are the energy companies paying? No.”

Miliband on Nov. 29 set out details of his energy policy, which includes splitting energy companies into supply and generation businesses. The Labour Party, if elected, would replace regulator Ofgem and create an Energy Security Board to ensure supply. It would also freeze prices for 20 months as pledged in September, to stem increases in household energy bills that are up 300 pounds a year since 2010.

Source: Bloomberg

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