SSE has accused the Labour party of undermining confidence in the energy markets after Ed Miliband promised to give powers to the regulator to drive down household bills before the end of this year.
Shares in SSE and Centrica fell on Friday as it emerged that the Labour leader was following up his promise of a price freeze with a commitment to make energy suppliers cut their bills by a further £100 per customer. SSE led the FTSE 100 fallers with a drop of 2% and Centrica were down 1.9%.
SSE said it had already taken a risk by cutting its prices by 4% from May and it was unrealistic to demand more, especially ahead of the ongoing investigation by the Competition and Markets Authority.
“We made our decision to cut our standard gas price knowing that our ability to recover costs, should the market outlook change in the months or years ahead, may be limited but we urge all political parties to recognise the realities of the energy industry and help us to continue to do the best for all of our customers,” said an SSE spokesman.
“This includes all parties committing to accept the outcome of the current Competition and Markets Authority investigation into the energy industry when that completes at the end of this year to provide energy companies with the all-important political and regulatory certainty we need in order to be able to plan and run our businesses efficiently,” he added.
Centrica, the parent group of British Gas, declined to officially comment on the latest initiative by the Labour party, but company sources privately expressed frustration that Labour was not waiting for the CMA report which is expected to be published by December.
Peter Atherton, a managing director and leading utility analyst with Jefferies investment bank, said the increasing number of political interventions could only undermine the market and potentially drive prices up.
“Ed Miliband has promised to give more powers to the regulator to enforce price cuts. But what if Ofgem concludes that retail prices should really be higher? Would a Labour government still demand cuts?
“The problem is that neither a political party nor Ofgem have the resources and expertise to know what a fair price should be. This is a very complicated market and each company will have its own cost base and hedging strategy.”
