We’ve all heard the old saying that a week is a long time in politics. In the energy industry too, things can change very, very quickly.
It was with regret that we recently announced an increase in the price of electricity and gas for our customers. A price increase is the hardest part of running this business, particularly at the moment when we know times are difficult for some of our customers.
Since we made this announcement energy has been front-page news. A public debate has started, and I welcome this as we know we need the public’s confidence in order to make the investments we need.
Society wants to see changes to the way the energy market works. We get this. Let’s now have a real debate about what these changes look like.
This is nothing new for SSE; we have always had an appetite for reforms that make things easier for our customers. We were the first big supplier to reduce the number of tariffs we offer to make it easier to pick the right one; we were the first to end cold calling as we know it is not what consumers expect from us and; and we were the first to introduce the Living Wage, making us the largest company in the UK doing so.
That’s why some of the criticism we’ve faced in recent weeks has stung us. We are a British company that employees 20,000 people across the UK and Ireland, paid £369 million in UK tax last year and invests around £1.5bn per year to keep the lights on for British homes and businesses.
The challenges that energy consumers, companies and investors in the UK face are vast. There is a debate about affordability, making the market easier for consumers and improving transparency. Some of the solutions that have been put forward by the Coalition and by Labour have real merit.
Firstly, affordability is absolutely critical to every household and business in the UK. That’s why SSE has consistently argued that government social and environmental levies should come off bills and be paid for through general taxation. The levies are the right thing to do – that is not in question. What is in question is whether they are levied in the fairest possible way. By putting these costs into general taxation it would reduce typical bills by £110 immediately. It would also shift the burden from those who can least afford to pay on to those who can afford to pay a little more, and it is very encouraging that this is now the subject of a Government review.
Secondly, we have got to make things easier for the consumer. We are currently working with the Government to try and reduce the time it takes to switch energy supplier. This will help consumers and keep suppliers on their toes. We’re keen to make it happen.
Finally, I recognise that we need to make this market easier to understand. No one doubts that energy involves some complexity – but despite efforts to make it more transparent, people think it’s still far more complicated than it needs to be.
That’s why the way companies like SSE buy and sell energy is an area of public interest. Some of the reforms put forward by the main political parties in this regard are constructive. We already routinely sell 100 per cent of our electricity generation in the day ahead market. It’s transparent, it helps small suppliers and we’re proud to have taken a lead in this area.
But I’ll accept energy trading is still complicated. That’s why want to see all power traded in the way I’ve described and then move on to seeing more electricity futures traded through a similar platform – so we’ll look very positively at proposals for putting electricity generation through a new type of exchange or pool that is not only open but is seen by consumers to be open as well.
The need to think positively about change also extends to how companies are set up. We have three business segments: Networks (the wires and pipes); Retail (including energy supply); and Wholesale (including generation). They are run separately and each has to stand on its own two feet.
As a UK-listed company we like to think that our activities are rather less opaque than some of our competitors (large and small), but I think there’s more we can do to explain this to customers. The legal and regulatory separation between Networks businesses and other types of energy business is already a well-established principle in energy regulation and if something like it were to be introduced between Retail and Wholesale, we would have no objections in principle and have no doubt it could work in practice.
As always there’s an appetite for reform at SSE. Customers should expect nothing less from us. You’ll hear more from us about this in the next few months and we’ll work with politicians from all of the major parties to achieve and implement a sustainable package of changes that gives customers, secure supplies of energy that are lower carbon and, most importantly of all, more affordable for the long term.