In November 2013 the UK Labour Party published a paper entitled Powering Britain: One Nation Labour's plans to reset the energy market and invited responses from interested parties on its proposals.
SSE has today published its response setting out its views on the proposals.
Summary
- SSE shares the Labour Party’s goal “to deliver a fairer energy market that works for ordinary people and secures investment for the future.” Building on its work in recent years it will work with consumers, political parties, regulatory authorities and any interested stakeholder to achieve this goal so that households and businesses have affordable, secure and lower carbon energy supplies.
- This consultation process is welcome and the proposals contained in it would inject further liquidity into the wholesale electricity market and improve transparency in this regard; however the proposals would not significantly reduce energy prices or provide energy investors with the long-term certainty they require to invest in the energy infrastructure consumers depend on.
- As an active market participant SSE wants to increase further wholesale electricity market liquidity. It has introduced industry-leading reforms to how it buys and sells power which have successfully injected considerable liquidity into the market and improved transparency. Ofgem has built on SSE’s reforms with the Secure and Promote licence condition. With time and growing participation from financial institutions, this can provide a reference for longer-term electricity contracts, improving liquidity in these markets as well.
- Energy companies need to take action and SSE in recent years has demonstrated a willingness to find sustainable solutions for its customers. In March 2014 SSE announced a price freeze until at least 2016, alongside a programme to streamline and simplify its business and a commitment to legally separate its Retail and Wholesale businesses to improve transparency. As a result of these actions the market is better for consumers. SSE continues to have an appetite for reform and will play its part, but it also believes that Governments have a major role to play to take some of the rising costs out of supplying energy and to provide energy investors with the certainty they require to commit to long-term investments in electricity generation, transmission and distribution.
- Notwithstanding the proposal for a 20-month price freeze, the consultation does not appear to have a clear commitment or a sustainable solution to reduce the costs of electricity and gas. Action must be taken to address the trajectory of energy costs in the coming years and ensure fairness, particularly in how the costs of government energy policies paid for through energy bills are levied from the most vulnerable consumers. SSE is supportive of the principles behind the mandatory social and environmental policies. However, given that energy prices in the UK are at historically high-levels, and these costs equate to around £100, and rising each year, of customers’ energy bills irrespective of their ability to pay, it is appropriate to consider whether funding such policies through energy bills is fair.
- The UK requires significant energy investment in the coming years to ensure consumers have the secure and lower carbon energy supplies they depend upon. SSE welcomes the consultation’s intention to provide energy investors with clarity and certainty; however given the urgent need for energy investment it needs to go further. There are additional measures which need to be considered before commitments to long-term energy investments can be made.