UK's SSE couples price cap promise with investment warning

by Reuters
Thursday, 23 January 2014 12:07 GMT

* Says to cap prices for at least a year from March

* May cut 2014/15 investment below 1.5 billion pounds

* To raise dividend 3 pct in 2013/14 financial year

* To review offshore wind business by end of March

By Karolin Schaps

LONDON, Jan 23 (Reuters) - British utility SSE said it planned to cap energy prices for about a year from this March, going beyond a previous promise to pass on government price reductions with a commitment to control bills not so far made by any of its rivals.

The price cap is the group's latest response to a political dispute in Britain about high energy bills, but came with a warning that SSE would likely cut investment in energy projects because of policy uncertainty - another vital issue given warnings of a looming shortfall in UK energy supplies.

SSE and others in Britain's "big six" utilities have all said in recent weeks they would cut prices following a government concession to move green or environmental levies away from energy bills and on to general taxation.

Such measures, which came after Labour leader Ed Miliband said in September he would freeze consumer bills for 20 months if he wins power in an election due in 2015, have been touted as cutting average bills by around 50 pounds a year.

Yet SSE, one of the biggest investors in Britain's energy sector, also said it was likely to cut its investments below 1.5 billion pounds ($2.5 billion) in the coming financial year, having been spending an annual total of between 1.5 billion and 1.7 billion every year since 2010.

It said the reduction was due to uncertainty on future project returns because of changes in government policy.

SSE will also review its offshore wind business after its two main offshore projects failed to qualify for state-guaranteed subsidies.

"The prospects for investment in generation assets in Great Britain are ... not encouraging," the company said in a trading statement, referring to changes the government has made on how it hands out subsidies to low-carbon energy projects.


Britain needs to attract around 200 billion pounds in investments in its energy production facilities and networks by the end of this decade to guarantee security of supply and integrate a huge growth in renewable energy capacity.

To help meet emissions reduction targets, the government has pushed through an electricity market reform that focuses on guaranteeing minimum power prices to types of energy that are more environment friendly.

SSE's Galloper and Beatrice offshore wind farms were not shortlisted by government to receive early guarantees on future electricity prices, a move which is likely to jeopardise the projects.

"(SSE) will complete a wide-ranging review of its offshore wind development portfolio by the end of this financial year and will report on its conclusions then," the company said.

The company is not alone in reassessing offshore wind. Britain has built the world's biggest offshore wind energy market a number of companies have been cancelling and selling projects in the face of steep costs.

SSE and others in the big six utilities - also including Centrica's British Gas, E.ON, EDF, RWE npower and Scottish Power (part of Iberdrola ) - came under fire at the end of last year after they increased energy tariffs.

SSE, the second-largest of the six which supply 97 percent of the country's homes, pledged to leave its prices unchanged until next year.

"SSE intends to cap energy prices at their new level until at least the Spring of 2015," the company said.

The group also said it expects to raise its full-year dividend 3 percent for the year ending March 31, having the previous year raised its total payout 5.1 percent to 84.2p.

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