SSE warns of 'consequences' of price cap

22 2012 in Qui

It said: 'SSE would however continue to caution against the unintended consequences of intervention in what is a competitive, dynamic and fast changing market. The Conservatives have pledged to introduce a price cap that is expected to squeeze the Big Six energy company's margins from standard variable tariffs used by around 17 million United Kingdom households while the opposing Labour party has said it would like to introduce state-owned energy firms in every region.

Margins on its retail energy business swung from 6.2% to 6.9%, even though customer numbers fell by 210,000 in the past year.

The "big six" supplier said margins per dual-fuel customer rose to 6.9% in the year to the end of March, up from 6.2% the year before.

"Big six" energy company SSE has said that there are "challenges" ahead including the threat of a price cap in the next Parliament.

SSE raised its electricity prices at the end of April by 14.9% for 2.8 million customers.

It blamed the increase on the rising costs of supplying electricity and Government schemes.

SSE Plc is preparing for "significant challenges" this financial year as the United Kingdom government prepares to cap energy tariffs, threatening profit margins at the nation's biggest utilities.

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SSE's annual results come as the energy sector comes under pressure in the run-up to the election with the Tories promising a price cap and Labour planning to nationalise part of the industry.

Prime Minister Theresa May said 17 million households would benefit by up to £100 from the cap on poor value standard variable tariffs.

Exceptional impairments were booked against the Retail unit in the year, particularly the against the technology developments projects relating to an Energy Supply customer billing system which is no longer being progressed.

SSE said the remedies proposed by the CMA, which have not yet fully been introduced, can make a real difference to consumers.

George Salmon, equity analyst at Hargreaves Lansdown, comments: 'If investors were wondering where the exodus of customers from British Gas have ended up, it's pretty clear from today's results that it's not at SSE. The stock has fallen 5.7 percent this year, compared with an 8 percent gain in the Stoxx 600 utilities index.

Overall, the group - which bought back £131m of its own shares in the year to March and which escalated that activity last month - is recommending a 2.1% rise in the full-year dividend to 91.3 pence.

"With headwinds growing in the retail business, along with low power prices, we see this strategy coming under increasing pressure", they added.

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