SSE: UK Govt can do more to ‘smooth’ energy prices

The chief executive of SSE plc, the Perth-based renewable energy and power networks giant, has said the UK government “can smooth energy costs for households beyond what industry can do alone.”

The UK energy regulator is expected to announce a rise to more than £3,600 a year for a typical household energy bill from October 1 from the current £1,971.

The price cap is expected to gradually rise to more than £4,000 by the new year before peaking at £6,000 by April.

In a newspaper column, SSE CEO Alistair Phillips-Davies said the UK government could artificially keep prices down for a period by providing payments to suppliers “to bridge the gap between this capped price and the costs they actually incur.”

The CEO said that rather than being a handout, this should be viewed as a “mortgage” secured against “the cheap future energy system …”

Phillips-Davies said the firm is exploring with the government how it can help smooth costs for households.

He said one idea being considered is a voluntary scheme through which “generators of non-flexible, low-carbon power such as wind and nuclear could sign up for contracts to deliver at a fixed price any power they haven’t already ‘hedged’ or sold into the market ahead of time.”

Phillips-Davies said this fixed price would be far lower than current wholesale rates and that generators would pay the difference back into a pot that could then help pay down any debt created by capping prices.

The CEO said offering these contracts for 15 years would spread costs out over a longer period “bridging the gap until other policies delivering cheaper, more secure energy take full effect.”

Explaining his proposal in a column for London newspaper The Financial Times, Phillips-Davies wrote: “As with Covid emergency support, it would rely on relatively cheap government borrowing, but with a plan to pay down this debt as we complete our energy transition and prices fall.

“I am sure the retailers will step up and help make this solution work — indeed many have been calling for it.

“As one of the UK’s largest investors in low-carbon electricity infrastructure, SSE is focused on delivering the long-term solutions to today’s problems.

“However, short-term measures are needed too, and we are exploring with government how we can help smooth costs for households.

“One idea is a voluntary scheme through which generators of non-flexible, low-carbon power such as wind and nuclear could sign up for contracts to deliver at a fixed price any power they haven’t already ‘hedged’ or sold into the market ahead of time.

“This fixed price would be far lower than current wholesale rates. Generators would pay the difference back into a pot that could then help pay down any debt created by capping prices.

“Offering these contracts for 15 years would spread costs out over a longer period, bridging the gap until other policies delivering cheaper, more secure energy take full effect.

“It is vital we don’t do anything in the short term to treat the symptoms of this crisis that will slow down delivery of the solutions that will address the underlying cause.

“We need huge capital investments in low-carbon energy infrastructure. These are delivered most cheaply when stable, long-term policy reduces risk.

“That’s how the UK became a global superpower in offshore wind. For SSE’s part, our plans could see us investing £24bn by the end of this decade.

“We plan to invest far more than we expect to make in profit and have cut our dividend policy to prioritise investment and growth.

“Money we make is being ploughed straight back into infrastructure that will boost Britain’s energy security and cut costs.

“This is a critical moment for the UK. Nobody yet has all the answers and the ideas we’re putting forward need work.

“But when new ministers take office in September they will find an electricity industry willing to help in the short term, while delivering a future energy system that will prevent us ever being in a similar predicament again.”

Scotland’s First Minister Nicola Sturgeon has warned the looming energy price cap rise must not “be allowed to go ahead”.

Speaking on BBC Scotland’s The Sunday Show, Sturgeon said: “This further increase in people’s energy bills can’t be allowed to go ahead because it is making it impossible for people to provide the basics for themselves and their families, but it is also continuing to fuel inflation, which, of course, is causing the problem in the first place.

“I want to make sure that the Scottish Government, working with energy companies, other stakeholders in Scotland, that we are genuinely doing everything we can at our own hand to help here.”

Sturgeon has argued that renationalisation of energy firms “should be on the table” but said the Scottish Government does not have the relevant powers to take such action.

She added: “I want us to come together to call on the UK Government to take the action only it can take.

“There is a looming disaster that is already unfolding but it is going to get worse.

“This is going to cause destitution and devastation, this will cause loss of life if real action is not taken to stem this crisis.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.