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SSE price freeze is kudos for Labour

ED Miliband made the most of his moment at Prime Minister's Questions yesterday.

After David Cameron welcomed the move by energy company SSE to freeze its own prices for two years, the Labour leader was ready for him.

"Over the last six months, we have obviously misunderstood you," said Mr Miliband sarcastically. "You are the champion of the price freeze. Can you explain why a price freeze was wrong six months ago but is the right thing to do today?"

The Prime Minister claimed credit for the SSE U-turn, saying it was down to the Government's decision to reduce so-called green levies on energy bills, but there is no question it has been the Labour leader, not the Prime Minister, who has set the agenda in the six-month tussle between politicians and energy companies over prices.

The Government's moves to reduce the eco levy and to threaten a competition inquiry have been in response to Mr Miliband's headline-grabbing pledge to freeze prices for 20 months after the next election. Labour's plan was derided by Mr Cameron as "unworkable, impossible to implement and probably a communist plot", yet SSE has now shown it is workable, straightforward to implement, and that adopting it need have no negative impact on share price.

The company is also acting in the spirit of a second Labour policy, by separating its wholesale arm - which includes energy production and storage - from its retail division which sells energy to homes and businesses.

If the other five leading energy companies now follow suit, it will of course rob Labour of their flagship policy going into the next election, which is a significant loss for Mr Miliband. For now though, the political kudos goes to him.

As for consumers, SSE's move is likely to deepen their cynicism about energy firms. They are likely to take it as evidence the companies have been holding out on the British public all along, claiming price hikes are unavoidable when now it seems they are not.

SSE claims it is making the move because it has listened to customers but is widely suspected of trying to pre-empt a threatened two-year competition inquiry into the way the British energy market operates. While SSE's change of stance is significant, it does not undermine the case for a full competition investigation. Only a major inquiry of this nature will give bill payers the confidence they need energy companies are operating in their interests. It should go ahead.

SSE's price freeze should be welcomed but it was not all good news, as the company announced it was shelving four offshore wind farm developments. There is no suggestion this is directly connected with the price freeze; rather it appears linked to concerns over the financial returns the firm can expect from the projects. This is a serious concern. It underlines how important it is the UK Government states its clear, long-term commitment to offshore wind power to give investors confidence and not allow support for this crucial sector to slide as a row rages about energy prices.

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