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Energy firms under pressure as SSE freezes prices until 2016

BIG Six energy supplier SSE has pledged to freeze household gas and electricity prices until ­January 2016, putting rivals under pressure to do the same.

The move by the owner of ­Scottish Hydro, which comes amid political lobbying on energy firms over rising bills and soaring profits at a time when household wages are being squeezed, was hailed by consumer groups as a bold move.

But they also called on suppliers and the Government to help those who struggle to pay for heating.

Steven Camley's cartoon

The sector faces the outcome of a regulatory probe in days which is expected to see it referred for a two-year competition investigation.

Prime Minister David Cameron said SSE had made clear it that a principal factor allowing it to freeze prices was the Government's decision to roll back green levies on energy bills, which saved households an average £50 a year.

SSE chief executive Alistair Phillips-Davies said the freeze would knock £100 million off ­profits for 2015.

He said: "We felt we needed to make a bold statement. It's all about making sure that we listen to customers, that we show that we are responsive to customers and so we have clearly said we will have to accept lower profits."

Will Morris, managing director of the group's retail arm, added that the freeze would be unaffected by volatility in world wholesale energy prices. He also said supply profit margins would fall from their usual level of around 5% to as low as 2.5%.

The announcement knocked 2% off the value of ­British Gas owner Centrica, which is likely to come under renewed pressure over bills.

However, SSE shares were up amid its disclosure of wider plans for the group's future, including a pledge on higher dividends.

Which? executive director ­Richard Lloyd said: "This is a bold move in an energy market badly in need of change and we welcome the certainty this brings to hard-pressed SSE customers."

Sarah Beattie-Smith, ­spokeswoman for Citizens Advice Scotland, added: "The price freeze will be welcome news for hard pressed consumers in Scotland, though more must be done by suppliers and Government to help the one-third of people who already struggle to heat their home."

SSE, which had ­criticised a pledge by Labour to force suppliers to freeze prices, is one of the so-called Big Six energy firms that dominate UK supply, together with British Gas, E.ON, npower, EDF and ScottishPower.

The firm, which is to axe 500 jobs in a voluntary redundancy programme as part of a drive to save £100m a year, is carrying out a "legal separation" of its wholesale arm - which includes energy production and storage - from its retail division selling energy to homes and businesses.

The move, which it says will be complete a year from now, appears to forestall potential regulatory action which it is speculated could result in action to split up large companies such as SSE that produce and supply energy.

On the prize freeze, Mr Cameron said: "What we have done is reduce the cost of energy charges so that companies are able to cut their bills. It is our policy that bills should be cut and bills are being cut under this Government."

Mr Cameron said that, since the green levies rollback, British Gas and E.On had cut £50, Scottish Power £54 and EDF £65 from dual-fuel bills, while npower, ScottishPower and EDF had said prices would not go up further in 2014.

However, Labour said that, even after the reductions implemented after the rollback, the Big Six power firms had all increased the size of overall bills this winter.

A party source said it showed a price freeze was "not only workable but necessary".

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