Competition probe won't mean blackouts

Radley pylons at sunset, Oxfordshire England.

Rival energy companies are "scaremongering" when they suggest that a competition probe could lead to blackouts, the chief executive of SSE says.

Alistair Phillips-Davies says that the investigation is a chance to "clear the air".

%VIRTUAL-SkimlinksPromo%"Throughout any inquiry it is time for this industry to listen and change, not be defensive or scaremonger," he wrote in the Daily Telegraph. "The choice facing energy companies is simple: attempt to carry on regardless without the trust of customers or stand up and be counted."

His comments will be seen as a sharp rebuke to Centrica chief executive Sam Laidlaw, who last week claimed that the investigation would delay investment in new power plants. He said there was "an increasing risk" that the lights could go out as a result.

Laidlaw's words have already been strongly criticised by MPs including energy secretary Ed Davey, who said Laidlaw was "absolutely, totally wrong".

But Professor David Elmes, head of the Global Energy Research Network at Warwick Business School, says Laidlaw has a point.

"A probe into the industry will take time, so that any reductions in price that could result need to be put into context with rising global prices and increasing investment costs by delaying the projects needed to supply our energy in the future," he says.

Last autumn, the National Grid warned that there was a danger of blackouts, with a fall in the amount of coal power generation leaving the country with just a five percent margin of power supply during periods of peak demand.

The investigation by the Competition and Markets Authority (CMA) was instigated by regulator Ofgem, and is expected to take up to 18 months. It will look at whether energy companies have been co-ordinating the size and timing of price rises. Last autumn, a price hike by SSE was followed swiftly by increases from Centrica, British Gas, npower and EDF.

Ofgem is also concerned by the industry's high profits, which increased from £233 million in 2009 to £1.1 billion in 2012.

"Ofgem believes a referral offers the opportunity to once and for all clear the air and decide if there are any further barriers which are preventing competition from bearing down as hard as possible on prices," says chief executive Dermot Nolan.

SSE has now promised to freeze its prices until 2016, with consumers keeping their fingers crossed that the other suppliers will once again follow suit.
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