Your independent energy adviser
0800 051 5770

CMA Submission – SSE

SSEIn the latest in our series analysing the responses of key players to the CMA investigation into the UK energy market we focus on the second largest energy supplier in the UK, SSE.

Even before the CMA’s publication of their Statement of Issues, SSE Chief Executive Alistair Phillips-Davies has been vocal in his support of the calling of the CMA enquiry earlier this year and led a chorus of criticism against Centrica’s Sam Laidlaw’s apocalyptic threats of what the probe would mean for the future of UK energy supply.

From that foundation SSE have continued to support the investigation whilst also highlighting the direction they believe the probe should follow and just as critically, should not follow, if the market is to see genuine and lasting improvement,

Phillips-Davies, said:

“The Great Britain energy market is highly competitive but SSE continues to have an appetite for reforms that further benefit customers. For example, we believe that reviewing and amending energy bill regulations so that customers’ bills are simpler or taking Government policy costs off those bills are two possible reforms that could benefit customers.”

“Over the coming few months SSE will keep trying to ask the right questions and remains committed to trying to find the right answers for our customers in an open and transparent way.”

Tackling each of the CMAs four ‘theories of harm’ SSE responded by saying that in their opinion:

  • Liquidity is now sufficient for independent retailers to manage risks and does not represent a material barrier to entry or expansion;
  • Small suppliers do not face material additional costs resulting from any lack of liquidity;
  • Smaller non-vertically integrated retailers do not face disproportionately higher costs than vertically integrated suppliers;
  • Vertical integration provides an efficient way of organising generation and retail activities given the inherent risks and uncertainties involved;
  • The existence of vertical integration does not prevent other models;
  • There is no evidence of any adverse behaviour in the power generation market;

SSE conclude by saying that features of a competitive and well-functioning market are evident in the UK energy sector include:

  • Fluctuating market shares,
  • The entry and growth of new suppliers,
  • Relatively low measures of market concentration compared to some EU markets,
  • Lower prices than in comparable international markets, and
  • The low retail margins achieved by the energy suppliers.

On a more prosaic level, SSE also expressed a keen intention for the CMA to “bust some myths” of the energy market such as:

  • Suppliers intentionally offering less competitive tariffs to ‘in area’ customers when according to SSE the reality is that the regional differences in prices simply reflect the differences in network costs.
  • Ofgem’s assertion that ‘tacit co-ordination’ is a feature of the market when according to SSE the prices are driven by variables outside of the suppliers control such as the cost of government environmental and social schemes, and network charges as well as each supplier having unique and incompatibly defined policies on wholesale prices.

In a final comment SSE have also called for the CMA to recommend that the differentials in regional pricing should be removed once and for all.

SSE’s recommendation is that a single nationwide charge should be implemented, facilitating the need for fewer tariffs and simpler understanding of any future regional price variances.

SSE’s macro and micro level thought processes here are to be commended, even if we do not agree with all the points made.

On balance we can therefore conclude that SSE have approached the CMA investigation both logically and constructively.

In not only challenging the four theories of harm with some strong justification (and in parts less persuasive argument), SSE have also called to task Ofgem and the energy myths as well as proposing alternative solutions such as the single national transportation price.

As expected then SSE have lived up to their reputation as the sensible supplier they are by relying on more than just hyperbole to get their point across.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.