24th Jul 2014 10:42
LONDON (Alliance News) - UK power supplier SSE PLC and distributor UK Power Networks have been forced to pay out a further GBP3.3 million in compensation relating to performance during storms last Christmas, and the UK regulator Ofgem also raised the minimum power cut compensation payment per customer.
Meanwhile, the UK Competition and Markets Authority published an issues statement as part of its ongoing investigation into the British energy market.
Shares of FTSE 100 constituent SSE were down 0.9% to 1,484.00 pence Thursday.
UK Power Networks, which owns and maintains electricity cables and maintains electricity cables and lines across London, the South East and East of England, is owned by the Chinese electricity distribution company Cheung Kong Group.
Ofgem said on Thursday that it has now secured a further GBP3.3 million in compensation from the two companies, bringing the total compensation payments to GBP8.0 million, following its investigation into their performance during the exceptional storms last Christmas in the south of England.
The regulator's findings showed that both companies could have done more to get customers reconnected faster and to keep them better updated on what was happening. As such, the power supplier and power distributor have made the new compensation payments as donations to organisations such as the British Red Cross, which played a key role in helping vulnerable customers during power cuts and severe weather.
"A power cut at Christmas time is the last thing anyone needs. While we recognise the hard work of the companies and their staff who were out working to reconnect customers during the severe weather, the companies could have done more to plan for the weather and keep customers informed," Maxine Frerk, Ofgem's senior partner for distribution, said in a statement.
Earlier this year, both companies were forced to pay out GBP4.7 million to its customers in goodwill payments after around 16,000 customers were left without power for over 48 hours during the festive period.
"In recognition of the inconvenience and disruption caused to customers, following discussions with Ofgem, Scottish and Southern Energy Power Distribution is committed to donating GBP1 million to the following charities: Red Cross, Age UK, MacMillan Cancer Support and National Energy Action," SSE said in a statement Thursday.
Separately, the regulator is raising the minimum payment per customer to GBP70 from GBP27 for those who go at least 24 hours without power, in an attempt to further strengthen incentives for companies to act quickly and reconnect customers as soon as possible.
Ofgem said the new rules come into play in April 2015 and also include substantially increasing the cap for payments made to customers to GBP700 from GBP216.
On Thursday, SSE unveiled plans to strengthen the electricity networks in southern England following a wide-ranging consultation with customers. It said that its power distribution arm Southern Electric Power Distribution will introduce a raft of measures to help those households who need more assistance during a power cut, and improve the way it communicates information about restoring power.
"We have asked for, and listened carefully to, the feedback of our customers and have today set out a range of improvements on customer communications, looking after those who need it most during a power cut and improving further the reliability of the network. This is not the end of the process, our customers views never stop being important to us, and it is my aim that we should not only meet but exceed our customers expectations," Stuart Hogarth, director of distribution at Scottish and Southern Energy Power Distribution, said in a statement.
In addition, on Thursday the UK CMA published an issues statement for its investigation of the British energy market.
The statement comes after Ofgem referred the UK energy market to the Competition and Markets Authority for a full investigation, asking it to investigate the barriers to competition inherent with the "big six" suppliers, on June 26.
The regulator proposed the investigation in March, saying that the market needs a market investigation "to clear the air", with the investigation expected to reassure consumers and complement Ofgem's reforms for a simpler, clearer and fairer energy market.
Ofgem added in June that it expects the CMA to look at the relationship between the supply business and generation arms of the six main suppliers, to study the barriers to entry and expansion for suppliers and the profitability of the "big six".
The Big Six energy firms are Centrica PLC owned British Gas, E.ON, EDF, Npower, ScottishPower and SSE PLC.
"We are looking to identify the underlying causes, at both wholesale and retail level, which could be leading to the widespread concerns that have surrounded this market in recent years - including rising energy bills, service quality, profitability and uncertainty over future investment," Roger Witcomb, chair of the the CMA's Energy Market Investigation Group, said in a statement.
The issues statement set out the scope of the investigation and initial theories on what could be adversely affecting competition in the energy market. These are broken down into four 'high level theories' including the possibility that the vertical nature of the UK energy market led by the Big Six energy suppliers harm the competitive position of the junior suppliers or that energy suppliers do not face enough incentives to compete on price due to inactive customers, supplier behaviour and/or regulatory interventions.
"SSE will review this Issues Statement and respond to the CMA within the requested time frame. Whilst we will work constructively with the CMA to demonstrate the many features of the market that do work well, we also have a strong appetite for reform that is in the clear interests of customers and competition," SSE Chief Executive Alistair Phillips-Davies said in a statement.
The CMA is required to publish its final report by December 25, 2015 and has set out a timetable setting out a schedule for the various stages of the investigation.
Energy prices have become a contentious political issue of late, with bill increases toward the end of 2013 blamed on a combination of higher wholesale prices, rising costs for maintaining infrastructure, and the cost of the government's green energy taxes.
In December, UK Chancellor George Osborne announced that customers of the Big Six energy companies would see an average GBP50 reduction in their bills based on reductions in green and social levies.
Prime Minister David Cameron later announced a review of energy pricing and competition in the Commons, coupled with a pledge to cut green taxes next year.
Opposition leader Ed Miliband has said Labour will freeze energy prices for two years if elected to power in 2015, prompting energy companies to warn that they may not be able to fund investments and warnings from critics who say companies may raise prices even more ahead of any freeze.
By Tom McIvor; [email protected]; @TomMcIvor1
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