SSE accused of 'smoke and mirrors' on energy reform

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The Independent Online

Energy analysts and rivals yesterday lined up to attack SSE over proposals to shake up the industry by auctioning all the electricity it generates on the open market, with one detractor calling the move "smoke and mirrors".

SSE's plans would see it break from its biggest rivals, which effectively sell most of the electricity they generate directly to household and business customers in a process that makes it difficult for smaller, independent players to break into the market.

However, critics said SSE's plans would do virtually nothing to increase competition and decrease prices.

Darren Braham, a director of First Utility, Britain's largest independent electricity supplier, said: "We reject SSE's moves as 'smoke and mirrors' that will have negligible impact on newer entrants growing in the market, competition and consumers."

Mr Braham said the proposals would be ineffective, in part, because SSE would auction its electricity in the "day-ahead" wholesale market, rather than further ahead of time in the "forward" market. Electricity suppliers typically buy only a very small portion of their energy the day before – just 1 per cent in the case of First Utility, which buys the rest up to two years in advance.

SSE argues that its proposals, which its generation and supply director, Alistair Phillips-Davies, called "the most significant change to the GB electricity market... since 2005", will make it easier for smaller players to compete by increasing transparency and liquidity in the market. It expects some of its main rivals to follow suit.

But while many applauded SSE's move as a symbolic step in the right direction, they said the group would need to auction its electricity further ahead to be of any help to smaller companies, who need to agree their costs months in advance.

Ofgem, the regulator, also welcomed the move, but said it "doesn't do exactly what we want... we want to see liquidity further out in the curve".

A spokesman for utility company Centrica, said that SSE's new move "will do little to increase liquidity in the forward power market".