Electricity firms warn price cuts will hit jobs

ELECTRICITY SUPPLIERS and unions joined forces yesterday to warn of heavy job losses across the industry following new price curbs announced by the energy regulator, Callum McCarthy.

The AEEU engineering union claimed the pounds 15 reduction in average household bills next year could result in as many as 10,000 redundancies. However, the public service union Unison put the figure at a more modest 2,000 to 3,000 job losses.

The Electricity Association, representing the country's 14 public electricity suppliers, also warned of the threat posed to jobs and security of supply adding it wanted to avoid a trade-off between cost savings and reliability. The instant reaction in the markets was one of relief that the regulator had backed down from draft plans announced in October to reduce average bills by as much as pounds 25, or 10 per cent. However, after an initial surge in share prices, stocks fell back and some electricity companies ended the day down as analysts concluded that the price curbs were still very demanding.

The marked difference between Mr McCarthy's draft price curbs in October and the final reductions announced yesterday is that he has decided to place more reliance on competition bringing electricity bills down.

However, in the key area of distribution charges - the amount companies levy for use of their local wires monopolies - he has barely shifted at all. Distribution charges, which make up just over a quarter of the average bill will have to come down by 24 per cent next year - equivalent to a reduction in income of pounds 650m.

In addition the regulator has re-allocated pounds 300m of costs from distribution to supply, where there is now a competitive market, giving companies little scope to pass on the costs to customers.

Mr McCarhty said: "I have been tough on companies where they have a monopoly and I have established a safety net in supply where I expect competition to be the real driver of prices."

He added that had he stuck by his initial plans for a much bigger cut in supply charges, it would have limited the scope for companies to undercut one another while customer inertia would have reduced the number of households switching supplier.

David Porter, director of policy at the EA, said the deep cost cuts represented "a tough challenge for the industry", which could jeopardise both jobs and future investment.

Companies have until 20 December to decide whether to accept the new price curbs or appeal to the Competition Commission. Only Scottish & Southern, which has escaped with price cuts of pounds 7-pounds 8, saw its share price end the day strongly up.

Outlook, page 23

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

Mary J Blige and Will.i.am to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
Jessica Ennis-Hill: 'I just want to give it my best shot'

Jessica Ennis-Hill: 'I just want to give it my best shot'

The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...