SSE boss fears ‘stark’ decisions after price cap

Inefficiency is not to blame for high energy costs, insists chief executive

The chief executive of SSE has warned that energy suppliers may face “stark decisions” about how to cut costs while continuing to deliver “decent customer service” in the wake of price regulation being introduced.

Writing for the Sunday Telegraph, Alistair Phillips-Davies set out his concerns about Conservative plans to introduce price regulation in the energy retail market.

He accepted the scrutiny under which the energy sector has been placed and promised SSE will “work constructively throughout the consultation and implementation processes” for a price cap.

Nevertheless, Phillips-Davies insisted that “as a major energy supplier we believe customers’ best interests are served by competition, not caps”.

He defended the industry against claims that headroom for lowering prices could be achieved through greater efficiency within company operations and processes saying that “Having already delivered significant cost reduction programmes across [SSE]” he could not agree “that inefficiencies are to blame” for high energy bills.

The chief executive warned the Conservative pledge to deliver a £100 annual saving on energy per household is unsustainable “without other measures to reduce the cost of energy”, or “stark decisions for suppliers about how to cut costs while continuing to deliver decent customer service”.

Phillips-Davies also urged politicians to understand that “supplying energy is not like some other retail sectors. The reality is the issues affecting the energy market are not new and will continue to exist regardless of whether or not government is involved in setting prices.”

He insisted that rising energy prices over recent years are not due to “profiteering energy companies”.

“Analysis shows industry profits have remained broadly flat, in our case averaging around £80 a year per customer, making it a relatively low-margin sector compared to other utilities such as mobile phones or broadband.”