* SSE freezes household prices until at least January 2016
* SSE to legally split wholesale, retail divisions
* Hit on profit estimated at 100 million
* Other suppliers expected to follow suit on price freeze
(Adds comments from political leaders, updates share price)
By Karolin Schaps
LONDON, March 26 British power utility SSE
said it would freeze prices and separate its wholesale
and retail businesses after an outcry over soaring energy bills
prompted a review of competition in the sector.
Britain's 'Big Six' energy suppliers, which control around
95 percent of the retail market, have come under fire for
consistently increasing tariffs and regulators are deciding this
week whether to open a full antitrust investigation.
The price increases have put SSE, Scottish Power,
Centrica, RWE npower, E.ON and EDF
Energy at the centre of a political row over the cost
of living, nearly one year before a general election.
SSE, the country's second-biggest household energy supplier,
promised on Wednesday it would freeze bills for its customers
from now until January 2016, a move that would lop 100 million
pounds off its profits over the entire period.
The strategic shift came in the first major announcement by
Chief Executive Alistair Phillips-Davies' since he took over
from long-serving executive Ian Marchant in July last year.
The price freeze forces SSE's rivals to consider similar
moves as customers increasingly shop around for the best deals.
It also pre-empts opposition Labour leader Ed Miliband, who
last year promised an industry-wide freeze on bills if his party
wins the election. Labour has also vowed to force utilities to
separate their retail and generation businesses.
Prime Minister David Cameron and Miliband both claimed SSE's
price freeze announcement as personal victories in a
parliamentary debate on Wednesday.
"It is hugely welcome in our country that energy companies
are cutting and freezing their bills," said Cameron, who has
taken a less confrontational approach to the utilities than
SSE said it would raise 1 billion pounds ($1.65 billion)
through the sale of its street lighting contracts and other
assets, and would cut an additional 500 staff in Britain.
It also plans to shelve two planned offshore wind farm
developments, adding to a string of project cancellations in the
sector in recent months.
It forecast capital investments of 1.6 billion pounds in
2014/15. The company had warned in January that number could
fall below 1.5 billion, blaming changes in government policy
that had cast doubt over future projects.
SSE shares were up 2.7 percent at 1438 GMT in London.
"The positives of the disposals/cost-cutting and the price
freeze will be countered by the warnings on medium-term
profitability," said Angelos Anastasiou, equity analyst at
Utilities had blamed their sharp price increases on higher
wholesale costs and increasing expenses for transporting energy
and government social programmes, for example to stem fuel
As household bills became a growing focus of voter
discontent, Cameron's coalition government has balked at price
controls and looked instead to market forces to drag down energy
Last month it announced new rules obliging the energy
companies to disclose long-term power prices twice daily in an
effort to draw new entrants into a fairer energy market.
Critics of price freezes say the utilities will find it
harder to invest in new projects, with the industry already
struggling to raise around 200 billion pounds to replace ageing
and polluting power plants and build new transmission lines to
cope with growing renewable energy production.
Breaking up the industry into smaller companies might
generate more competition, but those companies may also find it
harder and costlier to finance their investments.
Three regulators, including energy watchdog Ofgem, have been
carrying out a review of competition in energy and are due to
decide whether to refer the sector for an antitrust
investigation this week.
The companies stand accused of trading with each other at
discounted prices to inflate their profits and of drawing new
customers with discounted bills while keeping many other
customers paying higher prices on standard tariffs.
Britain's Secretary of State for Energy, Ed Davey, called on
the regulators last month to consider breaking up energy
companies if they were found to be abusing monopoly positions.
SSE said the legal split of its wholesale and retail arms
would improve the transparency of how the two businesses
Competitor Centrica already separates its upstream and
downstream businesses and breaks out profit numbers for both,
showing how the two units interact with each other.
"The complex vertically-integrated structure of the Big Six
makes it difficult to determine where profits and losses are
being made between the generation and supply part of their
business," said Tim Yeo, chair of the parliamentary Energy and
Climate Change Committee.
($1 = 0.6059 British Pounds)
(Editing by Paul Sandle and Tom Pfeiffer)