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Rejected energy merger points to end of state-run plan

Terry Murden, Scotland's Programme for GovernmentAn interesting, even ironic, timing of two announcements looks like having a lasting impact on the energy market.

First came the publication of a letter from Gordon Lindhurst, convener of Holyrood’s Economy, Jobs and Fair Work Committee, raising questions about the viability of the SNP’s proposed publicly-owned energy company.  Within hours, SSE and Npower provided him with some of the answers.

The two energy companies have highlighted the constraints placed upon them by the price cap. To explain further, the merger was not going to work for the new company, its staff, shareholders or customers.

Already this year we have seen eight small energy suppliers collapse in a challenging market in which they are vulnerable to rising wholesale prices. If two of the Big Six also can’t make it work then why should a state-backed energy company have any better luck?

Stephen Murray, energy expert at MoneySuperMarket, says the news is disappointing, as the merger could have delivered efficiencies and customer benefits that the two suppliers, individually, may struggle to make.

He says the price cap is a symptom of a bigger malaise in the market with too many suppliers being allowed unchecked access to the market, about 70 at the last count.

SSE says it will continue to build its energy services business outside the group, without specifying what it is proposing.

As for the Scottish government, there is now a pressing need for it to answer Mr Lindhurst’s questions on how a publicly-owned company plans to build a sustainable customer base, how it will operate, how it will align with existing initiatives, and what extra value it will add.

He may be waiting some time before he gets an answer, and don’t be surprised if this SNP policy commitment gets kicked into the long grass.

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