SSE and Centrica Shares Shrug off Ofgem Pledge to Ban "Complex" Tariffs

LONDON -- The shares of SSE  (ISE: SSE.L) and Centrica  (ISE: CAN.L) slipped just a fraction this morning after Ofgem, the electricity and gas regulator, announced plans to ban household energy companies from offering "complex multi-tier tariffs."

SSE fell 2 pence to 1,441 pence, while Centrica, the owner of British Gas, dipped 0.6 pence to 332 pence.

Ofgem said it is to consult on plans for a package of "simpler, clearer and fairer measures to improve radically the competitiveness" of the domestic energy market.

The regulator also claimed the move would "tackle problems of tariff complexity, poor supplier behavior and a lack of transparency" identified following feedback from consumers.

Ofgem's proposals include limiting each energy company to no more than four electricity and four gas tariffs. In addition, the plans include "dual fuel" agreements being presented separately to consumers as a stand-alone-tariff option.

Other Ofgem reforms include the banning of expensive tariffs no longer available to new customers, ensuring fixed tariffs default to the cheapest alternative at the end of the term, and the creation of an industrywide Tariff Comparison Rate figure to help consumers select the best deals.

The chief executive of Ofgem, Alistair Buchanan, said today:

Our plans will put an end to consumers being confused by complex tariffs and will usher in a simpler, clearer, fairer and more competitive energy market for all consumers. We have spoken to thousands of consumers who have helped us shape this package through a period of extensive consumer research, and are very grateful for their input.

I am glad to say suppliers have already responded with some initiatives, but these don't go far enough. Ofgem is determined to press forward with proposals to deliver for consumers the most far-reaching shakeup of the retail energy market since competition was introduced.

Other companies that may be affected by the proposals are French firm EDF, German suppliers E.ON and RWE, the latter of which owns npower, and Spanish group Iberdrola, which owns Scottish Power.

Even with today's statement from Ofgem, the shares of both SSE and Centrica have outperformed the FTSE 100 (UKX) this year, with gains of 10%-plus versus a 6% advance from the index.

The two shares also pay generous dividends, with SSE shares forecast to yield about 5.8% and Centrica on track to offer 4.9%.

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