Reuters: Hot Stocks: UPDATE 1-Price cap plan wipes more than 1 billion stg off UK energy firms

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UPDATE 1-Price cap plan wipes more than 1 billion stg off UK energy firms Sep 25th 2013, 10:00 Wed Sep 25, 2013 6:00am EDT (Adds details, reaction) LONDON, Sept 25 (Reuters) - More than 1 billion pounds was wiped off the value of Britain's two biggest listed utilities on Wednesday as the industry recoiled from a plan by opposition Labour leader Ed Miliband to freeze energy prices if elected in 2015. Shares in Centrica were the second biggest faller on the FTSE 100 Index in early trading, down 3.6 percent, while SSE was the third biggest faller and down 3.2 percent on the proposal set out by Labour on Tuesday. Though likely to be popular with voters who have been hit in recent years by rising energy costs, the plan has placed Labour on a collision course with the energy companies who say they need to charge higher prices to invest in infrastructure. The plan, which would involve capping business and consumer energy bills until January 2017, was slammed by the companies who would be on the hook to foot the 4.5 billion pound bill ($7.2 billion) for the plan. "The impact of such a policy would be damaging for the country's long term prosperity and for our customers," Centrica, with a market valuation of 20 billion pounds ($32 billion), said in a statement. "If prices were to be controlled against a background of rising costs it would simply not be economically viable for Centrica, or indeed any other energy supplier, to continue to operate and far less to meet the sizeable investment challenge that the industry is facing." Miliband appeared on British television and radio early on Wednesday in an effort to defend his policy, the viability of which was questioned by analysts. "The fundamental problem at the heart of this market is that when wholesale prices go up people pay more and when wholesale prices come down, people still end up paying more," he told BBC Radio. The issue of energy bills is likely to escalate as the groups tend to announce retail price rises in mid October, a move which historically attracts criticism from the media and charities who warn that many Britons can no longer afford to pay such high prices. Utilities blame the price rises on the need to upgrade the energy network and government schemes to reduce carbon emissions and improve energy efficiency, plus rising wholesale prices. Looming in the future is also the need to invest in new electricity generation. "Our initial view is that these (Miliband's) proposals would be so detrimental to investment in UK energy infrastructure, that they are unlikely to ever become legislation," JP Morgan Cazenove analysts said. ($1 = 0.6256 British pounds) (Reporting By Christine Murray and Sarah Young; editing by Kate Holton) Link this Share this Digg this Email Reprints

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