SSE to freeze energy prices

The group is also carrying out a "legal separation" of its wholesale arm - which includes energy production and storage - from its retail division which sells energy to homes and businesses.

The announcements came as SSE said it is to cut 500 jobs as part of a cost-cutting programme.

The announcement comes as the energy sector prepares to face the result of a regulatory probe which is widely expected to result in it being referred for a full-scale two-year competition investigation.

It comes amid intense political pressure over soaring household bills at a time when real-term wages are still falling - and public anger over energy company profits.

The price freeze comes months after Labour's pledge that it would force suppliers to freeze domestic energy tariffs.

Scrutiny of the sector has also focused on the dominant position of big companies that produce and supply energy, with speculation that a future probe by the Competition and Markets Authority could force these to separate.

SSE's split of its wholesale and retail divisions, which it says will be complete by March next year, appears to forestall such a move.

Meanwhile, it said plans to slim down the group by disposing of businesses and assets would raise around £1 billion.

The "value programme" will also see annual overhead savings of £100 million, with the loss of the 500 jobs.

SSE has shelved the development of two onshore wind farms with a total capacity of 117MW because it says they are no longer financially viable.

It said financial results to the end of March, due to be published in May, were expected to be in line with previous guidance, with adjusted profits before tax set to rise by 9%.

However, operating profits from its retail arm are expected to be 25% lower, reflecting customers' reduced energy consumption during a mild winter.

Energy Secretary Ed Davey said SSE's price freeze pledge increases the pressure on other energy companies to do the same.

He said: "This will be welcome news for SSE's customers and shows that the Government's work to reduce energy bills is working by lowering policy costs and driving competition. This shows that the Big Six are starting to realise they need to take big action if they want to keep their customers, who have been switching supplier in record numbers.

"SSE have shown today that the big energy firms are able to cut their costs and profits, and be confident about their ability to weather potential uncertainty in the wholesale markets, to give bill payers long-term price security. Customers of the others will be asking whether their suppliers will do the same. The Government encourages people to shop around for the best deal."

Which? executive director Richard Lloyd said: "This is a bold move in an energy market badly in need of change and we welcome the certainty this announcement brings to hard-pressed SSE customers. Millions of households can be confident that their energy bills won't be hit again by inflation-busting price rises in the months to come.

"By responding positively to our campaign for a separation of retail and generation businesses, SSE has also shown the industry itself can take action to improve transparency. We now want to see a full competition inquiry to ensure the whole energy market is opened up to more competitive pressure, to keep costs in check and give all consumers confidence they are paying a fair price."