Energy stocks hold firm despite Ofgem overhaul

By DAILY MAIL REPORTER
Updated: 05:51 EDT, 22 March 2011

Britain's quoted energy firms shrugged off industry regulator Ofgem's plans for an overhaul of the gas and electricity market as City analysts warned the move carried a high risk of unintended consequences.

Trading boost: Power station group Drax could benefit from changes

Ofgem yesterday announced changes including simpler pricing and the auctioning of a fifth of the energy produced by the so-called Big Six suppliers - British Gas-owner Centrica, Scottish & Southern Energy, Scottish Power, E.On, EDF Energy and Npower.

The companies must act before June 1 or face possible referral to the Competition Commission.

But despite initial falls, the London-listed firms' share prices mostly recovered.

Centrica was down just 0.7p at 327.8p, SSE up 1p at 235p and network owner National Grid up 1p at 578p. Scottish Power is Spanish-owned, E.On and Npower are German and EDF is French.

Matrix analyst Adam Forsyth said the moves might mean a small increase in competition for Centrica and SSE.

'More concerning is the proposal to require the big six energy firms to auction up to 20% of their electricity output,' he added. 'We think this sounds a little arbitrary and runs the risk of unintended consequences.'

Companies with flexible generation and which are good at trading may see a benefit, Forsyth said, which could boost power station group Drax (down 4.6p at 415.4p).

Meanwhile, Indian power firm Essar Energy was the biggest faller of the day, but it vowed that growth plans would not be derailed by project delays.

It said profits before tax rose 28% to £224m but shares fell 34.6p to 440.5p, after it reported delays to several projects.