Labour Victory in U.K. Election Seen Hurting Utility Industry

The labour 'battle' bus gets a quick clean on April 13, 2015 in Manchester, England.

The labour 'battle' bus gets a quick clean on April 13, 2015 in Manchester, England.

Photographer: Christopher Furlong/Getty Images

A victory for the U.K. opposition Labour Party at the May 7 elections risks “damaging” the country’s utility industry, Sanford C. Bernstein & Co. said.

Labour has reiterated a pledge in its election manifesto, published Monday, to freeze energy bills until 2017 and force utilities to pass on falling costs to consumers if it wins power.

“The retail environment is set to get more interventionist post the elections in the event of a Labour victory,” Deepa Venkateswaran, a London-based analyst at Bernstein, said in a note to investors. It’s “likely to be damaging from a sentiment point of view.”

The party has vowed to separate the power-generation and supply businesses of the so-called Big Six energy companies to create a more transparent market. Labour also plans to set up a new energy watchdog with the authority to strip utilities of their licenses if they “repeatedly harm the interests of consumers,” it said.

The Big Six -- Centrica Plc, SSE Plc, Electricite de France SA, RWE AG, Iberdrola SA and EON SE -- are subject to a probe by the Competition and Markets Authority to determine whether they profit unfairly from their market power. The authority is due to publish its recommendations by the end of the year, which may include splitting generation businesses from retail units.

A change from the current Conservative-led government would make the operating environment “riskier” for the retail businesses, Bernstein said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE