Centrica, SSE Drop as U.K. Patience Tested on Retail-Energy Fees

  • Barclays estimates 15% of Centrica’s value is at stake
  • Reregulation tempting, but common sense to prevail: Macquarie

Centrica Plc, the biggest British energy supplier, and SSE Plc extended losses a day after U.K. Energy Secretary Greg Clark said “time is up” for utilities driving up energy charges, signaling the government might intervene in the market.

U.K. lawmakers are planning to debate energy prices Thursday in parliament in London and the government plans to publish during the next few months a plan that might trim the value of utilities, according to Jefferies International Ltd. and Barclays Plc. SSE said on Monday its dual-fuel bills will increase 6.9 percent. Centrica’s British Gas unit last month extended a price freeze until August.

“There seems to be cross-party support for something to be done,” Oliver Salvesen, an analyst at Jefferies, said by phone. While it’s difficult to judge whether Britain will re-regulate its household energy market, “investors are concerned about what the government will do.”

Centrica fell 0.6 percent to 217.3p in London at 2:02 p.m., down for a fourth day. SSE declined 0.1 percent, while the Stoxx 600 Utilities Index dropped 0.2 percent. In the past month, Centrica declined 7.5 percent versus a 1 percent gain for the Stoxx 600 Utilities Index.

SSE’s tariff increase is justified because of higher costs, Barclays’ Stephen Hunt, an analyst in London, said Tuesday in an emailed research note. He previously warned investors that 15 percent of Centrica’s value was at stake and they may want to steer clear of utility shares while the government makes up its mind.

“Whilst regulating tariffs may appear politically appealing, we think common sense will prevail,” Dominic Nash, head of European utilities research in London for Macquarie Group Ltd., said Wednesday in an emailed note.

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