SSE’s U.K. Power Auction Won’t Break Big Six’s Hold, Fitch Says

A plan by SSE Plc, the U.K.’s second-largest power producer, to trade all its daily generation and use through an auction won’t break the dominance of Britain’s six largest utilities, according to Fitch Ratings Ltd.

Increased trading volumes in the day-ahead market may help reveal where energy companies make profits, the agency said in a statement. That may bring a “small incremental” benefit to consumers while allowing utilities to better defend allegations of “earning excessive profits from household customers,” according to the statement.

SSE, based in Perth, Scotland, said yesterday it plans to submit all its power generation and consumption needs into Nasdaq OMX Group Inc. and Nord Pool Spot AS,’s N2EX daily power auction. The company, along with Electricite de France SA, Centrica Plc, RWE AG, EON AG and Iberdrola SA’s Scottish Power all have generation and supply businesses and are able to use their own power for their customers. That may make it harder for smaller generators or suppliers to access electricity.

The retail energy market is very difficult to enter, Oliver Schuh, director in Fitch’s energy and utilities group, said in the statement. The six so-called vertically integrated utilities benefit from economies of scale in back office, brand recognition and marketing, he said.

“Their scale and diversification also allows them, if necessary, to pursue pricing strategies that smooth out the burden for domestic customers at times of volatile wholesale energy markets,” Schuh said.