Electricity and multi-utility stocks were falling sharply again on Thursday as investors continue to show concern over comments from Labour leader Ed Miliband who pledged to freeze energy bills if the party is voted back into power in 2015.
Shares in British Gas owner Centrica were falling heavily in afternoon trade, down 2.3% at 367.1p, followed closely behind by gas and electricity firm SSE which was 1.7% lower at 1,463p.
Water groups United Utilities and Pennon were also in the red, along with power station operator Drax.
Earlier this week, Miliband promised that Labour would halt rises in gas and electricity bills from May 2015 to January 2017 if it is re-elected at the next election. He estimates it would equal average annual savings of £120 for households and £1,800 for businesses.
Centrica on Tuesday reacted to the proposals, saying that itself and every other energy supplier would struggle to operate if prices were controlled against a background of rising costs. The firm said it would not be "economically viable".
Clive Roberts, an equity research analyst at S&P Capital reiterated this opinion on Thursday, saying that "some of the big six UK suppliers could sustain losses and exit the market" if bills are frozen. He also said that it would reduce the level of competition in the market "to the detriment of consumers".
Meanwhile, Neil Woodford, the head of equities at investment group Invesco Perpetual, whose parent company Invesco is Centrica biggest investor, attacked Miliband's plans saying that they risk damaging the investment case for the electricity industry in the UK. According to The Telegraph, Woodford accused the Labour leader of "economic vandalism" said a bill-freeze would block billions of pounds of new money that the government needs.
"If Centrica and SSE cannot make any money supplying electricity to the retail market then they won't supply it. The lights will go off, the economy will shut down," he was quoted as saying. Invesco owns a near-5% stake in Centrica and is also a major shareholder in SSE.
Woodford also attempted to quash claims that elevated energy prices are a direct result of profiteering by utility companies: "There have been umpteen investigations into the retail energy market by Ofgem over the last 10 years. But at no stage did any investigation highlight cartel activity or price fixing activity. There is no evidence of profiteering."
Top performing sectors so far today
Industrial Metals & Mining 1,581.37 +1.63%
Tobacco 36,991.84 +0.80%
Industrial Transportation 3,053.00 +0.78%
Real Estate Investment & Services 2,551.53 +0.67%
Real Estate Investment Trusts 2,428.00 +0.62%
Bottom performing sectors so far today
Electricity 9,424.82 -1.70%
Banks 4,915.81 -0.84%
Household Goods & Home Construction 10,172.13 -0.54%
Gas, Water & Multiutilities 5,653.64 -0.43%
Automobiles & Parts 8,131.79 -0.34%