Gas firm cuts bills ... by 62p a week!
E.On lowers prices by 5% (but only after its wholesale costs plunged by almost half)
ONE of the Big Six energy companies has announced an ‘underwhelming’ cut to their bills worth just 62p a week – despite huge falls in the wholesale price of fuel.
E.On is reducing the price of its standard variable rate gas tariff by 5.1 per cent from the beginning of February.
But the cut is tiny compared with the price of wholesale gas, which has plunged by 32 per cent in the last 12 months and 45 per cent in the last two years.
And the firm said it is not cutting its standard electricity tariff at all, even though the wholesale cost is down 13 per cent in 12 months and 22 per cent over two years.
This means that the average annual dual fuel bill for the two million customers on E.On’s tariff will fall by just 2.8 per cent, taking it down from £1,124 to £1,092 a year.
However, the company has also launched a new one-year fixed rate tariff that would charge £783 – a huge saving of £341 for those who ask to switch.
The cheap deal will put fresh pressure on the other energy giants to slash their bills.
Consumer experts said the cut is evidence of the reductions that should be made across the board – with some analysts suggesting that energy companies have the scope to cut standard tariffs by as much as £200 a year.
Joe Malinowski, founder of price comparison website TheEnergyShop.com, said suppliers have failed to pass on wholesale price falls.
‘If you’ve ever wondered why you might not be able afford a holiday this year, one reason could be that, over the past two years, you have paid your energy supplier £500 more for energy than you needed to,’ he said.
‘The fact that E.On can launch a fixedrate deal that is so much cheaper than its standard variable tariff also gives you some big clues as to what the real potential for cutting energy bills is.’
He said E.On customers could wait for the small reduction in their bill or shop around and save more than £300 a year.
Which? executive director Richard Lloyd said: ‘E.On has taken the first step by cutting its prices for gas deals, but given plummeting wholesale costs, consumers are bound to question if it’s enough. In a market where competition isn’t working effectively more has to be done to make pricing fair, switching easier and ensure the most vulnerable are protected.’
An inquiry by the Competition & Markets Authority has concluded that families on standard variable tariffs have been paying billions of pounds too much for years.
It is due to announce a shake-up in the market within weeks that could include a cap on variable tariffs and measures to help people move to the cheapest deals.
Ann Robinson, of the price comparison website uSwitch, said customers would be ‘underwhelmed’ by the small cut from
‘Consumers aren’t feeling the benefit’
E.On, which was long overdue. The chief executive of Citizens Advice, Gillian Guy, said: ‘Households are paying over the odds on their energy bills.
‘Wholesale costs are plummeting but consumers aren’t feeling the benefit.’
Around half of the average British household energy bill is based on market prices for electricity and gas.
The rest is composed of distribution costs and subsidies for vulnerable customers and for green energy schemes.
But E.On’s UK chief executive, Tony Cocker, said the firm could not cut bills further because of these other costs.
‘While the price we pay for our customers’ energy has fallen, we also have to take account of managing the various other risks in the market which can change, and the fact that many of the other costs that we don’t control but do have to bear have increased or may increase,’ he said.