E.ON, one of Britain’s ‘big six’ energy suppliers, announced it is reducing its average gas prices by 3.5%, amid falling oil and wholesale gas prices, making it the first top energy supplier to cut its gas prices.
E.ON customers will welcome the projected £24 saving each will make per year, which is equal to 2 weeks gas usage at the past rate, thanks to the price reduction.
However, E.ON’s headline grabbing move is their launch of a new fixed-rate tariff, billed by the energy giant as one of the cheapest deals available in the UK at £923 per year, giving its 4.5 million customers the chance to save over £200 from today.
Chief executive Tony Cocker said: “Today’s 3.5% cut to our standard gas price and the launch of the UK’s cheapest energy tariff, our one year fixed product, demonstrate that we fundamentally believe in doing the right thing for our customers.”
“This is further evidenced by the fact we are the first supplier to reflect through our standard tariff the overall drop in wholesale gas prices this winter but also that, when our prices had to increase at the start of 2014 to reflect cost increases, for the second year running we announced later than any other major supplier and, on that occasion, at a lower average percentage increase level than any other major supplier:” he added.
Despite Mr Cocker’s unsurprising willingness to extol the virtues of his own company, there are many who consider the price cuts to be unsatisfactory and somewhat meagre. Given that the cost of wholesale gas has plummeted by over a quarter of its selling price 12 months ago, the energy regulator called for more to be done to provide consumers with better value.
Ofgem, which regulates the gas and electricity market, said: “This is a small step in the right direction. We have consistently called for suppliers to explain the growing gap between falling wholesale prices and retail prices. Cutting prices is an explanation that consumers will understand and in a competitive market we would expect others to follow suit.”
Consumers can be forgiven for thinking the move politically charged, with Chancellor Osborne’s artful assertion made earlier this week that big companies ought to ensure households enjoy the benefits of falling oil prices through “utility bills and air fares”.
E.ON’s decision to cut their tariff so soon after the Chancellor’s comments implies the message has been heard loud and clear, and other top energy companies have been met with clamour from ministers and regulators to follow suit.
This represents a blow to Labour leader, Ed Miliband, who promised last year to freeze energy bills for 20 months if elected this year. This move has been met with disgruntlement from suppliers across the sector, with many citing this as their reason for not already having reduced prices over the course of the year.
“I look forward to meeting with the Big Six energy suppliers shortly where I hope more of them will follow suit,” said Matt Hancock, energy minister.
He added: “This wouldn’t have happened under Labour’s ludicrous price freeze policy, where high bills would have been frozen and families wouldn’t feel the benefit of falling global gas prices.”
The perceived triviality of E.ON’s price reductions spurred Caroline Flint, the shadow energy and climate change secretary, to defend Miliband’s controversial pledge, stating: “This shows that Ed Miliband was right to challenge the energy companies to cut their prices and pass on the falls in wholesale costs to consumers. But given gas prices have fallen by at least 20% a price cut of just 3.5% looks pretty measly and means consumers still aren’t getting the full benefit of falling wholesale prices.”
Labour have called for Ofgem to be instilled with greater powers to compel companies to cut their prices, and a commons vote on the issue will take place today.
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