E.ON has announced it is passing on a 3.3% cut in the cost of gas to its customers, a move that should leave around 1.8 million households better off.

The German-owned company, which was formerly known as powergen, last made a price change in March this year when it reduced electricity bills by 9%. However, last year it hiked gas bills by 41% and electricity bills by 25.7%.

E.ON currently has around 5.5 million customers in the UK, making it the fourth biggest supplier of energy in the UK.

Gareth Kloet, head of utilities at Confused.com, says the 3.3% price cut to gas bills is “welcome” but adds it only equates to around £2 less each month for the average customer.

“It's not going to make a huge difference to consumers struggling with their household budgets,” he adds.

However, the cut could pave the way for more providers to pass on cheaper wholesale costs to their customers.

At the end of June, independent consumer watchdog Consumer Focus accused energy suppliers overcharging their customers by an average of £74 a year by failing to pass on the cheaper cost of crude oil.

The cost of crude oil has fallen from $147 a barrel in July last year to about $70. In 2008, many households saw their energy bills rise by as much as 50% in response to the high cost of crude oil. However, the cuts made in 2009 to take into account falling oil prices have been less dramatic (see table below).

Scott Byrom, utilities manager at moneysupermarket.com, says that while E.ON’s move isn’t “earth shattering” it could spark a price war.

"It will hopefully encourage more competition in the market and mean other providers will also reduce their prices,” he add.

* changes to date 03/July/2009
 

• energy bills
• energe companies