E.on to cut gas prices by 5.1%
E.on is the first of the big six energy providers to announce price cuts in five months, knocking £32 off the average gas bill. Critics claim this just a ‘token’ amount, relative to plummeting wholesale prices.
Customers on its variable tariffs will see gas prices fall by 5.1% on 1 February. Fixed tariffs and those with prepayment meters will not benefit automatically.
The energy provider has also launched two new dual fuel tariffs. The first is a fixed one year deal, which it claims is the cheapest on the market at £783 for a typical customer paying by direct debit. The second, in partnership with Age UK, is a two-year fixed tariff for over-60s, at £939 a year, typically.
Though these deals are fixed tariffs, unusually there is no exit fee to leave early.
‘5.1% off bills is not a lot’
Other providers are expected to follow suit, but the savings that providers make from falling wholesale prices won’t be passed on in full, according to Mark Todd, founder of comparison site EnergyHelpLine.com.
“A domino effect is likely to follow but don’t be fooled into thinking it’s a price war – it isn’t – these are just token gestures,” he says.
“Since E.on’s last price cut in January 2015, wholesale gas prices have fallen 31% so 5.1% off bills is not a lot.”
He adds that while gas prices have fallen marginally for consumers, electricity bills haven’t fallen at all.
E.on says that wholesale energy accounts for less than half of bills. It cites other rising costs and uncertainty around the outcome of a Competition and Markets Authority investigation into the energy market, which will conclude in June.
How much you pay for your energy depends on where you live and how much energy you use, so E.on’s tariffs aren’t necessarily best for you.
To check if you can get a cheaper deal, use a comparison site such as Uswitch.com or EnergyHelpLine.com to get a comparison tailored to your usage.
If you’re on a fixed deal, also check for early exit fees before switching. E.on says those on its fixed rate tariffs can switch to another of its tariffs without any penalty.
Not to be confused with an early repayment charge (ERC). Exit fees are levied on top of ERCs, which are a method of clawing back lost interest on a loan repaid early. By contrast, exit fees are charged for the administrative work this entails. They are charged as flat fees, from £150 to £300. However, in January 2007, following mortgage lenders surreptitiously raising fees sometimes by fivefold, the Financial Services Authority (FSA) intervened and most mortgage lenders removed exit fees from new mortgages. If you paid exit fees on your mortgage before January 2007, you may be able to claim them back.