E.ON and npower cut gas bills

8 March 2010

E.ON and npower have become the latest energy suppliers to cut prices - putting additional pressure on other providers to pass on cheaper wholesale energy prices to customers.

E.ON has become the third energy supplier to cut prices, after announcing gas bills will reduce at the end of March. 

Around 1.9 million of its customers will see their gas bills decrease by 3.3% from 31 March - saving them an estimated £42 a year. E.ON's most vulnerable customers, who take the WarmAssist product, will start to benefit from lower gas bills from 1 March.

Npower, meanwhile, will reduce gas prices for approximately two million customers averaging by 7% from 26 March. It says this will shave £50 off annual gas bills. 

Kevin Miles, chief executive officer of npower retail, says: "We always aim to offer competitive prices to our customers and we have lowered our gas prices although our profits halved in 2009."

Over the past two months, both British Gas and Scottish and Southern Energy have cut gas bills – by 7% and 4% respectively.

The cuts have been made amid mounting criticism that energy suppliers are not doing enough to pass lower wholesale energy costs on to customers.

Last year, E.ON cut electricity bills by 9%. However, in 2008 (when wholesale energy costs rose significantly) it hiked electricity bills by a total of 25.7% and gas bills by 41%.

Graham Bartlett, managing director of E.ON's retail business, says: "The fall in current wholesale prices is only part of the pricing story as our customers are using gas bought over a number of years at much higher prices than today.”

Npower reduced electricity bills by 8%. In 2008, bills rose by 26.7% (electricity) and 43.2% (gas).

Despite the cuts, households should still brace themselves for higher bills in the future. A recent report from Ofgem, the energy regulator, warned that energy could become unaffordable for many in the future, with investment costs pushing bills up by 25% to over £1,500 within the next 10 years

Responding to E.ON's announcement, Ann Robinson, director of consumer policy at uSwitch.com, says: “This is great news for consumers as the fact that three of the big six suppliers have reduced prices puts the remaining three under intense pressure to follow suit.

"E.ON’s move tips the balance in favour of consumers and we now expect to see a domino effect as the remaining three topple into line.”

However, she adds that these cuts won’t offset the large increases to both gas and electricity bills in 2008.
“We now expect household energy bills to end up around £270 higher than two years ago putting even more emphasis on the need for consumers to start managing their energy costs,” she adds.

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