Energy giant E.ON to cut average gas price by 5.1pc
- Credit: PA
Energy giant E.ON is to cut its standard gas price by an average of 5.1pc and has launched what it claims is the cheapest fixed tariff on the market.
The February 1 cut, which it says is the equivalent of £32 off an average annual gas bill, comes after all the big energy companies have faced mounting criticism for failing to pass on falling wholesale prices to consumers.
E.ON said the new tariff - a one year fixed dual fuel deal with an average annual price of £783 - would be 'Britain's cheapest energy tariff available today'.
The announcement came as energy firms face pressure to pass on savings to customers, as wholesale prices for gas and electricity fall to their lowest level for five years.
The mild winter and lower commodity prices have led to further drops in wholesale gas and electricity costs, according to the ICIS Power Index, which analyses energy markets. The report, released last week, said UK power prices finished the year at five-year lows, and were down 23pc over the year.
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Energy and Climate Change Secretary Amber Rudd wrote to energy firms in the middle of last year asking them to pass on a fall in wholesale costs to consumers.
E.ON's chief executive Tony Cocker said: 'The underlying position is that whilst 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.
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'Once you've built in various uncertainties and other factors, whilst the wholesale market movements may translate across to a dual fuel domestic bill for a drop in prices of under 10pc, the inclusion of those other factors translates the percentage to the standard gas cut announced today. We will continue to keep all these factors under review.'
Price comparison website USwitch said E.ON's customers may feel 'underwhelmed' by the size of the cut.
Ann Robinson, USwitch's director of consumer policy, said bill reductions of at least 10pc or around £120 a year on gas and electricity would more accurately reflect the fall in wholesale prices.
She added: 'Consumers have patiently waited for over six months to see another Big Six price cut so this move, while welcome, is long overdue. Given the fact that wholesale prices are at a five-year low, E.ON customers may well feel underwhelmed by the size of this cut.
'Wholesale electricity costs fell 23pc last year, so why have we not seen a single reduction to Big Six standard electricity tariffs? This is yet further evidence that the energy market simply is not working for most UK households.'
Ofgem chief executive Dermot Nolan said: 'This is a step in the right direction and it is good to see some movement in energy prices for consumers.
'We have consistently called on suppliers to explain why retail prices are not falling and this price cut goes some way towards addressing that challenge.'