With the announcement of a 5.1% drop to its standard gas prices, energy giant E.ON has become the first of the ‘Big Six’ energy suppliers to cut their prices this year. The cuts are set to come into effect from February 1st and will save customers an equivalent of £32 off their annual gas bill, reducing a standard dual fuel bill to £1,057 a year.
The announcement comes as the first price cut from any of the Big Six in the last six months – which also includes British Gas, EDF Energy, npower, Scottish Power and SSE. It also follows recent pressure from politicians and regulator Ofgem to bring gas prices in line with wholesale gas costs.
The timing of this move is no coincidence and comes as Ofgem, the industry’s regulator said that energy companies are “overcharging in many cases”. When speaking to the BBC, Dermot Nolan, chief executive of Ofgem, said that gas and electricity prices should be cheaper “for the vast majority of people”.
Wholesale gas and electricity prices have also dropped recently due to a mild winter and lower commodity prices, according to ICIS Power Index. Wholesale gas prices were down by 34 per cent over 2015, while electricity costs fell by 23 per cent over the year. And yet, the big six suppliers have not reduced their prices since early 2015, and in the summer only British Gas announced cuts.
Amber Rudd, Energy and Climate Change Secretary, wrote to energy firms last year asking them to pass on the costs accumulated from the fall in wholesale prices to consumers.
What this could mean for you
Now that E.ON has come forward and announced these price cuts, it’s hoped that other energy suppliers will be encouraged to do the same. Analysts are already suggesting that British Gas could be the next to follow suit, and may already be preparing to cut its prices in order to compete.
With that said, it doesn’t mean that you should wait for these announcements to be made if you’re looking to save on what you pay for your gas bills. There are a number of cheaper deals out there – in fact, EON have just announced a new one year fixed dual fuel deal with an average annual price of £783.
To see the range of tariffs available to you (prices always depend on your region and usage), use price comparison sites like Uswitch, Moneysupermarket and comparethemarket to find the cheapest deal for you. If you’ve been with your original supplier for years, switching could potentially save you hundreds of pounds. When you do find a tariff that you’re happy with, it’s worth reviewing this every six months or so, to make sure you’re still on the best deal possible.