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E.ON cuts gas prices by 5.1%

E.ON cuts gas prices by 5.1%

Category: Gas and electricity

Updated: 20/01/2016
First Published: 20/01/2016

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This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

E.ON has announced that it's cutting its standard gas prices by 5.1% for residential customers – equating to three weeks of gas use by the typical household – with all four of its dual fuel tariffs set to benefit.

A welcome reduction

The announcement couldn't have come at a better time for customers, many of whom could be worrying about turning up the thermostat during the cold snap. The 5.1% price cut will come into effect on 1 February and will result in an average saving of £32 off a typical annual gas bill, which will come as welcome news to many.

The supplier also announced that it's launching its cheapest ever tariff, with the one-year deal costing an average of £783, as well as an exclusive two-year tariff for those aged 60+, again touted as being the cheapest on the market.

"Today's action once again makes our standard tariff the cheapest variable offering of any of the larger suppliers, and our new one-year fixed tariff is simply the cheapest product of its type on the market today," said Tony Cocker, chief executive of E.ON UK. "Our decision to make these moves is the right thing to do, [and] ultimately, we will always try to do our very best for our customers and today's action is a real demonstration of that fact."

But is it enough?

The price cut comes just a week after the energy industry received widespread criticism from regulators and consumer groups for not passing on the savings from falling wholesale energy costs to customers, so the fact that E.ON is the first to offer a reduction hasn't gone unnoticed.

However, some will argue that E.ON hasn't gone far enough: wholesale gas costs have fallen by 51% in the last year, and Mark Todd of energyhelpline argued that this should enable suppliers to pass on price cuts of as much as 25%, which makes the 5.1% reduction seem small by comparison. Customers should also be able to receive reductions on their electricity bills, said Mark, with wholesale prices down by 33%.

So just why aren't bills falling by as much as we'd hoped? Tony explains: "The underlying position is that whilst the price we pay for our customers' energy has fallen, we also have to take into account the various other risks in the market that 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.

"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 10%, 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."

Essentially, suppliers are arguing that they have a lot of other expenses to cover that aren't directly related to wholesale costs, which is why bills aren't falling at the same rate as wholesale price reductions.

For some this won't be a good enough explanation, but on a positive note, at least E.ON is leading the way when it comes to price cuts – the industry hasn't seen such an announcement from a major supplier since last summer – which means their customers, both current and existing, will be able to benefit.

What next?

Want to make even better savings? Don't rely on price cuts – compare the available tariffs and see if you can find a better deal. The typical customer could save as much as £539 on their gas and electricity tariff, according to energyhelpline, and switching from a standard tariff to a fixed rate deal could levy the most significant savings. Consult our search tool to see how much you could save.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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