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E.ON cuts gas prices – will others follow?

E.ON cuts gas prices – will others follow?

Category: Gas and electricity

Updated: 13/01/2015
First Published: 13/01/2015

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 It is now over 6 months old so the content may be out of date.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 announced this morning that it's reducing standard gas prices by an average of 3.5%, effective immediately, which is the equivalent to £24 off an average gas bill per year. This means their standard tariff is now the second cheapest available, say E.ON, and they've also announced the launch of a new fixed rate one-year deal, thought to be the cheapest on the market at £923.

It'll come as welcome news to customers who were hoping to benefit from lower energy prices, with E.ON being the first supplier to take the plunge and div>reduce their tariff following the dramatic fall in wholesale costs. It's hoped that more will follow suit, but the question is, will they?

Fall in wholesale costs = reduced prices for consumers?

Firms are under increasing pressure to reduce their prices as wholesale gas now costs around 30% less than it did a year ago, with Government ministers and consumer bodies alike calling for a change. Given that the suppliers themselves are paying less, it's hoped that more will follow E.ON's lead – they may only have reduced costs by a small margin, but it's a start.

However, critics argue that suppliers could go further, as the overall reduction in the cost of wholesale fuel is still failing to be reflected in the price consumers have to pay. Tony Cocker, chief executive of E.ON UK, said that this was largely down to gas prices being more volatile than oil prices: "While oil prices have slumped, the gas price has remained volatile - some days up, some days down - and many of the other non-energy costs that we don't control but make up a customer's bill have increased and are set to increase further… [but] where it is possible we will try to pass savings on to our customers."

So, the end customer may not reap the full benefits of the reduction in wholesale costs, but it's hoped that they'll at least see a slight improvement.

Mark Todd, director of energyhelpline.com, commented: "It's good to see E.ON doing the right thing and passing on some of the huge wholesale price falls to customers. It's a small but important move that exposes the lie by some energy suppliers that price cuts are not possible.

"We urge other suppliers to follow suit and go further. Wholesale gas prices are down 28%. The energy companies could all cut gas prices by up to 14% compared with the 3.5% drop E.ON has made, but customers shouldn't expect an avalanche of price reductions – whilst energy bills shoot up like a rocket if wholesale prices go up, when wholesale price falls happen, consumer prices only come down like a feather.

"We hope the move by E.ON encourages other suppliers to take some action now. Our recent survey revealed 40% of Brits are being forced to risk their health by heating their homes below the recommended temperature this winter, because they are worried about how they will afford sky-high energy bills. Cash-strapped customers need immediate cuts to ensure they don't shiver in their homes. Ultimately, the reaction of the other suppliers will show us where their priorities lie – their customers, or profit."

Time will tell if other providers follow suit, but it's hoped that most will bite the bullet and pass on the savings they're making to their customers. Those tied into fixed rate deals may not experience the full benefit, but those on standard tariffs certainly will – and if you're approaching the end of your contract, it's time to start your research.

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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.