Consumers welcome gas price cuts, but is it enough?

Most of the big six energy firms are to cut bills, but by less than last year's rises, so users should still look for cheaper options

Switch or stick, fix or flex those are the options which face Britain's millions of energy customers. Up until last week, the right choices to make were to probably switch and fix your tariff.

A year or so of rising prices had culminated in the big six energy suppliers raising their gas and electricity prices by up to 20 per cent just in time for Christmas. Some industry watchers were warning that global pressures on energy were only going to go one way for the foreseeable and that was up.

But then a funny thing happened: wholesale gas prices have started to fall back again as economic output has been hit across Europe and there has been a a warmer than expected winter. What's more, one-off inflationary factors such as the Japanese earthquake and the Arab Spring have receded.

In fact, since November, according to industry estimates, the wholesale price of gas has fallen by 9.4 per cent. Set against this, minor tinkering in price by three of the big six providers – EDF on Wednesday plus British Gas and Scottish & Southern Energy (SSE) on Thursday – does not look quite so generous. EDF reduced its gas price by 5 per cent, while British Gas cut its electricity tariff by the same amount and SSE by 4.5 per cent. But crucially SSE's cut won't come into force until after the winter on 26 March. On Friday, nPower followed suit cutting gas prices by 5 per cent.

The level of price cut contrasts starkly with the tariff hikes that took place in late 2011. British Gas raised gas by 18 per cent and electricity 16 per cent. EDF racked up its charges by 15.4 per cent and 4.5 per cent respectively and SSE by 18 per cent and 11 per cent. Ian Peters, the managing director energy at British Gas, put the discrepancy down to "prices in the wholesale market for gas to be delivered at the end of 2012 had increased by 14 per cent since the end of 2011." But he added that the cut would benefit customers immediately and to the tune of £24 a year on average: "This price reduction means British Gas is once again offering the cheapest standard electricity, on average, of any major supplier," Mr Peters says.

Yet the company's decision to hold gas prices was described as baffling by Mark Todd, the director of energyhelpline.com, the online comparison service. "Consumers will find it baffling that the company cannot also reduce gas bills as well – especially after the EDF Energy move. The maths don't seem to add up. British Gas needs to do something on gas as well if they want to look like they are passing on wholesale falls fairly.

"It's interesting to note that a 5 per cent gas price cut would have cost British Gas more than double this electricity price cut," Mr Todd adds.

In total, the comparison service estimates that gas wholesale prices have actually fallen 27 per cent from their peak last summer but only now are some consumers feeling a little benefit. But Adam Scorer of the watchdog Consumer Focus reckons that this could be just the start of some providers turning over a new leaf.

"Some recognise that their relationship with consumers is frankly toxic and they don't want to be associated with headlines saying that they are holding onto profits from falling wholesale prices. Compared to the past, prices have come down relatively quickly this time around. But with the regulator, Ofgem, soon to outline its plans to reform the industry, this could just be firms recognising that they need a bit of good PR," he says.

Regardless, though, of whether the energy providers are changing their approach or are still up to their old tricks, what should consumers do now? The key advice, as ever, according to the Ofgem website and consumer groups such as Which? is to switch supplier if you have never done so.

Estimates vary on how much can be saved by switching – from £100 to £300. According to comparison service uSwitch, the current difference between the cheapest and most expensive dual fuel energy deal among the big six providers is on average £188. After the changes announced this week and based on consumers using 3,300 kwh of electricity and 16,500 kwh of gas the most expensive provider is Scottish Power at £1,391 a year and the cheapest is EDF at £1,203. But if you want cheaper prices still for the same usage, uSwitch recommends looking outside the big six with First Utility isave dual fuel V9 deal coming out at £1,030, just ahead of OVO Energy's new energy fixed tariff at £1,061.

Longer term, though, Tom Lyon, an energy expert at uSwitch, reckons that those who fix their tariff will be better off than those who remain flexible. "Certainly those who chose to fix last summer are better off as the price cuts are only a fraction of last autumn's rises. Over the next few years costs are only going in one direction with lots of investment needed to secure supply and not forgetting the extra expense of moving to renewables," Mr Lyon says.

And fixing brings surety of cost something valued by Karen Bryan, from Berwick on Tweed and author of the Helpmetosave money blog: "I chose to fix in March 2011 for four years and although there are penalties for early exit I find that I'm still paying less despite these price cuts. I can now budget with certainty for the future without watching ever energy announcement nervously."

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Tax Manager / Accountant

    £35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

    Ashdown Group: Contracts Executive - City of London

    £35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

    Recruitment Genius: Call Centre Debt Collector - Multiple Roles

    £21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

    Day In a Page

    Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

    US betrayal of old ally brings limited reward

    Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
    VIPs gather for opening of second Suez Canal - but doubts linger over security

    'A gift from Egypt to the rest of the world'

    VIPs gather for opening of second Suez Canal - but is it really needed?
    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
    The male menopause and intimations of mortality

    Aches, pains and an inkling of mortality

    So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
    Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

    'How can I possibly be on the list with these writers I have idolised?'

    Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
    Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

    Bettany Hughes interview

    The historian on how Socrates would have solved Greece's problems
    Art of the state: Pyongyang propaganda posters to be exhibited in China

    Art of the state

    Pyongyang propaganda posters to be exhibited in China
    Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

    Vegetarian food gets a makeover

    Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
    The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

    The haunting of Shirley Jackson

    Was the gothic author's life really as bleak as her fiction?
    Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

    Bill Granger's seaside-inspired recipes

    These dishes are so easy to make, our chef is almost embarrassed to call them recipes
    Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

    Tourists are limp, leaderless and distinctly UnAustralian

    A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
    Blairites be warned, this could be the moment Labour turns into Syriza

    Andrew Grice: Inside Westminster

    Blairites be warned, this could be the moment Labour turns into Syriza
    HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

    The mystery of Britain's worst naval disaster is finally solved - 271 years later

    Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
    Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

    'I saw people so injured you couldn't tell if they were dead or alive'

    Nagasaki survivors on why Japan must not abandon its post-war pacifism
    Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

    The voter Obama tried hardest to keep onside

    Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen