Npower is fourth of 'big six' to cut prices

Only Scottish Power and EDF are still to announce reductions in gas bills

Npower became the fourth of the "big six" energy suppliers to cut its gas prices yesterday, ratcheting up the pressure on Scottish Power and EDF to announce similar plans before the new tariffs come in at the end of this month.

Around 2 million Npower customers will benefit from the 7 per cent cut in its standard tariff from 26 March, equivalent to £50 per year.

Comments from Kevin Miles, the chief executive of Npower's retail business, emphasised energy suppliers' sensitivity to longstanding criticism over high prices. "We always aim to offer competitive prices to our customers and we have lowered our gas prices although our profits halved in 2009," Mr Miles said yesterday. "The combined profit from supplying nearly 6.8 million accounts and operating nine power stations was equivalent to just 9p a day for each customer account."

Npower's decision comes just days after E.ON announced a 6 per cent reduction in its gas prices, which in turn followed a 4 per cent drop from Scottish & Southern last week and British Gas's market-leading 7 per cent cut in early February.

All the reductions for standard customers are due to come into effect by the end of this month, creating a de facto deadline for similar announcements from Scottish Power and EDF, says Scott Byrom, the head of energy at Moneysupermarket.com.

"There is now considerable pressure on the others to follow suit and we expect announcements from them imminently," he said. "The rest of the market is telling customers that costs will be coming down at the end of this month, which is a deadline for the remaining suppliers to announce their plans."

British Gas was the first to change its tariffs to reflect falling wholesale prices, cutting its prices by 7 per cent in early February. But the company revealed profits up by a whopping 58 per cent to a record £595m at the end of the month, despite a 7 per cent fall in consumption. And consumer groups renewed calls for sharper reductions, despite parent group Centrica's defence that the group has massive capital expenditure requirements to ensure future security of supply and was hit on the supply side by the same falling wholesale prices that boost its retail business profits.

But consumer groups are still not impressed. Although unit costs came down from the all-time highs of 2008 following price cuts last March, the recent long, cold winter has left consumers with the UK's highest ever energy bills. The latest round of price reductions will not help because they do not take effect until the worst of the winter is over.

"Consumers have gone through a difficult winter with the highest energy bills in history and now we are not only seeing rather small reductions but they don't come into effect until the winter is over," Mr Byrom said.

But while only single-digit reductions are available on standard tariffs, consumers can make bigger savings by shifting to cheaper packages. "Standard customers could cut their bills by up to 25 per cent," Mr Byrom said.