NPOWER has become the fourth major energy company to cut prices this week – as a study from the industry watchdog found that consumers could be £250 better off on a fixed deal, despite the falling prices.
The firm slashed its gas bills by 5.1 per cent, the biggest of the reductions so far and coming after Big Six rivals British Gas, E.ON and ScottishPower all reduced their prices amid falling wholesale costs.
NPower’s reduction, which will come into force on 16 February, will save the average customer £35 a year on their utility bills.
Meanwhile, research from Ofgem found that most consumers would be better off on a fixed deal rather than a standard variable rate, saving as much as £250 a year.
Ofgem said that the gap between average variable tariffs and the cheapest fixed tariffs is so wide that customers are still better off moving to a fixed deal, even if wholesale costs continue to fall. The research also found that some of the cheapest fixed tariffs were with independent suppliers with some fixed deals at around £915 per year, compared to £1,165 for the average variable tariff with one of the larger suppliers. Around half the people who switch firms now move to independent suppliers.
Dermot Nolan, chief executive at Ofgem, said competition was not strong enough in the standard rate – rather than the fixed deal – market.
He added: “Around 60 per cent of customers are on variable tariffs, and the lack of competitive pressure on prices for these customers is another reason why the Competition and Markets Authority is investigating this market. In the meantime, I would like as many consumers as possible to look for a better deal, as it’s never been easier to shop around for their energy.”
Consumer groups criticised this week’s gas price reductions as coming too late – at the end of the peak winter period when usage is at its highest – and said that the cuts are not big enough compared to the plummeting cost of wholesale energy.
E.ON’s cut was brought in with immediate effect, but the reductions announced by the other three providers will all be introduced later in the winter.
Ann Robinson, director of consumer policy at uSwitch.com, said: “This might be the fourth price cut from the big six suppliers but standard tariff consumers are still not getting a fair deal this winter. With wholesale gas prices falling for months on end, the price cuts so far seem token gestures.”
Jeremy Cryer, energy spokesman at Gocompare.com, said: “No doubt there will be some customers left frustrated that this reduction has taken so long to pass on.
“And it is still paltry when compared to the reported drop in wholesale gas costs of around 20 per cent.”
Martin Lewis, founder of MoneySavingExpert.com, said: “With the wholesale price of energy having come down by about 20 per cent to 30 per cent since the start of 2014, and the prices of the cheapest switchers’ deals having dropped more than 10 per cent, these cuts are trivial.”