Energy price rises cut but don’t expect lower bills

Energy companies were encouraged to invest in renewable energy such as wave power. Picture: PA

British Gas said it would cut dual-fuel bills by 3.2 per cent from 1 January, while rival SSE also pledged to slash costs by

4 per cent by the end of March.

However, the reductions come just weeks after all of the Big Six energy companies announced increases to their bills of between 8.2 and 10.4 per cent.

Other companies, including ScottishPower, yesterday welcomed the government’s proposals and said they hoped to put off further price rises as long as possible – but did not commit to reducing bills. Npower said it would reduce its prices, but had not yet decided by how much.

The cuts are in addition to a £12 rebate for the government’s warm home discount scheme.

The moves come after Chancellor George Osborne confirmed that the costs of some energy-efficiency and social schemes would be rolled back in this week’s Autumn Statement.

He is to cut the cost of the energy company obligation (ECO), an insulation scheme delivered by energy suppliers, next year.

“Today’s announcement confirms a serious, workable package which would save households around £50 on average,” said Energy and Climate Change Secretary Ed Davey.

The energy issue has dominated the political agenda since Ed Miliband promised to freeze prices for 20 months if he won the general election.

The government said cutting the cost of the ECO should shave £30 to £35 off bills, on average, next year. But consumer groups warned the reductions would not offset increases announced by major providers in October.

Jeremy Cryer of GoCompare pointed out that average bills would still be about £55 more a year than they were last winter.

Ann Robinson, director of consumer policy at uSwitch.com, said: “It’s important that consumers understand that even if this reduction is passed on in full, their bills will still be higher than they were previously.

“It’s also vital that they do not think they are protected from future hikes. If wholesale prices change significantly, they could still see their bills go up.”

Clare Francis of MoneySupermarket added: “The price cuts need to be passed on as soon as possible and it is worrying that some energy companies have suggested there will be a delay.”

Labour shadow energy secretary Caroline Flint said the taxpayer rather than the energy companies would be left to foot the bill. “Any help is better than none, but you can judge this government by who they’re asking to pick up the tab – the taxpayer,” she said. “The energy companies have got off scot-free.”

Burning questions

Q What is happening?

A The government claims its measures will lower energy bills without sacrificing green commitments or reducing help to vulnerable households. This will mainly be through diluting the energy company obligation (ECO) and extending it by two years, and funding the warm homes discount, which gives £135 a year to eligible pensioners, out of tax.

Q How will the ECO be diluted?

A Energy firms will not have to install so much expensive solid wall insulation in homes, but will be allowed to insulate more cavity walls and lofts to meet their obligations.

Q How will this impact the average household?

A The government expects the ECO changes to cut £30-£35 off average bills next year. Its Treasury-backed rebate on the Warm Homes Discount will account for £12, with another £5 from electricity distribution firms.