Energy provider E.ON has announced it is to cut the cost of its standard-tariff gas prices for residential customers by 5.1% from next month (1 February 2016) in response to the ongoing decline in wholesale costs.
In a statement released today (20 January), the UK division of the Germany-based group said the cuts would result in annual energy bills being on average £32 (€41.5, $45.4) lower, while the new rate would be the cheapest currently on the market.
"The underlying position is that while the price we pay for our customers' energy has fallen, we also have to take account of managing the various other risks in the market which can change, and the fact that many of the other costs that we don't control but do have to bear have increased," said Tony Cocker, chief executive of E.ON.
As a result of oversupply in the global gas market, prices in the UK fell by 33% last year following a 28% slide the year before. E.ON is so far the first of the 'big six' to have cut energy prices in the last six months. The decision was welcomed by consumer groups, although some indicated that price cuts were long overdue and should have been introduced earlier.
"Consumers have patiently waited for over six months to see another big-six price cut, so this move, while welcome, is long overdue," said Ann Robinson, the director of policy at price comparison site USwitch. "Given the fact that wholesale prices are at a five year low, E.ON customers may well feel underwhelmed by the size of this cut. Wholesale electricity costs fell 23% last year, so why have we not seen a single reduction to big six standard electricity tariffs? This is yet further evidence that the energy market simply is not working for most UK households."
Last week, energy-industry regulator Ofgem warned that energy firms were guilty of "overcharging in many cases", and its chief executive Dermot Nolan said gas and electricity prices should be cheaper "for the vast majority of people".
"We really should be seeing bigger retail cuts than we have seen so far," he told Radio 4's Today programme, adding that energy firms were getting away with overcharging customers as they were "not facing strong enough competitive challenges".