The 1.1 million customers on Scottish Powerís variable and standard tariffs are to get a 4.8% reduction in their gas bill. This will save the average household on this scheme £33 a year, though the new price is not to be introduced until February 20th, once the yearís coldest weather has passed.
Moreover, the energy giant is unveiling a new fixed-price tariff costing an average of £930 for gas and electricity, delivering one of the most competitive prices on the market.
This is seen as a response to the fact that over the last year, wholesale gas prices have fallen by 28%. Until recently, none of the big six energy suppliers had reduced the bills for the 11 million households operating on standard tariffs.
However, mounting pressure from politicians and consumer interest groups have forced their hand.
Scottish Power are the third to concede, with British Gas announcing a similar reduction at 5% from February 27th, and E.ON leading the way last week when they cut gas prices by 3.5% with immediate effect. The remaining suppliers of Npower, SSE and EDF are likely to respond with similar cuts this week. All of the major suppliers have been under threat due to the increasing trend by customers to move to smaller, independent suppliers. Energy UK have released data showing that in the last year, 1.3 million people had made that transition.
Ed Davey, the Secretary of State for Energy and Climate Change informed customers that they would see the benefits of increasing competition in the energy market. He stated that there was ìeven more pressure on other energy companies to drop their pricesî and that ìIf people arenít seeing price cuts, now is the perfect time to check their tariff and see what deals are on the market.î For those looking to change he moved to reassure them: ìSwitching suppliers is quicker and easier than ever before as part of our work to cut energy bills and reform the market.î
However, dissatisfaction with the behaviour of energy suppliers persists. Ed Milliband, after announcing Labourís intention to freeze gas bills for two years if elected in May, referred to British Gasís price cut of 5% as ìtoo little, too late.î
The chief executive of Citizens Advice, Gillian Guy, concurred, stating: ìAll energy firms have a duty to pass on savings to their customers. Just as with British Gas and E.ON, Scottish Powerís gas bill reduction has fallen short for consumers after rocketing prices. Energy companies must look to pass on wholesale costs by cutting electricity bills, not just gas. Energy bills are up a third since 2010 yet figures show wholesale costs at a four-year low.î
She went on to implore consumers to contact their energy supplier and ensure they were on the cheapest tariff, stating that Citizens Advice were dedicated to seeing a reduction for ìall customers, not just those able to switch to get the best deals.î
Scottish Power has launched a staunch defence, with Neil Clitheroe commenting: ìAll Scottish Power customers can take advantage of our best dealsî and that ìCustomers already on fixed-price tariffs can also move between our tariffs at any time, without paying any exit fees.î
Much of the criticism is a result of the news that wholesale prices have fallen due to a lower demand for gas after an unusually warm November and December. Furthermore, raw energy costs, specifically oil, have fallen as well due to a weaker demand sparked by a recovering global economy. Clitheroe went on to address these factors, stating: ìOur prices reflect all of the costs that contribute to a customerís bill. The wholesale price of energy accounts for half of a customerís gas bill, but non-energy costs such as transmission and distribution networks and environment and social obligations remain unaffected by any wholesale reductions in price.î
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