Scottish Power joins gas price cuts
Scottish Power today became the third Big Six firm to cut household gas tariffs in the face of pressure to pass on the falling cost of energy on wholesale markets.
It is cutting prices by 4.8% from February 20 in a move that will affect 1.1 million customers on standard or variable tariffs, cutting bills by an average of £33. It will not apply to those on fixed tariff deals.
The move was welcomed by the Government. Labour, which is promising to introduce a price cap if it wins the next election, said it represented a fraction of the savings made by the company from lower costs.
It comes a day after a 5% cut was announced by British Gas and a week after a 3.5% cut from E.ON. Energy firms have come under pressure from politicians as well as regulator Ofgem to pass on the benefit of sharply lower wholesale prices.
There is likely to be a "domino effect" on the rest of the so-called Big Six - which dominate UK gas and electricity supply - to announce cuts too, it was claimed.
SSE - which has frozen tariffs until next year - said: "If we can lower prices or extend our freeze, we will."
EDF and npower have yet to comment.
Neil Clitheroe, Scottish Power's head of retail and generation, said: "Today's decision has been made to benefit our customers and keep our prices competitive.
"We will continue to keep our prices under review. Our pricing reflects all of the costs that contribute to a customer's bill."
He pointed out that the wholesale price of energy accounts for half of a customer's gas bill, with other costs such as distribution and transmission charges and environmental and social levies making up much of the rest.
The firm, owned by Spain's Iberdrola, also launched a new fixed tariff which it said was one of the most competitive available. It also said those on fixed tariffs could switch without paying exit fees.
Energy Secretary Ed Davey said: "Competition is hotting up and customers will see the benefits. With the market getting more competitive there's even more pressure on other energy companies to drop their prices."
Shadow energy secretary Caroline Flint said: "Given wholesale gas prices have fallen by at least 20%, a price cut of just 4.8% means consumers are only seeing a fraction of the savings.
"This price cut has also been delayed for a month, meaning consumers won't see any benefit at all until winter is almost over."
The gas price cuts have thrown the energy sector back into the spotlight four months ahead of the general election.
The firms have fallen short of industry estimates suggesting bills could fall by £136 a year if suppliers were to pass on the full drop in wholesale prices.
Industry experts believe the firms may be reluctant to make deeper cuts for fear they will be locked into them should Labour win the election and cap prices.
The latest announcement comes two weeks after Chancellor George Osborne launched an investigation into whether key sectors such as energy firms were passing on the costs of falling wholesale prices to consumers.
Labour proposed giving Ofgem new powers to force suppliers to do so.
The sector is also in the midst of an in-depth investigation by the Competition and Markets Authority which could result in bigger players such as British Gas being broken up.
Martin Lewis, founder of independent consumer website moneysavingexpert.com, said: "With the wholesale price of energy having come down by about 20%-30% since the start of 2014 ... these cuts are trivial.
"I expect the remaining three of the Big Six will rapidly follow now, shaving down their gas prices slightly too - but nowhere near the amount we should've seen after the wholesale price cuts."
James Padmore, head of energy at price comparison website comparethemarket.com, said the other Big Six energy suppliers were likely to follow in a "domino effect" of falling gas prices.
He said: "Expect further pressure on the size of the price cuts - an annual saving of £33 is tiny compared to that offered by one of the smaller suppliers, with savings up to £400.
"High-profile political price-freeze pledges - while well intentioned - could be holding back the savings that the Big Six are able to pass on, as they do not want to be locked into lower deals, especially if the wholesale price of gas rises."
A spokeswoman for EDF said: "EDF Energy's prices are under constant review and we work to ensure that our prices attract new customers and offer good value to existing ones."