With wholesale energy prices currently in a lull, E.On has become the first of the big six commercial energy companies (the others being British Gas, SSE, ScottishPower, EDF Energy and npower) to announce it will pass these lower costs on to their customers.
News from the German-owned energy supplier said that the price cut would ‘save about 2 million households £24 on a typical annual bill’; the equivalent of approximately a fortnight’s gas usage.
The change in pricing isn’t entirely altruistic from E.On, however, as growing pressure from the UK government has been questioning why – if wholesale commercial electricity and gas are so low – are energy bills remaining at record-high prices.
Last week the Treasury announced that it would be launching and investigation into why prices remain fixed despite these fluctuations in supply cost, and energy minister Matt Hancock announced he has requested the presence of all six of the companies at a meeting to explain their prices.
By getting ahead of the other major suppliers, E.On not only put pressure on their rivals, but are also likely hoping that this drop in the cost of bills will have customers of the rest of the market reconsider their current deals, and for existing customers to find a more cost-effective tariff. The company also said customers could save more than £200 by switching to a new fixed-price tariff with an annual bill of £923, which it said was the cheapest on the market.
It’s not only E.On who are hoping for some good PR from the move; Matt Hancock – a Tory Minister – took the opportunity to point out that this drop in the cost of energy for domestic customers would not happen under Labour’s plans to freeze energy prices, should they win the General Election in May.
Hancock decried the strategy as ‘ridiculous’, and mentioned he was “looking forward to meeting with the Big Six energy suppliers shortly where I hope more of them will follow suit,”.
Should the Conservatives manage to convince all Big Six energy suppliers to lower prices ahead of the election, it serve to turn one of Labour’s most positive campaign promises into something that is potentially very negative.