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Electricity and Gas Price Cuts

Chris Hurcombe
by Chris Hurcombe January 17, 2012
ofgem energy market

Electricity and Gas Price Cuts – What does it really mean?

The six major energy suppliers known as the “Big Six” have announced either gas or electricity price cuts for their household consumers in recent days. Despite the fact that here at Catalyst our aim is to find the cheapest business gas and business electricity prices for our clients, we decided to investigate these cuts and find out if they will really make much difference to the average household energy bill.

When it comes down to household finances any type of cut to our daily, monthly and yearly costs and expenditure is welcomed.

But to what extent are these electricity and gas price cuts really?

The truth is that the price reductions for Electricity and Gas announced last week represent about 15 per cent of the value of the increases announced by the “Big Six” in the autumn.

Between the months of August and November each of the “Big Six” suppliers raised their gas prices by between 15 and 20 per cent while four of the six increased their electricity prices by over 10 per cent. EDF and Npower were the only ones that kept it bellow the 10 per cent mark, with 4.5 per cent and 7,2 per cent increases respectively.

Whilst any reduction on our household expenses is welcomed, these cuts will only bring savings of between £26 and £39 annually, which is rather insignificant when compared with the average rise of £220 for a household on a dual fuel tariff as a result of the autumn hike in prices.

According to Consumer Focus the average household energy bill is up by 14% compared to this time last year. Adam Scorer, director of policy and external affairs at Consumer Focus, said:

“This narrowing of costs must be reflected in consumer prices. The widening gap between wholesale and retail prices has become the fault line for consumer confidence. Companies want to regain the trust of their customers. Narrowing the gap is a necessary part of achieving this.”

Despite the fact that these cuts will not make much impact on an average household energy bills, narrowing the gap is surely a start. Like Kate Saines from Myfinances.co.uk said:

“We can only hope these reductions are the first, and more will follow.”

Another important fact from these price cuts is that no supplier announced a dual tariff price reduction; they’ve either reduced their gas or electricity prices. By doing this the impact is even smaller on household energy bills.

“Most of these cuts also don’t come in to effect until March, when milder temperatures are likely to return and our peak demand over the winter period has gone”  Commented Chris Hurcombe from Catalyst.

Right now the bottom line is that these cuts will go nowhere near cancelling out the 21 per cent hike in prices of the previous 18 months. In total over this period household energy bills became £224 more expensive.

So will cuts of five per cent and similar really make much difference to the average household energy user?

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