23rd Jan 2015 14:23
LONDON (Alliance News) - UK gas and electricity regulator Ofgem Friday urged consumers to switch to a fixed price energy tariff, despite major firms committing to introducing price cuts to their variable tariffs in February, and said independent suppliers, rather than the so-called 'Big Six' suppliers, are offering the cheapest deals.
Four of the Big Six energy firms have recently announced plans to cut annual gas and electricity bills in February, after coming under pressure to pass on the fall in wholesale gas prices to consumers.
Scottish Power Ltd will reduce domestic gas prices by 4.8% and has just launched a new fixed-price tariff that has an "average dual-fuel bill of GBP930," whilst Centrica PLC's British Gas will cut bills by 5%. E.ON will slash its annual standard gas bill by 3.5%, while nPower has made the biggest average price reduction, with prices set to fall by 5.1% on its standard domestic gas tariff.
The other two big energy firms, SSE PLC and EDF Energy, are both expected to make similar cuts in the near future.
However, Ofgem Friday said "despite the recent cuts to variable prices, the potential saving of up to GBP250 means that most consumers would be better off moving to a fixed deal."
"The gap between average variable tariffs and the cheapest fixed tariffs is so wide most consumers would be better off on a fixed deal," said the regulator.
The claim comes after Ofgem released research that suggested some of the cheapest fixed tariffs were with independent suppliers, with fixed deals averaging around GBP915 per year, less than Scottish Power's new fixed tariff. The average variable tariff bill is around GBP1,165, according to the regulator.
"Around half of customers switching supplier now move to independent suppliers... the cheapest fixed tariffs are generally found with independent suppliers," said Ofgem.
The regulator admitted there is competition to obtain customers interested in fixed price tariffs, but warned there was no "rigorous competition between suppliers that benefits consumers," it said.
"Around 60% of customers are on variable tariffs, and the lack of competitive pressure on prices for these customers is another reason why the Competition and Markets Authority is investigating this market," said Dermot Nolan, chief executive of Ofgem.
On Wednesday, Scottish Power said for every GBP100 spent by a typical gas customer, GBP51 is made up of wholesale energy costs, GBP24 goes towards the delivery to the customer's door, whilst GBP12 is put toward customer service. The remaining balance is put toward environmental obligations and VAT, and GBP3 is profit for the company.
Centrica shares were down 0.5% to 269.80 pence per share on Friday afternoon whilst SSE shares fell 0.7% to 1,480.12 pence per share.
By Joshua Warner; [email protected]; @JoshAlliance
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