E.ON drops electricity prices 9%
The announcement
Since Christmas, both British Gas and Scottish and Southern Energy have announced energy price reductions. Now E.ON, another of the Britain's 'big six' energy suppliers, has stated it will reduce prices.
From 31 March 2009, E.ON electricity will be reduced in price by 9%. The company says this will affect "the majority" of its residential customers, and should benefit 4.1 million people.
What about gas?
Sadly, E.ON has not signalled any intention to reduce the price of gas.
The energy supplier claims that, in comparison with its competitors, it has maintained one of the lowest gas prices on offer throughout the winter.
E.ON also says that its average gas prices will remain cheaper than British Gas's – even taking into account the price cuts the firm recently announced.
Will other companies make similar cuts?
The short answer is: probably.
Don't forget, since last autumn energy suppliers have come under increasing pressure to reduce their prices. Earlier this week, MPs met with representatives from E.ON, npower, EDF Energy and Scottish Power – and the politicians demanded to know when recent falls in the wholesale price of energy would be passed on to consumers.
In addition, E.ON's announcement means it is the third large utilities company to make changes to its tariffs. Because the market's major players tend to mirror each other's price moves, it's likely the remaining few will follow suit – and I think it's possible we'll see price reductions of up to 10% from those energy companies yet to show their hands.
In response to MPs' questions, EDF Energy and Scottish Power executives have stated that their companies hope to reduce prices soon.
Meanwhile, npower was reluctant to commit to cuts - though my view is that, once all the company's competitors have reduced their prices, npower won't allow itself to be undercut.
Should I switch my energy supplier?
Trying to keep track of the energy market can be confusing. Companies regularly review the deals they offer customers – and to work out which supplier offers the best deal for you, you must take into account factors such as your annual energy usage and location.
For this reason, it's unwise to sign up with a company simply because it has announced a price reduction. Using a utilities comparison service remains the easiest, most effective way to search for the cheaper tariff for you.
If you're a keen switcher and have changed your energy supplier fairly recently, it's unlikely you're on your company's most costly tariff. Therefore, it might make sense for you to wait until the remaining three suppliers have announced their price moves: once the market is a 'level playing field', you can be confident any energy price comparisons you make will help you obtain the very lowest price available.
Having said that, it's impossible to know how long this will take – or how much you're likely to save by leaving your comparison until later. And in the meantime, the UK is experiencing severe weather and extremely low temperatures. For many households, this will mean higher heating costs.
If your energy bills are a cause for immediate concern, it might make sense for you to compare deals and switch suppliers now. Your transfer from one supplier to another may take several weeks - so the faster you act, the more likely it is you will benefit from lower prices for the rest of winter.
Finally, if you have never switched your supplier (or have not done so for some time), you could make savings of up to £391 a year by taking your business elsewhere.
**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**
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