View the article online at http://citywire.co.uk/money/article/a557543
British Gas and SSE cut energy prices
(Update) British Gas cuts electricity prices by 5%, while Scottish and Southern Energy announces plans to reduce its gas prices by 4.5%.
Minutes after British Gas announced an immediate 5% reduction in its electricity bills, Scottish and Southern Energy (SSE) revealed plans to cut its gas prices by 4.5% on the 26 March.
The price cuts will benefit around 3.5 million SSE gas customers and 5.3 million British Gas electricity customers. SSE also pledged that it will not raise its bills again before October 2012.
SSE customers, and M&S Energy customers, will see their typical gas bill, which rose by 18% in September, come down by around £28 a year.
Confusingly, this only equates to a 3.8% reduction rather than SSE's headline cut of 4.5% to the unit price of household gas. This is because while the reduction in unit price reflects the fact that wholesale prices have come down, the fixed charge associated with gas bills – meter readings, environmental obligations and supplying costs – is still the same, said a spokesperson for SSE.
Those on both single fuel and duel fuel tariffs with British Gas meanwhile will save £24 a year on their electricity bills. The move means British Gas is now the cheapest of the Big Six providers for electricity – though customers saw their electricity prices rise by 16% in August last year.
SSE's electricity prices and British Gas' gas prices, which rose 11% and 18% respectively last year, will stay the same.
Any customers on fixed rate or Economy 7 tariffs with either provider will not see a reduction in their bills.
Ian Peters, managing director of energy at British Gas, said: ‘We want to keep prices as low as possible for our customers. Household budgets are stretched, and we are doing everything we can to help our customers keep their bills down.’
In response to why it has not reduced its gas prices meanwhile, British Gas said: 'We have to buy energy in advance to protect our customers against any sharp spikes in prices – like we saw last winter. While there have been some short-term falls in the cost of gas, the longer term trend continues to be upward'.
Mark Todd, director of Energyhelpline.com, said: ‘The maths doesn’t seem to add up so British Gas needs to do something on gas as well if they want to look like they are passing on wholesale falls fairly’.
‘Let’s not forget that wholesale gas prices are down to 53p / therm for winter gas, 25p or 32% down on what they were in early September. The wholesale price makes up 47% of the cost of supplying gas to a home (according to Ofgem) meaning that a 32% wholesale price drop would cut the costs of supply of gas to a home by around 15%,’ he said.
‘It will be fascinating to see what the remaining four members of the ‘Big Six’ do now because there are very real opportunities to increase customers if they play their cards right,’ he added.
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