Fuel bill cuts will follow energy policy change

 
pensioner has cup of tea by the fire Most energy providers have said they will pass on the savings generated

Major energy firms have started to announce plans to pass on savings to customers following a new package of measures from the government.

British Gas owner Centrica said it would cut bills by £53 in January, two months after a £123 price rise for the average dual-fuel customer.

SSE also said it would pass on savings of around £50 and Npower plans a conditional price freeze until 2015.

The moves come after the government said it would make changes to bills.

Some subsidies for those in fuel poverty will be moved into general taxation and some green policy targets will be slowed down. It said this would cut energy bills by a total of £50 a year for the average household.

Analysis

Energy bills are not going to rise by as much as they would have done, but they still cost a lot.

Today's announcements from the energy companies come after a curious couple of months of political wrangling.

Energy bills have proved to be the platform for a bigger tussle between the parties, over who can sound the most credible at a time when for many people prices are going up faster than wages.

Labour's promise to freeze energy bills for 20 months if it wins the election has been derided by the coalition as a con, which says it won't work.

But the advantage of it, right now, is it is easy to understand.

This is the government attempting to fight back and illustrate its on the side of consumers.

Homebuyers could instead be granted £1,000 to spend on energy-saving measures.

However, overall prices are rising this winter for most energy customers, as the price rises outweigh any cuts that result from these government plans. The cuts will also come at different times, not necessarily at the depth of the winter.

New plans

Major suppliers have been responding to the move, which comes shortly after announcements of inflation-busting winter price rises which angered many customers.

Npower said it would not raise prices any more until spring 2015 unless wholesale costs went up.

The company introduced a planned price rise of 10.4% over the weekend, but it said that would be reduced, once it has worked out how much changes to government policy would save it.

Caroline Flint: "Not a single measure that will cost the energy companies a single penny"

SSE and British Gas said they would pass on the savings - the former by April, and the latter in January.

Meanwhile, EDF has indicated it would not raise prices again before 2015. In November, it announced a 3.9% rise in bills to take effect in January. This was lower than many of its rivals in anticipation of a move by the government.

E.On, which has not announced a price rise yet this winter, said that the government changes would mean prices would not be as high as they could have been.

Scottish Power said it would pass on the cut in full, but added that other factors - such as wholesale costs could still put pressures on bills.

The Energy Minister, Ed Davey, told the BBC the planned moves by the government would save households an average of £50 on fuel bills.

But Labour leader Ed Miliband, in a speech on Monday, is to accuse ministers of using "smoke and mirrors" over its plan. He has pledged a 20-month price freeze if Labour wins the next election.

Changes

Currently, the average dual fuel bill for households is £1,385.

Graphic showing what your gas and electricity bills are paying for with the largest part being the wholesale purchase of energy, supply costs and profits.

Some of the saving will come in the form of a reduction in the Energy Companies Obligation (ECO), which requires energy companies to provide insulation or other energy-saving measures to 400,000 homes a year.

Energy Secretary Ed Davey says the government's policy is a "real help for consumers"

In future, these measures will be paid for by a tax-funded programme of £500m, and will be granted via an average £1,000 stamp duty rebate for home buyers who need to improve energy efficiency at their new property.

The total £50 cut in the average household bill is made up of:

  • A reduction of about £30 to £35 as a result of changes to ECO
  • A rebate of £12 on electricity bills for customers in each of the next two years, owing to changes to the Warm Home Discount
  • A one-off £5 cut in electricity bills by cutting network costs, which represent close to a quarter of a typical bill

Richard Lloyd, executive director of consumer group Which?, said: "It is about time the government started getting the cost of energy under control and this will be a welcome step in the right direction for consumers who are struggling with the increased cost of living.

Paul King from the Green Building Council says the bill reduction is a "really short-sighted move"

"It is right to refocus the Energy Company Obligation so that it gives greater priority to those most in need of help, with lower-cost measures such as loft and cavity wall insulation. But in return for more time to get this right, the suppliers must now commit to greater transparency and to getting their costs down, fast."

Meanwhile, the Environmental Audit Committee of MPs has accused the government of "shifting the goalposts" to reduce the number of households in England classed as in fuel poverty.

 

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  • Comment number 60.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +108

    Comment number 59.

    So they are reducing the increase (not cutting) bills by allowing them to contribute even less to the public purse? It'd be more efficient for the govt to give the cash straight to consumers than relying on energy firms to pass on cost decreases.

    This is just stupid moving numbers around to make things look better, no actual benefit to any of us - much like most govt policies.

  • rate this
    -5

    Comment number 58.

    Well, I like this very much. I did not expect to have the whole increase removed because the companies do have to invest - but this £50 is welcome. I just wish Ed Miliband had not stampeded the companies into a price rise because he was worried about his position as Labour leader and made a silly pledge.

  • rate this
    +3

    Comment number 57.

    So much like the problem with the criminals in the UK banking sector, which have also stretched out for years, UK government has choosen to treat the gaping,festering wound that is the UK energry sector with a Mr Man sticking plaster.

    The current government's motto should be 'Soft on corruption, soft on the causes of corruption'.

  • rate this
    -8

    Comment number 56.

    Large property...Large Bills.

  • rate this
    +3

    Comment number 55.

    If Cameron and his millionaire cronies think this insult is going to get them elected in 2015, they had better think again!

  • rate this
    -2

    Comment number 54.

    So that will be 96 pence a week then! Real heady politics and well worth headline news on the Beeb and every mainstream news paper.
    God forbid that there might be something important going on in the world.

    Perhaps Labour could announce that all gas and electric will be free if they are elected, throw in petrol at 10p per litre and I might even vote for them. (Perhaps not!)

  • rate this
    -2

    Comment number 53.

    As usual, nothing for Oil heating customers without mains gas, just for South East, Townies, and the rest.

  • rate this
    +5

    Comment number 52.

    £50 a year whoopty doo . hardly a vote swinger is it. rip off britain alive and well

  • rate this
    +5

    Comment number 51.

    Maintain the obscene payments to top bosses of privatised companies, protect unreasonable profit margins and find another door to sponsor all this by ordinary taxpayers. I am not impressed and not surprised.

  • rate this
    +1

    Comment number 50.

    Civil unrest is soon to be unleashed upon the greedy.

    It's coming people.

    Be prepared.

  • rate this
    -1

    Comment number 49.

    Parliament is three quarters empty, suppose it wouldn't bother you, if someone else is paying your bills.

  • rate this
    +1

    Comment number 48.

    Maybe I am getting this wrong but I doubt it.
    The reduction of fuel bills is because the government will tax fuel slightly less. So the energy firms are actually not losing out at all. At the end of the day it is public money funding a price cut. P.S. I was in Russia last month, they pay £5 a month for gas, flat rate, use as much as you like. Why do we buy our own gas at international prices?

  • rate this
    +1

    Comment number 47.

    A read through the pages of Private Eye will show how deep-rooted is the unethical or even corrupt behaviour in every strata of our governance, journalism and commerce. Even some of those on the Parliamentary Standards Committee have allegations to answer. The energy company bigwigs have friends in high places so us plebs won't get a fair deal. If my MP ever comes canvassing...

  • rate this
    0

    Comment number 46.

    All this shows is that the power companies were indeed raking it in and could well have afforded not to make such severe increases that they did in the first place.

  • rate this
    0

    Comment number 45.

    we still got to pay , the cost is just in general taxation now instead of on fuel bills . fooling no one these condems ,, nasty people nasty party

  • rate this
    +2

    Comment number 44.

    £123 - £53 still equals a £70 price hike people can ill afford.

  • rate this
    +1

    Comment number 43.

    I hope Osborne gets the same stick Brown did when he gave a 75p increase in the pension a few years back.
    There is a huge and growing problem for poor people - most of whom work and do not spend it all on fags. A token 96p per week is not going to do a great deal. A much wider look at prices, wages and the distribution of wealth and income is long overdue. ConDems to do this? HAHAHAHA

  • rate this
    +2

    Comment number 42.

    Why should the tax payer pay for cuts? Why should we protect companies massive profits? The worst decision in the history of mankind was placing essential human needs into the hands of greedy shareholders which demand year on year growth. In a finite market this results in unethical year on year price rises.....just the same as the oil companies. Welcome to the century of 'unethical greed'

  • rate this
    +3

    Comment number 41.

    Haven't people realised that our elected public servants are more interested in big businesses and self interest than what it good for those who they really serve.

    It's about time we reminded them how and why they are in power.

    As people have said, £50 is a desultory amount compared to the profits made and it is just been taken from green energy not the money that goes to the big six.

 

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