Business

SSE follows E.On with gas price cut

Close up of the flames of two gas hobs Image copyright Getty Images
Image caption SSE is to cut its gas tariff by 5.3%

The UK's second biggest energy supplier SSE is to cut its standard gas tariff for domestic customers by 5.3%.

SSE is the second of the big six suppliers to announce price cuts this winter. Both companies are only cutting gas, not electricity prices.

Last week E.On said it would cut gas prices by 5.1%.

SSE said the move - which it is estimated will save a typical customer £32 a year - will take effect from the 29 March.

But while E.On's customers will benefit from the price cut at the beginning of February, SSE's will have to wait until the end of March.

It leaves the company open to criticism that its customers will not benefit during the winter season, the period when they use the most energy.

SSE also said it had lost 300,000 customers in its trading update in the nine months to December, but it expects to deliver full-year earnings and dividend targets.

Investigation

The big energy companies have been coming under pressure in recent weeks to cut prices in the wake of steep falls in the cost of wholesale gas and electricity over the past year.

SSE said it was more difficult to offer a reduction in electricity prices because they had not come down as much as gas and there were significant increases in other supply costs such as the modernising the UK's transmission and distribution network.


Analysis: John Moylan, Industry correspondent

There's been a lukewarm reaction to SSE's price cut. A "token gesture" was the view of long-time consumer campaigner Ann Robinson. She also pointed to the fact that (for the second year running) SSE's customers won't feel the benefit of a reduction in gas prices until the end of winter.

That delay will have implications for bills and the firm's profits.

We tend to burn through a lot of gas in February and March - up to 25% of our annual usage, according to one industry estimate.

What's more, on average around 70% of households are on the type of standard tariff which will be cut. But in SSE's case it's 90%. That's more than any other big supplier.

In short, the bulk of SSE's customers won't have a price cut this winter.

The regulator Ofgem has said previously energy customers can save much more money - up to £300 a year - within a matter of weeks, if they switch from standard tariffs to fixed price deals.


The gas price cut will see a reduction in the company's standard tariff - a variable rate which is usually more expensive than fixed-rate deals. This is often the tariff that inactive and vulnerable consumers find themselves on.

Earlier this month, the boss of energy regulator Ofgem told BBC News that the big energy companies were "overcharging in many cases" with prices failing to fall in line with dropping wholesale costs.

Reacting to SSE's cut, Dermot Nolan, chief executive of Ofgem, said "This is a move in the right direction, but if the market is as competitive as suppliers claim we would expect to see further price cuts.

"Ofgem referred the market to the CMA because we feel competition is not bearing down fast or hard enough on consumers bills."

The investigation by the Competition and Markets Authority (CMA) has been examining the energy market for 18 months.

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