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Recent energy-price reductions were a sham

Neil Faulkner
by Lovemoney Staff Neil Faulkner on 12 March 2009  |  Comments 0 comments

All the announcements of lower energy prices have not reduced the price of the cheapest tariffs.

I was hammered by readers a few months ago when I told them that waiting until all the energy suppliers have lowered their prices before switching was going to cost them more. (Read Beware of energy switching advice.) That's why I've been compiling the evidence throughout the period in order to prove it to you.

Firstly, here are the price decreases of the big six suppliers according to themselves and to the press:

Big-six energy-price changes

Supplier

Gas cut

Electricity cut

When

British Gas

10%

0%

19 February

EDF Energy

0%

8.8%

31 March

E.ON

0%

9%

31 March

npower

No announcement

No announcement

N/A

Scottish and Southern Energy

4%

9%

30 March

ScottishPower

7.5%

3%

31 March

 

Although some of these changes aren't effective till the end of the month, lovemoney.com's comparison tool has been updated with the new prices. However, that doesn't make the tiniest difference to the cheapest energy tariffs, as I'll soon demonstrate.

The sham

People on the big six's standard tariffs - the most expensive tariffs the suppliers have - received the cuts mentioned above, and a few people on other tariffs got some sort of reduction, typically a great deal smaller than was announced.

However, the cheapest tariffs are unchanged. The tariffs that were at the top of the table before the cuts remain in place charging the same amount.

Here's one of the examples I tracked. It's dual fuel in a Guildford post code:

Low-energy user in Guildford

Cheapest tariffs before price changes

Cheapest tariffs after price changes

npower Sign online 14: £526 estimated bill

npower Sign online 14: £526 estimated bill

Utilita energysaver2: £568 estimated bill

firstutility Smart Energy online paperless: £569 estimated bill

firstutility Standard energy dual fuel: £581 estimated bill

firstutility Smart Energy online paper bills: £581 estimated bill

npower Web 14: £582 estimated bill

npower Web 14: £582 estimated bill

British Gas Websaver 1: £592 estimated bill

ScottishPower PriceSure Energy Online: £593

 

Let's compare the two sides of the table. You'll see that smaller companies have been busy creating new tariffs and removing others from new applications. Utilita has removed its energysaver version 2 and firstutility has got rid of its top tariff and replaced it with two more. This manoeuvreing is normal for all energy companies throughout the year. It's unrelated to the price reductions (or increases) of existing tariffs. In any event, you wouldn't have saved any money by waiting till now to switch.

The big news is that npower's tariff remains top, but no cheaper than before. Despite all the other suppliers reducing prices, their cheapest tariffs haven't got any closer to the top of the table.

Unfortunately, npower hasn't yet reduced prices. The evidence I've got indicates that it won't reduce prices at all. Furthermore, it already has the cheapest tariff in many regions (depending on your usage) so, if it does the extraordinary move of reducing the price of its cheapest tariff, that's a bonus for you.

The standard tariffs of the big six, the ones most affected by the price reductions, remain between £115 and £260 more expensive than the cheapest tariff.

Let's look now at medium-energy users:

Medium-energy user in Guildford

Cheapest tariffs before price changes

Cheapest tariffs after price changes

British Gas Websaver 1: £1,058 estimated bill

British Gas Websaver 2: £1,058 estimated bill

npower Sign online 14 (and Web 14): £1,059 estimated bill

npower Sign online 14 (and Web 14): £1,059 estimated bill

Utilita energysaver2: £1,061 estimated bill

EDF Energy Online:  £1,075 estimated bill

EDF Energy Online:  £1,075 estimated bill

E.ON EnergyOnline Extra Saver 12: £1,090 estimated bill

E.ON EnergyOnline Extra Saver 12: £1,134 estimated bill

EDF Energy Annual Fix 2: £1,099 estimated bill

 

British Gas was the cheapest before and it remains the cheapest. It stopped offering version 1 of Websaver and now offers version 2 at a price that's just a few pence different. This will change: Version 1 promises to be at least 10% below British Gas' standard-tariff but version 2 promises to remain just 6% below. At present, Websaver 2 has a reduction of 11%+, and even more versus people who pay quarterly. If you've been waiting to switch tariffs, you might now get the same top price but with a worse guarantee.

I've already mentioned that Utilita pulled its version 2 of the energysaver tariff, hence EDF's promotion in the table. Notice here that you have to get down to fourth place in the column on the right before you see a supplier that has actually decreased its price.

The big six's standard tariffs are still between £100 and £135 more expensive than the cheapest tariff in the table.

High-energy user in Guildford

Cheapest tariffs before price changes

Cheapest tariffs after price changes

npower Web 14: £1,441 estimated bill

npower Web 14: £1,441 estimated bill

EDF Energy Online:  £1,456 estimated bill

EDF Energy Online:  £1,456 estimated bill

Utilita energysaver2: £1,466 estimated bill

E.ON EnergyOnline Extra Saver 12: £1,464 estimated bill

British Gas: Websaver 1: £1,475 estimated bill

British Gas: Websaver 2: £1,472 estimated bill

npower Sign online 14: £1,484 estimated bill

npower Sign online 14: £1,484 estimated bill

 

The top two places remain unchanged, so it's just third place that actually makes a (£2) difference, with E.ON swapping in from Utilita at the same price. Fourth and fifth places remain unchanged.

Standard tariffs are between £75 and £215 more expensive than the top tariff.

We must re-think when we switch tariffs

The cheapest tariff for you will vary depending on where you live and what your usage is, but all of the tests I did had the same sorts of results as above: the cheapest tariffs haven't changed.

I hope I convinced a few of you to switch a few months ago when it was colder. If you didn't switch in winter, you'll have paid high prices when your heating usage was high. By waiting until now to switch, you'll have lost out on cheaper energy for no reason. Don't forget for next winter!

> Compare gas and electricity prices at lovemoney.com

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