Fall in energy bills offers hope for homeowners

Today saw Scottish Power slash the cost of gas on its Price Sure fixed energy plan by 10%, providing new hope for homeowners, and prompting expectations among consumer groups that the next few months could see energy bills decrease across the board by between 10% and 15%.

Both new and existing customers of Scottish Power look set to benefit since the changes will bring the average gas bill down to £1,129 - a saving of £81 on the previous average bill of £1,210.

Energy expert Will Marples of the comparison site uSwitch.com, said the expectation was that suppliers would adopt a cautious approach to reducing energy prices since they would be concerned that wholesale prices could increase.

"To mitigate this risk, they are likely to opt to introduce cuts in two stages, making an initial reduction of 10 –15 per cent in the run up to spring 2009, followed by a second cut of a similar or smaller level later on in the year if wholesale prices remain low," he added.

Since the peak in gas and electricity prices last year, prices have dropped by 40%, while oil has fallen by almost 73% between July 2008 and the end of the year, although the price of crude oil has rebounded over the past week.

"In terms of gauging the size of a potential cut it is worth noting that even after recent sharp falls, wholesale prices are still higher than they were at the beginning of the year," said Joe Malinowski of price comparison portal TheEnergyShop.com.

"Having said that, our analysis of forward wholesale prices and energy suppliers' costs suggests that there is scope for a cut of 15 per cent on standard gas prices and a 10 per cent cut in electricity prices."

According to uSwitch.com, a 10% drop in both electricity and gas prices would mean that the average household bill would fall by £129, taking it to £1,164.

Will Marples added: "The prospect of £129 coming off the average household energy bill within the next few months is welcome, but moving to a competitive energy plan could save up to £350. More importantly, this is something consumers can do for themselves today."

Joe Malinowski agreed; explaining that customers on standard rates can already save more than the likely price cut by switching to British Gas' WebSaver 1 tariff.

"This not only guarantees an immediate saving but also further savings if British Gas cuts its standard prices by more than 5 per cent. That's the deal to go for," he said.

Source: Times Online | Last updated: 5th January 2009

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